Annuity Product - Potential

INSURERS are set to launch a slew of annuity products in the near future now that the government has proposed to remove the eight per cent investment income tax on deferred annuity.

More consumers are expected to snap up annuity products since they can expect better returns.

The realisation of a need to have a retirement or annuity plan has intensified of late, prompted mainly by concerns that the life-long Employees Provident Fund (EPF) savings are too small an umbrella to protect from all the rainy days during one's twilight years.

According to the EPF, 72 per cent of contributors who withdraw their savings at the age of 55 tend to spend all the savings within three years.

Furthermore, with tremendous advancements in medicine, people are living longer than before while medical bills will also be higher than before.

According to the Life Insurance Association of Malaysia (LIAM), with the ageing population and rising costs, a private pension scheme is required to supplement the income for the current generation who will retire in future years.

For private pension schemes to take off, as evidenced from other overseas markets, LIAM believes the government will need to provide tax incentives to pension scheme contributors.
For the majority of the working population, the EPF is the nearest that they could have as an annuity plan.

Back in July 1 2001, the EPF launched its annuity scheme but it was scrapped due to objection from trade unions and consumer organisations that wanted the scheme to be managed by the EPF and not by the insurance industry.

However, within slightly less than two months after it was launched, a total of RM160 million in single premiums were withdrawn to purchase the annuity - RM140.43 million for the conventional annuity scheme and RM18.72 million for the takaful annuity scheme.

In its 2000 annual report, the EPF reported that the annuity scheme recorded the highest number of applications among the new withdrawal schemes that were introduced in that year.

As at end 2000, a total amount of RM720.19 million was withdrawn by 33,412 members to purchase annuities.

Insurance players took notice of consumers' appetite for the such pension plans but was hindered by the eight per cent tax on on annuity fund.

But this will now be removed and put annuity in the same level playing field as the private retirement scheme (PRS) that was launched in July this year.

But, unlike the PRS that is managed by only eight providers, the annuity scheme is open to all insurers.

The pension market in Malaysia is gaining importance thanks to Bank Negara Malaysia's masterplan for the financial services sector.

Consumers can expect more retirement planning initiatives by the government to cater for one's twilight years as the country pushes towards a high-income status.

9% - 10% Malaysia Life Insurance Growth

Malaysia’s life insurance business is expected to grow by 9% to 10% next year on strong demand from the middle class coupled with brisk economic growth.
A spokesman for the Life Insurance Association of Malaysia (Liam) said the growth would be helped by fresh graduates buying insurance for saving and protection purposes.

“While the policies are for the long term, they will be cheaper if one were to buy them at a young age,” he told Bernama after a blood donation campaign here yesterday.

He said the association would meet Bank Negara and the Finance Ministry on the 2013 Budget proposal to remove investment income tax on deferred annuity and the introduction of new group insurance schemes.

“We believe the 15 life insurance companies, which have strong distribution channels, will take this opportunity to help the public,” he said.

The spokesman said LIAM would also organise awareness campaigns on the importance of life insurance.

“With greater awareness of insurance coverage, the current percentage of population with life insurance will increase to 75% as targeted in the Economic Transformation Programme (ETP) from 43% now,” he said.

He said LIAM also hailed the Government’s efforts in having life insurance for the Armed Forces personnel, students as well as farmers, as they formed a key part of society.

AIA Close to Snapping ING

ING Groep NV  is close to selling its fast-growing Malaysian life insurer to Asian insurer AIA Group Ltd., the first fruits in a broad dismantling of its Asian insurance operations. The sale, and accompanying auctions for other Asian insurance operations, represents yet another European firm selling once-prized Asian assets in the wake of the global financial crisis. These disposals have often been tied to repayments of taxpayer bailouts or demanded by regulators to make financial institutions simpler and more focused on their home markets.

ING is the latest European company looking to sell once-prized Asian assets. The Dutch company is close to selling its Malaysian life insurer. In the case of ING, European regulators made asset sales a condition of winning retroactive approval for its €10 billion ($12.9 billion) bailout by the Dutch state in 2008. It will be left with its commercial and retail banking business in the Asia Pacific region, which fits with its new, banking-focused strategy.

It is unclear what price ING, the Netherlands' largest bank by assets, will get for its Malaysian assets, or for all of the Asian assets it is selling. The Dutch insurer has said that its Japanese, Korean and Southeast Asian insurance operations had a combined book value under international financial accounting rules of €6.1 billion, or about $7.9 billion.

