KUALA LUMPUR (March 17): AIA Bhd, Hong Kong-listed insurer AIA Group Ltd’s Malaysia unit, believes there might be some misunderstanding that caused the anti-competition allegation by the Malaysian Competition Commission (MyCC) in relation to price-fixing in the automobile repair industry.
At a press conference today, AIA’s chief executive officer Anusha Thavarajah said the company, which is one of 23 companies being investigated for anti-competition, has provided all documentation required by MyCC, and is awaiting the result of the investigation.
“We are a composite insurer, yes, we have a general insurance license, we are one of the 23 companies that are involved, and we are working through to resolve this with the commission. We don’t have any updates at the moment,” she said.
Nevertheless, Anusha said general insurance only represents a very small portion of the group’s insurance portfolio, and hence does not expect the result to have significant impact on AIA’s business.
For the financial year ended Nov 30, 2016 (FY16), general insurance contributed 8% of AIA's total annualised new premiums (ANP) of RM1.407 billion, while the remaining came from life insurance.
On Feb 22, the MyCC announced it had issued a proposed decision to impose financial penalties totalling RM213.45 million against 22 general insurers in Malaysia, over the agreement with the Federation of Automobile Workshop Owners’ Association of Malaysia (Fawoam) on trade discount rates for parts of certain vehicle makes, as well as on hourly labour rates for workshops under the PIAM Approved Repairers Scheme (PARS).
These insurers will have 30 days to make a written representation to the MyCC.
“We have cooperated and provided the documents required. I think it is just [a] misunderstanding between parties, and ultimately, the right resolution will come about,” Anusha said today, after AIA’s annual financial result briefing.
During her presentation, Anusha said AIA managed to maintain its third place in terms of market share among industry peer.
“We [are] still able to achieve high teens, about 18.4% market share, but we have the highest growth rate of 28.6% from FY15 among the top five players,” she said.
“We are still extremely optimistic with Malaysia as a place to grow our businesses, despite there [being] worries that the economy is not doing well, but our FY16 VONB shows that we are still growing,” she said, but declined to provide any outlook statement for FY17.
AIA’s FY16 VONB grew by 23% from RM664 million in FY15. The company’s operating profit after tax for FY16 increased by 6% to RM1.11 billion, from RM1.04 billion.
According to AIA Group’s annual reports, its Malaysia operation generated a total revenue of US$2.16 billion (RM8.93 billion) for FY16, a slight decline of 1.1% from US$2.19 billion (RM8.35 billion).
She explained that the average foreign exchange rate between ringgit and the U.S. dollar applied by AIA Group were RM4.13 for one U.S. dollar in FY16, and RM3.82 for one U.S. dollar in FY15.
For FY17, following an internal market survey, Anusha said AIA is going to focus more on products that cater to children, women and high-net-worth individuals.
"The overall insurance penetration rate is at about 56%, still very low from Bank Negara's [Malaysia] target of 75%. So this year (FY17), we are opening another four branches in Kota Kinabalu, Penang, Ipoh and Seri Manjung," she said.
"We have more than 40 branches [in the country] now. The opportunity to grow is very big, and we can leverage on our infrastructure and network, to go as far as we could to tap these growth," she added.
Moving forward, though Anusha acknowledged that there are worries the insurance business may be disrupted by technological advancement, she stressed that the fundamental of the business remains intact.
"Customer experience can be disrupted, but the fundamental of life and Takaful insurance cannot be disrupted. You can buy insurance online, but when we are sick, it is always better to have someone to help us, this is an interpersonal business," she added.