Malaysia’ Kurnia to Expand Non-Motor Insurance Business

Malaysia's largest nonlife insurance company, Kurnia Insurans (Malaysia) Bhd., said it is opting to expand its non-motor business after seeing a 23% increase in those lines in the first half of 2010.

Kurnia Insurans, a subsidiary of Kurnia Asia Bhd., said it aims to achieve 50% growth in non-motor insurance business in 2010, driven by new product launches for lines including medical and personal accident.

"We are totally committed to build a strong non-motor portfolio. We will continue new innovative initiatives," said Tan Sri Kua Sian Kooi, executive chairman of Kurnia Asia, in a statement.

The nonlife insurer aims to grow its non-motor business, with a target 30% share of total gross premiums by 2012. The company reported a net profit of 27 million ringgit (US$8.6 million) in the six months ended June 30, down from 69 million ringgit a year earlier.

Motor insurance accounted for 88.8% of Kurnia Insurans' net premiums of 907.98 million ringgit in 2009, according to Bank Negara Malaysia, the country's central bank and financial regulator. Medical/personal accident and fire classes represented 6.3% and 1.5% of its total net premiums, respectively.

In Malaysia, motor insurance has experienced deteriorating underwriting results with an industry combined ratio 112 in 2009, due to poor performance in third-party death and bodily injury coverage, which posted a combined ratio of 292.4. The motor insurance portfolio was unprofitable in seven of the past eight years, according to the General Insurance Association of Malaysia.

Fraudulent claims, vehicle thief, inflated insured costs, escalating court rewards and higher capital adequacy levels under the risk-based capital regulatory regime have contributed to weakening results of motor insurance, said the nonlife association.

Motor insurance was Malaysia's biggest nonlife line, with net premiums of 509.2 million ringgit and 3.9 billion ringgit for third-party death and bodily injury insurance and other comprehensive insurance in 2009, respectively. Overall, the motor sector represented 58.6% of the country's total nonlife net premiums, according to Bank Negara.

Kurnia Insurans accounted for 12% of market share of Malaysia's nonlife sector, with net premiums of 907.98 ringgit in 2009, according to Bank Negara. The insurer had 18.2% market share in motor insurance, with net premiums of 805.4 million ringgit.

For the long term, Kurnia Insurans is looking into growth opportunities in non-motor and overseas businesses. "We have a campaign and initiatives to drive production in our non-motor business. These actions plans aim to build a strong platform for sustainable non-motor growth," said Tan Sri.

In overseas markets, Tan Sri said the insurer "is channeling resources to grow our existing operations in Indonesia and Thailand."

In Cambodia, Kurnia Asia has formed a joint venture company, Kurnia (Cambodia) Inc. Co. Ltd., in June. Kurnia Asia owns 60% of shares in the venture and its individual partner Oum Prum Mondale for the remaining shares. The Malaysia-listed company is applying for an insurance license for the operation in Cambodia.

In 2008, Kurnia Asia teamed up with Canadia Investment Holding, owner of Cambodia's largest bank, to form joint venture Cana Kurnia Insurance plc. in Cambodia to offer nonlife and life insurance, but that proposed insurance venture was terminated.

In Malaysia, the nonlife insurer said it is "deploying various distribution channels to grow its non-motor business" with the development of "a 2,000 non-motor agency force" while it is on track to recruit 200 more by the end of 2010. The insurer added it has won several key corporate accounts during this first half and has teamed up with new brokers.

Kurnia Asia is also looking to expand into takaful, or Islam-based insurance business in Malaysia as it awaits a response from Bank Negara to its application for a takaful license (BestWire, June 23, 2010).

In funding its business development, Kurnia Asia has been approved for a private placement of 148.84 million of new ordinary shares in August, representing 10% of the company's issued share capital.

(By Iris Lai, Hong Kong bureau manager: [email protected])