MAA Assurance Bhd, virtually the sole contributor to main board-listed MAA Holdings Bhd, expects a string of positive news in the next 12 months that includes strong premium growth and writebacks in equity provision.
MAA Assurance executive director/chief executive officer Ramlan Abdul Rashid said the improving equity market would contribute significantly to the company's bottomline.
“At the current KLSE Composite Index level, which is slightly above 800 points, it would translate to a writeback of RM160mil,” he told StarBiz.
Premium growth and controlled claims ratio, as well as equity market investments, are crucial factors in determining the profitability of insurance companies.
A foreign research house said the strong premium growth recorded by MAA Assurance in the first half of the year was expected to continue in the second half.
“Our premium growth would be roughly three to five times the GDP growth. So at more than 4.5% expected this year, our growth would be between 14% and 20% for the current year,” said Ramlan.
For the year ended Dec 31, 2002, MAA Assurance's total premium for both life and general was RM1.256bil. New business for life division last year was RM380mil while for general it was RM416mil.
The company has also added a 25% premium loading in third party insurance from July, and according to the foreign research house, this should improve claims ratio beginning the second half of this year.
On the company's RM39mil loans extended to Tajo Bhd, Ramlan said positive developments in the PN4 concern suggested that the amount would be recovered soon.
Tajo Bhd expects to complete its restructuring exercise that will see MAA Holdings emerging as the controlling shareholder with a 54.1% stake in Mithril Bhd, the company that is taking over the listing status of Tajo.
A recent newspaper report quoting Mithril chief executive officer Yeoh Hong Hwang said Tajo was expected to complete its restructuring exercise by year end and to be requoted in March next year.
The research house said that there might be more good news for MAA Assurance to spark an upward re-rating of MAA Holdings.
They include a potential writeback in over provision of taxes, ranging between RM18mil and RM20mil, by year end.
“The Inland Revenue Board had earlier requested for the provision be made for the three years from 1995 to 1997, but have recently sent a statement to waive it,” said Ramlan.
Other positive developments that are closely watched by the industry are the long overdue motor tariff rebalancing that could raise premiums by 20% and the possibility of a revival of the Employees Provident Fund (EPF) private annuity scheme similar to the previous product that was discontinued.
“We are hoping for both developments to materialise. The motor tariff, for instance, has been static for 20 years. The cost of labour has gone up, the cost of spare parts has gone up. So, the rebalancing should benefit the whole industry and not just insurance companies alone,” he said.
As for the EPF-related private annuity scheme, Ramlan said the proposal tabled would be similar to the unit trust scheme, where EPF contributors were allowed to withdraw a certain portion of their money to be invested into insurance products.
In the previous EPF scheme, MAA Assurance bagged the highest spot, recording sales of over RM1bil.
Ramlan declined to provide any information when asked about the possibility of MAA Assurance merging with a foreign company, as reported early this year.
The report, quoting sources, said MAA Holdings would likely partner a foreign insurance company with a strong brand to help it further penetrate into the Indonesian and the Philippines markets.
MAA unit, MAA International Assurance Ltd, currently operates in Indonesia through PT MAA Life Assurance and PT MAA General Insurance.
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