HIGH SIN­GLE DIGIT GROWTH IN PRE­MIUM IN­COME SEEN FOR IN­SURANCE SEC­TOR

Source: OSK Re­search – In­vest­ment Strat­egy 2013 Report, 28 De­cem­ber 2012

Insurance - - INDUSTRY UPDATES -

Ac­cord­ing to OSK Re­search, the in­surance in­dus­try is ex­pected to see high sin­gle-digit growth in pre­mium in­come sup­ported by the grow­ing af­flu­ence of the mid­dle-in­come pop­u­la­tion, healthy con­sumer spend­ing power, an un­der-pen­e­trated mar­ket and in­no­va­tive prod­ucts through bank chan­nels and agen­cies that have en­hanced prof­its from life in­surance. The taka­ful seg­ment is ex­pected to con­tinue reg­is­ter­ing a high dou­ble digit growth of around 20% through 2014. Although the taka­ful in­dus­try is still at an early stage of devel­op­ment, it is sup­ported by in­creas­ing aware­ness of di­ver­si­fy­ing taka­ful from a niche seg­ment ca­ter­ing to the Mus­lim com­mu­nity, en­hanced reg­u­la­tory re­forms to sup­port taka­ful in­fra­struc­ture. The surge in merg­ers and ac­qui­si­tions (M&A) as a re­sult of the in­dus­try’s lib­er­al­i­sa­tion has rerated in­dus­try val­u­a­tions. This is due to the ceil­ing for for­eign own­er­ship be­ing raised from 49% to 70% since 2009, in­creased par­tic­i­pa­tion of for­eign in­sur­ers with greater re­gional scale and ac­cess to cap­i­tal and at­tain­ing strate­gic fits to ful­fil cap­i­tal ad­e­quacy re­quire­ments of the RBC frame­work and chang­ing reg­u­la­tory re­quire­ments. OSK Re­search be­lieves the in­dus­try con­sol­i­da­tion will progress as play­ers are still align­ing their op­er­a­tional ef­fi­ciency to adapt to an in­creas­ingly com­pet­i­tive and free mar­ket.

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