ING, whose presence in Asia dates back to 1857, had built itself into one of the largest foreign life insurers in Asia by annual premium equivalent, a common sales measure among insurers, analysts say. The Dutch firm has been selling life-insurance policies in Asia since the early 1980s and has insurers in South Korea, Japan, Malaysia, Hong Kong and Thailand. It also has joint ventures in mainland China and India and an investment-management business in Asia, all of which it plans to sell.

For buyers like Hong Kong-based AIA, the ING sale represents a rare opportunity to bulk up in a fast-growing region and acquire valuable banking partnerships through which insurers can distribute their products, a process that otherwise can take years to do organically.

The biggest attraction among the ING assets that are being sold has been Southeast Asia. Insurers around the world have called it a sweet spot, given the regions' growth prospects. As an expanding middle class seeks to protect rising living standards, life-insurance premiums are expected to increase 6.6% next year, compared with 2.3% growth in the U.S., according to estimates from reinsurer Swiss Re. Overall, however, the size of the region's life insurance market is still dwarfed by the mature U.S. market.

ING is ranked fourth in Malaysia by gross written premiums and ninth in Thailand, according to analysts. AIA already has a presence in both countries.

Toronto-based Manulife found it hard to compete with AIA for ING's Southeast Asian assets. The Canadian company, which initially bid for all of ING's life insurance operations, also faced opposition from shareholders, who would be asked to buy new shares to finance the deal. Manulife has targeted Asia as a key growth market and is in 11 Asian countries.

Con Succeeds When There Is GREED

The poor are haggling over the difference between 10 sen and 20 sen of price increase while the rich are haggling over the difference between 1% and 2% of investment return. The poor are helpless because they have no money while the rich are seeking ways to make more money.

There is a scene in Hong Kong movie Life Without Principle that shows Denise Ho, who plays a bank customer manager, persuaded housewife Soh Hang-suen to invest the BRIC fund with a greater return. Ho kept explaining the investment risk to Soh, and Soh constantly repeated that she was clear about the risk.

The plot reflects the money game played in a capitalist society. To earn commissions, the bank officer instigated customers to make high-risk investments while the housewife gave up stable fixed deposit to pursue for high returns. As a result, she lost all her hard-earned money.

Gold trading
The recent controversial raid on the Genneva Malaysia Sdn Bhd offices has exposed human nature, just like a movie plot.

There are many people with extra money in the country and the 3.5% bank annual interest rate has failed to meet their desire to make more money. Therefore, many legal and illegal investment plans have emerged in recent years and Bank Negara has revealed the blacklisted 87 investment companies last month to alert consumers.

Illegal investment plans have taken away much wealth, such as the seaweed plantation project in Sabah, coffee chain stores and crab breeding project. The Companies Commission of Malaysia (SSM) also brought to light that a total of 196 illegal investment plans in the market had tried to search for their prey last year.

Investors were fooled as they have neglected two points, namely the investment protection and the rationality of the investment return.

Any companies involved in investment and interest activities must first obtain a permit from Bank Negara. Banks can guarantee the safety of deposits because they are backed by Bank Negara and a deposit insurance mechanism, while the general investment companies have no protection for investment.

Secondly, if the monthly investment return is 2%, it would be 24% for a year. How could the investment companies earn so much money? The higher the investment return amount, the more it is suspicious. Take the seaweed plantation project as an example, the return would be three times the capital after six months with a monthly interest of 7% for 30 years. Even the world’s best investor would not be able to do it.

An investment company might be able to pay the investment returns in the beginning, but once there is a cash flow problem, it might fall into arrears and when investors lose confidence, the company will collapse. Lucky those who get their money and leave in the beginning and pity those who lose even their capital in the end.

Asset bubble
It is what we called a capitalist society. It maximises the profits and thus, various funds emerge, including hedge funds. Fund managers keep speculating futures, commodities, gold and foreign currencies in the market to meet investors’ expectation of high returns, as a return, the fund managers get their rewards.

The money game has led to various asset bubbles. When the bubbles burst, investors suffer great losses and the worst is, the poor will have to bear the economic turmoil resulted from the collapsed asset prices.

Life is short. How can we feel peace and happy if we have to worry so much about losing money everyday?

Money game is always followed by risks. Do investors really understand it?

Snoopy Selling Insurance At Wal-Mart

MetLife Inc. - the largest U.S. life insurer, is turning to the world’s biggest retailer and Snoopy to boost sales of its policies to less-affluent consumers. The insurer began offering prepaid life policies at about 200 Wal-Mart Stores Inc. locations in South Carolina and Georgia last month, Shane Winn, a spokesman for New York-based MetLife, said in an e-mail today. Shoppers can buy a package adorned with an image of the comic-strip beagle Snoopy that offers as much as $25,000 of coverage for one year.

