Prudential Financial Existing South Korea

US-based Prudential Financial Inc. is putting its Korean life insurance operations up for sale as several foreign insurance companies are planning to leave the South Korean market due to its slow growth and poor profitability.
Prudential Financial has tapped Goldman Sachs as lead underwriter of the sale of its Korean unit, which it fully owns through Prudential International Insurance Holdings.

The sale could fetch about 2 trillion won ($1.7bn) and is expected to win the attention of major financial groups in Korea due to the financial soundness of Prudential Life Insurance. Two major financial groups - KB Financial Group and Woori Financial Group - are considered potential bidders of Prudential Life Insurance, according to sources.

Prudential Life Insurance is the 11th largest insurer in the South Korean market, with KRW20.19 trillion ($17.1bn) in total assets as of mid-year. Furthermore, it placed fifth in terms of accumulated net profit, with KRW105 billion ($89m) in the first six months of the year.

KB Financial Group has expressed strong will to strengthen its life insurance business. Woori Financial Group has also expressed interest in acquiring an insurance company under a mid- to long-term project.

Multiple foreign insurance companies are planning to leave the South Korean market as poor profitability predicted to continue. South Korean life insurers booked a 24.3% on-year drop in their combined profit in the first nine months of this year due to mounting operating losses from waning insurance demand.

The net profit of the country's life insurance firms totaled 3.06 trillion won ($2.58bn) in the January-September period, down from 4.04 trillion won a year earlier, according to the Financial Supervisory Service (FSS) on Monday.

Likewise, foreign life insurers' net profit showed a year-on-year decline of 16.3 percent with a slow economic growth, an extremely low fertility rate and a low interest rate leading to a rapid decline in insurance profit.

Tongyang Life Insurance and ABL Life Insurance, which are under contract management by the financial authorities of China, are likely to be put on the market and KDB Life Insurance is currently in the process of sale.

The FSS urged life insurers to break out of their insurance premium-focused business model if they wanted to seek growth in an increasingly saturated market.

FWD Singapore Exit Group Medical

FWD Group, believed to be the fifth-largest group medical insurer in Singapore, is exiting this business here. The insurance arm of Hong Kong's investment conglomerate Pacific Century Group said it will wind down its employee benefits business in Singapore, key of which is group medical insurance, by December 2020, a company spokesman told The Business Times (BT).

This means that FWD Singapore will no longer pitch for new contracts for that business and will also not renew existing contracts once they expire, the spokesman added.

The move will impact over 80,000 members across various companies covered by its employee benefits business, according to FWD's website.

The spokesman also told BT that affected clients were informed last month on the shuttering of the business.

"FWD Singapore has made a business decision to focus on and allocate more investment and resources to other lines of business that support stronger future growth in the market, including our fully direct and online life and general insurance business," the spokesman said on Wednesday (Dec 4) in response to BT's queries.

The company did not provide details on what will happen to its staff working in the employee benefits department.

FWD is controlled by entrepreneur Richard Li, the son of Hong Kong's richest man Li Ka-shing.

In April 2016, it acquired a 90 per cent stake in group medical insurance provider Shenton Insurance from Parkway Holdings, an indirect wholly-owned subsidiary of IHH Healthcare Berhad. Shenton was then rebranded to FWD.

FWD will still maintain its direct-to-consumer business, which offers a suite of life and general insurance products including direct-term life, car, travel, personal accident and maid insurance.

Outside of Singapore, FWD Group spans Hong Kong and Macau, Thailand, Indonesia, the Philippines, Vietnam and Japan, offering life and medical insurance, general insurance and employee benefits across a number of its markets.

Korean Expatriates - Jiwasraya Liquidity Problem

The liquidity problems hounding state-owned insurance Asuransi Jiwasraya has not only affected Indonesian citizens but foreigners as well, including the South Korean vice president of PT Samsung Electronics Indonesia, Lee Kang Hyun.The liquidity problems hounding state-owned insurance Asuransi Jiwasraya has not only affected Indonesian citizens but foreigners as well, including the South Korean vice president of PT Samsung Electronics Indonesia, Lee Kang Hyun.

Lee and 47 other foreign nationals, went to the House of Representatives Commission VI overseeing industrial and investment matters to lodge a complaint over the matter on Wednesday. 

