Horizon.my

RHB Research has recently published an interesting report on the life insurance sector in Malaysia.

Currently there are 16 life insurance companies in Malaysia and the major players are Great Eastern, AIA, Prudential and ING. The industry size is around 11.9m policies with annual premiums of RM17.4 billion. RHB Research expects insurance premiums to grow by 12-13% per annum for 2010 to 2012.

Malaysia has a relatively low market penetration rate, with premiums to GDP ratio of 3%. This compares to 7.9% for Singapore, 13.9% for Taiwan and 9.1% for South Korea.

Rising healthcare cost and the use of life insurance as a savings plan will play an increasingly important role to up the penetration rate in Malaysia. It is believed that Muslims consider life insurance to be “haram” or sinful and this has somewhat inhibited the growth of life insurance in Malaysia. However with the introduction of Family Takaful, there is now a strong potential for the life sector to grow.

In addition the government has continued to support the sector in its 2010 Budget. The income tax deductible amount was raised from RM6k to RM7k per annum. This is to encourage greater savings and protection among Malaysians and reduce burden on the government as our population ages.

If you are interested to profit from this growing sector, most Malaysian banks can offer some sort of exposure to the life insurance market. However, some other purer plays listed on Bursa Malaysia include:

* Total Assets includes policyholder funds

LPI Capital (which owns Lonpac Insurance) trades at a huge premium, much like its parent company Public Bank Bhd. On Bursa Malaysia, we can’t really buy exposure to the leading life players such as Great Eastern, AIA and Prudential. So looking at this, Allianz and Manulife are both decent bets for long term exposure to the Malaysian Life Insurance market. Both are controlled by leading global life companies and have the expertise to build their operations over here. In addition, Manulife has just formed an asset management division which is currently managing unit trust funds and seeking client mandates for managing equity funds in the Asia region. It would give exposure to the Malaysia funds management market in the longer term.

Bursa Malaysia stock codes shortnames:
- Allianz Malaysia Berhad (ALLIANZ)
- LPI Capital (LPI)
- Kurnia Asia (KURASIA)
- Manulife Holdings Berhad (MANULFE)
- MNRB Holdings Berhad (MNRB)

Disclosure: The author holds shares in Manulife Holdings Berhad.