Khazanah’s Avicennia to invest in neighbouring markets

KUALA LUMPUR: Khazanah Nasional Bhd’s subsidiary, Avicennia Capital Sdn Bhd, aims to invest in emerging markets in South-East Asia.

The Malaysia-based holding company is looking to grow its business in the country, Indonesia, the Philippines, Singapore and Thailand.

“Our primary thrust is on life and health insurance, on top of general insurance,” Avicennia chief executive officer Alexander Ankel, who is a 30-year industry veteran, told StarBiz.

“We’re open to the full menu of insurance services in Malaysia. In other countries, however, our focus will be on life, pension, health and travel insurance.”

He said Avicennia aimed to explore building best practices around takaful insurance in Malaysia, as well as developing it in Turkey (where it is called Participating Insurance), as there have been signs of interest.

“We see from their banks that they want to start consumer loans and savings products built around the Islamic financing principle,” Ankel said.

“We are looking at South-East Asia and Turkey as investment targets, as we have a solid relationship with Turkey.”

As of last April, Khazanah’s investments in Turkey amounted to more than US$2bil (RM6.5bil).

“Our recent investment in Acibadem Sa lık ve Hayat Sigorta Acıbadem Sigorta is emerging as one of Avicennia’s pillars. Turkey’s close proximity to Europe also promises growth potential supported by the Government’s legislation,” Ankel said.

The start-up had, in November 2013, completed the US$252mil (RM810mil) acquisition of a 90% stake in Acıbadem Sigorta, a major health and life insurer in Turkey, which holds the second-largest health insurance market share in the industry.

The other two companies under Avicennia’s portfolio are CIMB’s Sun Life Malaysia Assurance Bhd and Sun Life Malaysia Takaful Bhd, which were acquired in April 2013.

“The prospects for us in acquiring these companies would be to have a balanced global portfolio and access to markets with supportive demographic numbers, while leveraging their risk and utility scales as with insurance companies. Irrespective of who buys into whom, it helps the company to grow and gives it access to new distribution,” Ankel said.

Avicennia plans to invest in companies that have reached – or are about to reach – critical mass in terms of skill sets combined with relevant distribution capabilities, specifically banking, that cater for sustainable growth. “We are satisfied with our engagements in the existing subsidiaries and shareholding agreements, as in the case of Sun Life.”

While aiming to build our team to about 25 people by next year, we will be looking into introducing a business model to satisfy all our stakeholders jointly with the existing management team of the subsidiaries,” Ankel said.

Speaking on the outlook for the insurance industry in 2015, Ankel said it was expected to grow 1%-2% ahead of gross domestic product (GDP) growth and would most likely exceed that target.

“GDP targets might be revised due to (low) oil prices and the hike in the US dollar, but these changes are cyclical and temporary,” said Ankel, adding that Avicennia would eventually introduce a micro-insurance model targeting developing countries outside of Malaysia.

Meanwhile, the pending tariff deregulation of fire and motor insurance would likely encourage a second consolidation of the insurance industry, Ankel said.

“It will be a test for many companies, including their shareholders and management teams. There would then be an upside for takaful insurance, as there would be ample room to improve the product offering. As it is, there is room for takaful insurance to grow in Malaysia, as it hasn’t differentiated itself enough as a compelling product proposition.”