Jiwasraya’s problems date back to late last year, when the company was forced to postpone the payment of mature policies that were marketed through various banks as bancassurance worth Rp 802 billion (US$54.14 million). The policies should have been paid in October 2018.

The company booked losses of Rp 15.89 trillion in 2018 and Rp 13.74 trillion during the first nine months of 2019.

Lee said he had policies totaling Rp 16 billion at Jiwasraya. “Eight billion has been paid but the remaining Rp 8.2 billion is still with Jiwasraya,” he told reporters as quoted by kompas.com.

Besides Lee, 47 other South Korean citizens had been affected by the payment postponement as Korean bank KEB Hana had offered Jiwasraya bancassurance products to its customers in Indonesia.

Lee said at first the Koreans were not worried about Jiwasraya’s initial postponement in October 2018 because it was a state-owned company. But concerns have grown as a year has passed with no news.

“Many of the Koreans that have become victims are women because for Koreans usually family finances are handled by the women,” he said. “Many of these women’s husbands have already finished their assignments [in Indonesia] but have not gone home because of this money. One woman’s husband has even died but she cannot return to Korea because of this issue.”(kmt)

Lee and 47 other foreign nationals, went to the House of Representatives Commission VI overseeing industrial and investment matters to lodge a complaint over the matter on Wednesday. 

Jiwasraya’s problems date back to late last year, when the company was forced to postpone the payment of mature policies that were marketed through various banks as bancassurance worth Rp 802 billion (US$54.14 million). The policies should have been paid in October 2018.

The company booked losses of Rp 15.89 trillion in 2018 and Rp 13.74 trillion during the first nine months of 2019.

Lee said he had policies totaling Rp 16 billion at Jiwasraya. “Eight billion has been paid but the remaining Rp 8.2 billion is still with Jiwasraya,” he told reporters. 

Besides Lee, 47 other South Korean citizens had been affected by the payment postponement as Korean bank KEB Hana had offered Jiwasraya bancassurance products to its customers in Indonesia.

Lee said at first the Koreans were not worried about Jiwasraya’s initial postponement in October 2018 because it was a state-owned company. But concerns have grown as a year has passed with no news.

“Many of the Koreans that have become victims are women because for Koreans usually family finances are handled by the women,” he said. “Many of these women’s husbands have already finished their assignments [in Indonesia] but have not gone home because of this money. One woman’s husband has even died but she cannot return to Korea because of this issue.”(kmt)

Medical Tourism & Great Food - Penang

They come, they eat, and they enjoy the sun. And most importantly, they also get their looks enhanced. This is what most health tourists are coming here for as the reasonably priced procedures, the language and food have made the state one of the most sought-after places for plastic surgeries. 

Singaporean Annie Lee, 56, who came to have her eye bags reduced, said she was paying just over RM6,000 for the procedure.

“Elsewhere, it would have cost me more. Besides, I have trust in the plastic surgeon here, and I have no problem communicating with them, ” she said, adding that it was her second cosmetic procedure here after the first one in 2007.

A plastic surgeon, Dr Lee, said plastic surgery in Penang was significantly cheaper than other countries like Korea and Japan.

“We have the latest up-to-date surgical equipment and technology that are on par with countries like Korea and Japan, which are known to be go-to countries for plastic surgery. Most of our procedures are also on par in terms of material, equipment and implants. Yet, we are cheaper by a significant amount, ” he said.

Dr Lee said the most popular surgeries were eyelid surgery, facelifts, rhinoplasty, breast implants, tummy tucks, liposuction, laser treatments and other injectable fillers.

He said most of the clients he received were mainly from Indonesia, adding that he also received Singaporean patients who would travel to Penang for plastic surgery as it was much cheaper.

“The surgeries here range from RM5,000 to RM50,000, and if they are carried out together, they only come up to S$16,000, which is much cheaper for Singaporeans. As for my Indonesian patients, it is more convenient for them to travel to Penang. Flight tickets are also cheaper for them. Hence, when they visit Penang for plastic surgery, they end up paying only half the amount that they would have to fork out elsewhere, ” he said.

