SHAH ALAM, Nov 24 (Bernama) -- Selling the life insurance business of
Tahan Insurance was a tough decision, according to Idaman Unggul Bhd's
executive chairman Datuk Annuar Senawi.
"If you asked people in the market, they will say Annuar is a specialist
in life, and when he is selling something that is very dear to him, there
must be other bigger objectives he want to achieve," he said in an
interview with Bernama.
"I have a very dear uncle who asked why I was selling my best asset,"
Annuar said, acknowledging that even those who close to him could not
understand the rationale behind selling the life insurance business.
"To most investment bankers, the life insurance licence is valuable
because it allows you to collect money from the public and keep it for
30 years," he said.
However, according to him, the sale of the life insurance business marked
a turning point for Idaman.
Tahan Insurance, the insurance arm of Idaman, recently sold its life
insurance business to Affin Holdings Bhd and National Mutual International
Pty Ltd (NMI) for RM121 million cash, and the process is expected to be
completed in three months.
NMI is a wholly owned subsidiary of AXA Asia Pacific Holdings Ltd.
Annuar said the life insurance business was easier to sell because many
wanted it.
"I am beginning to appreciate what Bank Negara Malaysia was doing
in pushing me to conclude it quickly. Your mind has to be focused on the
business because whatever you do today, if you don't do it right, you
will pay the price down the road five to seven years later," he said.
Annuar said he had to make the major strategic decision.
"If I continue to have both (general insurance and life insurance
businesses), I might lose both," he said, pointing out that the financial
sector is in a capital-intensive industry.
He added without large capital, it would be difficult to expand in the
financial sector because in the business environment, "money and
technology get the best brains".
Annuar estimated that to be among the top five insurance companies in
the country, Tahan Insurance with the life insurance business would have
to spend RM600 million in the next five to 10 years to invest in infrastructure,
particularly distribution channels.
He said it was not easy to do well in the life insurance business if
the company was not linked to a bank, which has a captive customer base
where it could carry out data mining and deduct premiums from the accounts
of customers.
Annuar said Tahan Insurance was now aiming for a place among the top
five insurance companies in terms of profitability and among the top 10
in terms of premiums.
"You go one step backward to go two steps forward. That is reality.
Sometimes you want to keep everything but end up losing everything,"
he said.
In terms of assets, Tahan Insurance is ranked ninth among 26 insurance
companies in the country.
"We won't go for size alone but sometimes to have large profits
you must have a large volume of business. If you want a certain level
of profit, you must have the volume," Annuar said.
"But if you grow the business too fast, you are bound to suffer
in terms of profitability," he said, mindful of the limitations.
"We have to sell the business for numerous reasons, but suffice
to say that we needed to raise money to increase the capital of Tahan
Insurance to address the shortfall in the general insurance business,"
he added.
Annuar said when Idaman embarked on an exercise to merge three insurance
companies -- Talasco, People Insurance and Tenaga Insurance -- in the
2003-2004 period to form Tahan Insurance, it discovered that one of them
had inadequate provision.
As a result, he said, Tahan Insurance needed to sell the life insurance
operations to raise money to address that shortfall in insolvency margin,
which was resolved after the sale.
Annuar said there were various options for Tahan Insurance in order to
keep its life insurance business such as bringing in a partner to inject
capital, and there was no shortage of suitors.
He thought then the best way was forming a strategic alliance with a
bank, and many were interested including a few major foreign banks which
sent their top executives to meet him.
However, such a tie-up with a foreign bank did not get the blessings
of the central bank.
Finally, Bank Negara came up with a solution for Tahan Insurance, which
was to split the life insurance and general insurance businesses.
"With the plan, it became easier for us to work out our strategy
on how best to resolve the shortfall in Tahan," he said.
However, Annuar said, Tahan Insurance would not stop looking for strategic
alliances going forward and in developing new products.
"We are looking at two major new areas to spread our risks, marine
cargo and health insurance," he said.
Tahan Insurance will be announcing its major thrust into marine cargo,
Friday.
Its expansion into new products is to improve its product mix, which
is now dominated by the motor business at 65 percent.
Annuar said Tahan Insurance is expected to shift its portfolio to 49
percent motor and 51 percent non-motor by 2008.
He also said that he was mindful of the plight of Idaman shareholders
as the share price plunged to around 24.5 sen currently compared with
a high of RM1.60 previously.
"My shareholders have been waiting for two years for something to
happen but in insurance when you go into long-term business it takes seven
years," he said.
"We have gone through four years now and I think we have another
three years to clean up everything," he added.
Annuar, who emerged as the white knight of beleaguered Idris Hydraulic
(M) Bhd to rescue Talasco, which was then a low-profile composite insurer,
said he is in the insurance business for the long haul.
"When we do something, we want to do it right so that eventually
we are able to sustain the profitability generated," he said.
Annuar said the sale of the life insurance business would provide a gain
of RM87.3 million next year.
"Although it is a one-off thing, I think it will give us confidence
to meet people in the market because while we may think long term, people
sometimes look at you on a short-term basis," he said.
Therefore, he added, Idaman needed to "create excitement" to
sustain investors' interest.
-BERNAMA-
|