MetLife is seeking to increase the proportion of policies it sells directly to consumers to add clients and cut costs tied to middlemen. The insurer has set a goal to cut expenses by $600 million by 2016 as it targets return on equity of as much as 14 percent. Direct sales, including those through the internet, may climb to 13 percent of the U.S. individual life market in 2016 from 8 percent in 2010, the company said in a May 23 presentation, citing data from Limra.

“That’s where the growth is, that’s where we need to be,”William Wheeler, president of the company’s Americas division, said that day.

A one-year policy, providing a $10,000 death benefit, is advertised at $69 for people ages 18 to 44. Those 60 to 65 would pay $429 for $25,000 of coverage lasting a year. Customers purchase a prepaid card that holds enough value to cover the policy’s cost and then call MetLife to answer health questions and activate the coverage. Those who don’t qualify can return their purchase or use the card to shop for other products.

Everyday Services

The program marks the first time Bentonville, Arkansas-based Wal-Mart has sold life insurance and is part of the company’s efforts to expand offerings of financial products, said Sarah Spencer, a company spokeswoman. She said it’s too early to gauge the customer response.

“We’re trying to make sure our customers have access to affordable, everyday money services,” she said by phone.

The Wal-Mart program is “an effort to pilot a new product in a new channel and in a new market,” and not directly related to the cost-cutting efforts, Winn said.

U.S. life insurers typically focus on selling policies with larger face values to more affluent individuals, said Randy Binner, an analyst at FBR Capital Markets. By distributing coverage at Wal-Mart, MetLife can reach consumers at different income levels, he said.

Insurers “largely focused on affluent and mass affluent Americans, effectively the upper end of the income scale,”Binner said by phone. “There’s a large population in the U.S. that’s pretty underserved.”

Peanuts, Blimp

MetLife’s branding efforts include its blimp, naming rights for the stadium that’s home to the National Football League’s New York Jets and New York Giants, and Peanuts characters created by the late comic-strip artist Charles Schulz.

“Snoopy and the Peanuts characters are strongly associated with MetLife and they’re obviously very valuable,” Binner said.“To the extent that you have a brand like that that has mass appeal, it’s interesting to think about ways you can make your product more available.”

A website explaining the life insurance sold at Wal-Mart lists prices and terms, and also answers questions about the coverage including “Is it really that easy?”

“Does Snoopy live in a doghouse?” is MetLife’s answer. The program doesn’t have a set end date and MetLife will evaluate the results later this year, Winn wrote in an e-mail.

Ugly Swan Life Policy

Life insurance is one of the most misunderstood financial tools in the marketplace and at times it has even been called “the worst financial investment someone could ever make.” On the contrary, life insurance is really like the ugly duckling in the story by Hans Christian Andersen.

At first glance life insurance appears to be ugly because many people think you have to die in order for it to be a good investment. However, the opposite is true. It can actually be one of your greatest investments because it has living benefits that can be utilized during your lifetime. Once you begin to understand the living benefits of this tool, you too will see it as a “beautiful swan,” a financial investment like no other.

Let’s look at the qualities of what most would consider an ideal (swan) investment.
1. Guaranteed Values (Both cash values and death benefits)
2. High Rate of Return (Compared to similar secure investments)
3. Tax Advantages (Both during accumulation and at death)
4. Control, Use, and Flexibility
5. Liquidity (Accessible without penalty or taxes via policy loans)
6. Dividends Paying
7. Sold by Reputable Sellers (It can be purchased from A, AA, or AAA - rated companies)
8. Reduced Market Risk Profile (It is not correlated to market movements)
9. Self-Completing in the Event of Death
10. Self-Completing in the Event of Disability
11. Enhanced Creditor Protection (State Specific)

We can find each of these “ideal investment” qualities in a properly designed whole life insurance policy. A properly designed life insurance policy can do all of this and more.

Gold Buyer - Beware

KUALA LUMPUR- At least 50 gold buyers have been standing vigil outside a trading company for hours in Kuchai Lama, here, as Bank Negara officials raided the premise.

The buyers have been waiting since noon after they heard of the raid, fearful of the fate of the gold they had purchased days ago from Genneva Malaysia Sdn Bhd.
The raid was a joint operation by police, Domestic Trade, Cooperatives and Consumerism Ministry and BNM under the Anti Money Laundering Act.

The company was set up in 2007 and has been charged for a similar offence before. The case is still pending.

Con works in the presence of greed