Dr Lee also said his Indonesian patients felt at home in Penang due to the language and food. Dr Lee said out of about 60 patients he got in a week, an average of 20% to 30% of them were foreigners, including Caucasians.

Additionally, the Hokkien dialect spoken here makes the Indonesian Chinese feel at home. 

“Regardless, results from the plastic surgeries are the most important factor. When clients are happy with the results, they return for other procedures. Our results are on par with procedures that are usually done in countries like Korea, ” he said.

Meanwhile, another plastic and cosmetic surgery senior consultant at a leading hospital said most of their patients were Indonesian Chinese from Medan, Acheh and Palembang.

“The treatments and procedures they seek are mostly double eyelid surgery, nasal augmentation and lower eyelid reduction, which concerns eye-bags. Other foreigners like Europeans, especially those from the United Kingdom, would usually opt for nasal reduction and facelifts, as the price is much cheaper here, ” he said yesterday.

Penang tourism development, arts, culture and heritage committee chairman Yeoh Soon Hin said Penang was the top state in the country when it came to medical tourism.

“Many tourists seek good and quality services through cosmetic surgery overseas, and this makes Penang an attractive option. This is due to the high cost of the procedures in Western countries compared to Penang. Additionally, language is not a problem here for Westerners as many doctors here speak English fluently. We also offer reliable services as many professionals here were trained overseas, ” he said.

Penang, which generates up to 50% of the country’s medical tourism income, was earlier quoted as being the “top medical tourism destination in Malaysia” in a recent article by The International Medical Travel Journal, a world-leading journal for the medical travel sector.

According to the Malaysian Healthcare Travel Council (MHTC), Penang’s healthcare industry alone generated some RM500mil in revenue during 2017.

MHTC reportedly attributed success factors for Penang’s medical tourism to affordable private hospitals, niche marketing strategy and supporting infrastructure like hotels and malls.

It said that of the total, Indonesians make up the biggest group of inbound tourists seeking medical treatment at various medical facilities in Penang.

Detariffication Malaysian Insrance

The ongoing phased detariffication of the Malaysian insurance industry is not expected to lead to another wave of consolidation. However, the general trend is expected to continue, potentially driven by a combination of regulation and market opportunity for larger companies to expand their footprint.

Speaking to the media on the sidelines of the launch of the Malaysian Insurance Highlights 2019 report, Malaysian Reinsurance Bhd (Malaysian Re) president and CEO Zainudin Ishak (pix) said that currently, the Malaysian market is considered stable.

“Across the players in Asean, Malaysia is ranked second after Singapore in the average size of general insurance companies with a value of US$161 million (RM672 million), so with the 21 insurance companies currently operating along with the four takaful providers, this is sufficient for the present moment.

“However, this dynamics might change for a variety of reasons. There’s no ideal number of companies to have in the market, but if you look at the critical mass, each and every company has to put up capital by the shareholders and that will have to generate returns.

“At US$161 million per insurance company, that is already above critical mass levels,” he said.

Apart from market consolidation, the report also highlighted other major trends impacting the industry, namely: detariffication, B40 strategies, takaful prospects and InsurTech.

On detariffication, the report stated that of the interviewees polled, 52% expect average motor insurance rates to be below pre-tariffication levels, while 83% expect the same to occur for fire insurance prices.

However, this is subject to significant uncertainty over Bank Negara Malaysia’s future pace of liberalisation.

Meanwhile, Dr Schanz, Alms & Co AG partner Henner Alms said the current mySalam programme may not be sufficient to meet and address the demands of those who need it.

Alms said the current programme covers 36 critical illnesses, but the challenges that the B40 segment faces could be far wider than these.

“The question is how do you get beyond the current solutions that are provided? There have been different approaches taken across emerging markets, but it is agreed that the under penetration in low-income segments is a major challenge for every society.

“These are people that are most exposed to disasters and have the least amount of protection, and therefore it is in the interest of every policymaker and insurance provider to find a solution to address this kind of challenge,” he said.

According to the report, when asked about potential alternatives to the current B40 scheme, survey participants came up with suggestions such as subsidised compulsory insurance schemes, technology-enabled solutions and capital relief and tax incentives for those insurers that are actively serving the B40 segment.

Other suggestions also include public-private partnerships between insurers and government agencies, dedicated public-private awareness programmes and innovative ways of premium payments.

