FOLLOWING its recent acquisition of the insurance business of Amanah General Insurance Bhd (AGIB) for RM93.1mil, Japan-based Tokio Marine Insurans (M) Bhd (TMIM) is setting its sights on expanding its growth in a number of key business areas.
The second largest marine insurer in the general insurance industry, TMIM appears better poised now to gain greater market share of not only multinational-related business, but also that of the local general sector through its activities in the development of agency and broking business, its chief executive officer K.C. Phang said in an interview to explain future business implications of the move.
TMIM and AGIB commenced discussions in 2001 and the business acquisition agreement was entered into in May the following year, with TMIM purchasing the business, assets and liabilities of the latter, thereby expanding its branch network from two to eight offices, including one duplicated office in Malacca.
The acquisition and transfer (between the two parties) took effect from Nov 1 last year, following the Vesting Order granted by the High Court of Malaya on Oct 22 of the same year.
The acquisition, funded entirely by TMIM, is in line with its own policy as well as that of its holding company The Tokio Marine and Fire Insurance Co Ltd to expand business domain in the country,'' Phang said.
While TMIM is strong in marine and fire portfolios, AGIB comes with a mix of traditional corporate connections, agency and broking business. AGIB wrote around RM73mil in gross premium in 2001, with fire representing 33% of the total portfolio, motor 33%, marine 5% and miscellaneous 29%.
The combined premium income of TMIM and AGIB for the FY2001 totalled almost RM190mil and the former may see a combined portfolio well in excess of RM200mil when the books are closed for the financial year (FY) ended December 2002.
TMIM is optimistic its premium income for the FY2002 will touch RM173mil, representing a growth of 48%. The combined premium should propel the company to the top 15 general insurance companies,'' Phang said.
Where TMIM will be in terms of size henceforth depends on its management policy and the comfort level it now has. While TMIM may strive to enlarge its market share through growth strategies and development plans which have since been initiated, some rationalisation and consolidation of the business following the acquisition seem inevitable. This will assert some pressure on the top revenue line.
The positive point that has emerged is that the acquisition has not only led to a larger and greater spread of assets and an increased clientele base, but also a wider network in terms of operations throughout the country, as the six branches of AGIB will from now on play a more supportive role in TMIM's total business plans,'' Phang said.
How does TMIM see its non-fire and marine cargo portfolios following the acquisition exercise? Phang said the company was confident of making significant strides with the steady and encouraging growth of its agency force in other areas of business such as personal-line classes - householders, motor, personal accidents and medical package policies.
Given the increasingly challenging scenario that is emerging in the general insurance industry due largely to competitiveness, Phang said TMIM was bracing itself for some tough times ahead, including having to incur a higher cost of operations brought about by the second consecutive year of renewal of treaty reinsurances.
Reinsurers are walking out of programmes which to their mind are no longer profitable and where terms and rates fall short of their expectations, but TMIM is confident of being on top of the situation,'' he said.
And, why is TMIM so confident about its future position as a player in an increasingly difficult environment?
Phang said the company had reasons to be optimistic as its competitive edge'' is its highly skilled staff force who know the market and local conditions well and are able to work cohesively as a team within the framework of high professional standards comparable to the best in the industry.
Asked whether the slower growth in overall global business had affected TMIM, he said that like most players in the industry, the company had been affected by the slower pace of business in the past two years.
The orders by overseas buyers for our manufactured goods were considerably lower judging by the declarations received. Maybe, more so in the case of TMIM, because of its larger than normal base of marine accounts,'' Phang said.
While acknowledging that global business trends were becoming more uncertain, coupled with the lingering negative impact of Sept 11 on reinsurance costs, the company believes its target of expanding its business domain is both realistic and in line with its own objectives as well as that of its holding company.
Notwithstanding the fact that TMIM's base of international and multinational clientele is very much larger than many of its peers, the company has also set its sights on expanding the local business sector, especially that which is primarily in the hands of brokers and agents. It is believed that agents control roughly 40% of the total market premium estimated to be worth RM6.9bil for the first nine months of FY2002,'' Phang said.
By this, he meant that agency business could easily become the company's mainstay one day.
For further penetration of the local market, TMIM is undertaking several measures including providing more training sessions and seminars for agents, the kind that are oriented towards upgrading not just business skills but also honing communication skills to meet the discerning demands of a growing customer base.
Having scored high marks for its smooth acquisition of AGIB, TMIM now does not rule out the possibility of venturing into more acquisitions. According to Phang, its parent company is upbeat'' about the prospects of doing more insurance business in the region, and by all appearances, the maiden acquisition by TMIM is expected to serve as a vital launching pad to help realise its corporate objective of becoming a key player.
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