Insurer looks at lower dividends

  • Business
  • Wednesday, 07 May 2003


UNI.ASIA Life Assurance Bhd, formerly known as EON CMG Life Assurance Bhd, will not raise its life insurance premium rate in the near term despite the current economic uncertainties. 

Instead, the company was looking at lowering the current 7% per year effective rate of return for policyholders, chief executive officer Ooi Say Teng said after the launch of new names for SEA Insurance Bhd, EON CMG Life Assurance and Menara SEA Insurance in Kuala Lumpur yesterday. 

The new name for SEA Insurance is Uni.Asia General Insurance Bhd, while Menara SEA Insurance is now Menara Uni.Asia. 

Like many other local life insurers, Uni.Asia Life had raised its life insurance premium rates by between 10% and 15% last year to offset poor returns on investment, and Ooi noted that premium rates higher than the current 7% would in the longer run burden policyholders. 

Deputy Finance Minister Datuk Chan Kong Choy (right) and Tan Sri Mohd Saleh Sulong at the launch of new logo and names for SEA Insurance, EON CMG Life Assurance and Menara SEA Insurance.

The Director-General of Insurance Annual Report 2002 released on Monday had warned that a further revision in the pricing of life insurance products might be necessary to reflect the less favourable returns in the current investment climate. 

Ooi said Uni.Asia Life, a member of the Uni.Asia Capital Sdn Bhd group (formerly known as Tower-Ed Sdn Bhd) opted for dividend revisions as it believed that the current poor investment climate was only temporary. And when the situation returned to normal it could raise the dividend rate. 

He explained: “If you increase the premium now, you cannot bring it down in the following years; the contract is long term in nature. But if things look up, you can increase the dividend rate.” 

Uni.Asia Life Assurance, which has more than 50,000 customers, manages RM230mil in funds – RM50mil invested in equities, and the rest parked in fixed income and bonds. 

Great Eastern Life (M) Bhd, in a Starbiz report on Tuesday, had said the company was not expecting to raise premium rates over the next year or two. 

Its chief executive officer Alex Foong had said the company had already responded to the low returns in the equity market, adjusting its premium rates last year. If the situation persisted, adjustments in premium rates or bonus rates for participating products might have to be implemented. 

According to Foong, every insurance company would have different ways of overcoming such a situation. ''As an example, for new products, the premium charged could be increased while maintaining the bonus rate, or the premium rate could be maintained and the bonus rate reduced,’’ he said. 

Hong Leong Bank general manager (consumer branch banking) W.H. Huan concurred with Foong. 

“At this moment, premiums collected are channelled into investments,'' Huan said. “In an uncertain situation, we may look at either increasing premiums or lowering dividends, depending on the level of competition. It may involve other factors besides pricing. Efficiency and after-sales service are also important.'' 

Meanwhile, Uni.Asia Life's holding company, Uni.Asia Capital – 51% owned by DRB-Hicom and 49% by Singapore-based UOB Group – has projected RM935mil in new business premiums in its first year of operations, with the bulk to come from the life division. 

DRB-Hicom group chairman Tan Sri Mohd Saleh Sulong said the group had projected life insurance premium income in 2003 at RM535mil. 

“Beginning with a target of 5% market share in 2003, Uni.Asia Life Assurance is confident of capturing 10% share in 2004 and 15% share in 2005,'' he said. 

This would be made possible by mobilising the group's enlarged network, its bancassurance distribution channel, which includes 2,700 life insurance intermediaries, he said. 

According to Saleh, the life insurance business was slated for further growth next year, partly due to growing awareness of a need for “protection” against the Severe Acute Respiratory Syndrome. 

The group's life division was expected to fetch RM700mil premium income next year, he added. 

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