Finally the report looked at the long-term effect of digitisation on the industry, and the findings showed that 84% of the interviewees said they consider platform-based ecosystems irrelevant.

“Most experts and executives think that such ecosystems ‘will rise but slowly’. Consumers are not seen as being ready yet for such digital solutions.

“In addition, even the longer-term potential of digital insurance ecosystems is expected to be limited to the segment of low and easily affordable premiums,” it noted.

The inaugural MIH is the latest in a series of thought leadership publications from Malaysian Re, and offers a comprehensive review of the current opportunities and challenges facing Malaysia’s general and takaful markets.

mySalam Is Insufficient

The benefits of the free National Health Protection Scheme, mySalam, may not be sufficient to meet the takaful needs of the bottom 40 percent household income (B40) group and make significant penetration in this segment, said a research consultant.

Dr Schanz, Alms & Company partner Henner Alms said although the demand for the government's insurance initiative was substantial, the programme had limitations.

"It covers 36 critical illnesses and provides a reward in case members acquire any of these diseases. However, the challenges the B40 segment are facing could be far wider. The question is really how do you get beyond the current solutions that are provided," he said.

He told reporters this at the launch of Malaysian Reinsurance Bhd’s inaugural issue of Thought Leadership publication, “Malaysian Insurance Highlights (MIH) 2019” in Kuala Lumpur today.

Alms said there had been very different approaches taken across emerging markets to gain access to more people.

"I think it is agreed that the under-penetration in low-income segments is a major challenge for every society because these people are those who are more exposed to disasters and have the least protection.

"Therefore, it is in the interest of every policymaker and insurer to find solutions to address this kind of challenge. However, it is not easy and often enough solutions that have been taken across different markets are frequently a combination of the private sector (insurers) and the government on the other side," added Alms.

On broadening the 36 critical illnesses scope, he said it was not necessary because the B40 segment was facing a number of different challenges.

"If you take, for instance, China and India, the agricultural insurance in combination with the government is a very good solution to provide income safety to that segment, but that is a completely different approach that will also provide great benefits," he said.

Meanwhile, Zainudin Ishak, chairman of MNRB Holdings Bhd, the parent company of Malaysian Re, said the idea was also to come up with a scheme that is commercially driven, supported by sufficient pricing mechanism with the right benefits.

"I think the regulators are trying to encourage industry players today to ensure that we're able to give the most efficient distribution channel - in terms of digitising insurance - so you're able to remove some of these costs and these costs can be translated directly to savings in (insurance) premium," he said.

Zainudin said those are some of the challenges besetting the insurance industry today and all stakeholders needed to find a solution.

MIH 2019, which includes input from over 30 senior insurance executives and experts operating in the market, focuses on five major trends, namely de-tariff, market consolidation, B40 strategies, takaful prospects and InsurTech.

Shaky Distribution Model

Life insurance industry growth and profits have been badly hit by disrupted advice distribution channels over the past 18 months. The industry is now loss-making in aggregate, the consultancy says. A $33 million profit in 2018 has worsened to an $86 million loss in the first half of this year. The life industry’s profit was $1.5 billion two years ago.

Ordinary life risk product lines reported a $130 million loss in the first half of this year, with retail disability income the worst performer. It made a $499 million loss in the first half of the year.

Disability income business made a loss of $567 million in 2018. Product design issues, demographic trends, regulation and changing community expectations all contributed to its woes.

The introduction of the Life Insurance Framework and a retreat from direct distribution models after the Hayne royal commission has reduced commissions and led to subdued growth rates, KPMG says.

Direct premium growth contracted by 1% in the first half of the year compared to the same time last year and increased by only 1.6% over the whole of 2018.

Superannuation risk products have also deteriorated, with just $44 million profit during the first half of the year, compared to $372 million over the whole of 2018.

KPMG Partner and Head of Life Insurance Pauline Blight-Johnston says the past two years have been a considerable challenge for the industry, and the public is increasingly questioning the industry’s value.

“The profitability challenges driven by higher than expected claims payments across the industry are perhaps the greatest we have seen in a generation,” she said. “There is clearly a large disconnect between the perceived and actual value being delivered by these products.”