Etiqa Insurance, one of Malaysia’s largest composite insurers and takaful providers, is considering further merger and acquisition activity going forward to boost its business, both locally and overseas.
Etiqa is a joint venture insurance operation that was formed in 2007 by a merger between Malaysia National Insurance and Takaful Nasional. The company is 69.05 percent owned by Maybank, with Ageas Insurance International holding the remaining stake. Etiqa now distributes conventional insurance and Islamic takaful proucts under a unified brand name. The company has progressed quickly since its inception and now believes it could vie for the top spot in the Malaysian insurance industry.
Etiqa officials outlined the company’s business ambition through a series of media events in the past week. The Malaysian insurance conglomerate wants to become the overall industry leader by 2015 and intend to leverage their position as the country’s largest takaful distributor and to continue developing a fast growing conventional life insurance business to meet these objectives. Etiqa expect their overall gross written premiums to amount to MYR7.5 billion (US$2.37 billion) by 2015, up from the MYR4.3 billion (US$1.36 billion) projected for this year. Etiqa Chief Executive Officer, Hans de Cuyper explained to the press that hitting these premium targets was achievable given the Southeast Asian country’s growing appetite for insurance and investment solutions. “Based on our own extrapolation, we can be the largest insurer by 2015 by growing top line to MYR7.5billion from MYR4.3billion currently. That alone will be sufficient to be at the top,” de Cuyper said.
Etiqa’s current premium levels place them as the number two insurer in Malaysiam behind market-leading Great Eastern Life, who project MYR5.6 billion (US$1.77 billion) in gross written premiums for 2011. Despite trailing Great Eastern, Hans de Cuyper told reporters that there was plenty of space in the Malaysian insurance market to expand and that the company remained in a solid fiscal position to facilitate growth. “It is definitely an achievable target for us considering our solid financial strength and as we increase our GWP from MYR2.8 billion (US$886 million) in 2006 to MYR4.3 billion (US$1.36 billion) this year, making us a strong number two in the market,” he said. The sovereign financial woes affecting the US and the Eurozone are not expected to have a negative impact on the group’s investments.
Through 2012, Etiqa plan on gaining market share through the development and launch of various new life and family insurance products in Malaysia. This reflects an overall industry trend in the country, which has seen life and family protection products become increasingly more popular, as more people look to cost-effective savings and investment-linked solutions, over just general insurance. A new study released last month by ING Insurance Berhad revealed that 83 percent of all Malaysian consumers believe that there was a greater need to protect their lifestyles now than compared to just 12 months ago. Rising healthcare costs and lifestyle expectations has enabled the attitude towards and awareness of insurance to change quickly. Overall, the rise in income, healthcare, education and housing opportunities across most of Asia, have given families in the region greater access to a lifestyle they would now like to protect.
Etiqa is also working to upgrade its infrastructure, optimize operations and implement bold new marketing strategies to humanize insurance and takaful for a still largely unaware Malaysian populace. By year’s end, the company is also aiming to secure a wealth management license under the private pension framework, which was announced as part of Malaysia’s 2011 Budget. In addition, Etiqa remain open to growing their operations in Malaysia either organically or through mergers and acquisitions with smaller domestic players, but as de Cuyper explained, this would depend on market circumstances going forward. “If any potential acquisitions can add to our strength, fit into our financial ambitions and culture, then we may consider it,” de Cuyper said.
Any upcoming acquisition activity for Etiqa will likely come through the company’s dominant takaful branch. Etiqa Takaful has been at the forefront in the development of the takaful insurance industry in Malaysia, and could become the first company of its kind in the world to exceed MYR2 billion in annual Islamic contributions this year. Etiqa Takaful command roughly 45 percent of the domestic takaful market at present and have also now established Islamic insurance operations in Brunei, Singapore and Pakistan as well. According to Etiqa Takaful officials, Indonesia has been earmarked as the next likely destination, and could become part of the Islamic insurer’s regional portfolio by the middle of 2013. After gaining almost half of the takaful market share in Malaysia it has become important for the company to balance its insurance business through further acquisitions. Indonesia offers significant potential for takaful insurance products due to its large predominantly Muslim population. Etiqa Takaful will also be able to leverage their relationship with Maybank, who already have a significant presence in the country. Maybank owns a full fledged Islamic bank (PT Bank Maybank Indocorp) and a full fledged commercial bank (Bank Internasional Indonesia) in Indonesia. Through their affiliation with Maybank, Etiqa thus gains an extensive regional distribution network, to aid sales of their bancassurance and takaful insurance products. “With an institution like Maybank behind us, we are definitely going to achieve and maintain our leadership in takaful and insurance,” de Cuyper said.
The takaful insurance market has become an important business line for multinational insurance companies searching for new sectors and opportunities for growth. In April, Ernst & Young’s World Takaful Report forecast the takaful market to be worth US$12 billion in 2011, growing 31 percent from US$9.15 billion in 2010. Key takaful markets are characterized by low insurance penetration rates and comparatively high rates of economic growth. Major foreign insurers have duly taken note of the huge growth potential from this brand of products. While the outlook in more established international markets remains quite static, demand for takaful insurance products, targeted towards predominantly Muslim populations in Middle-East, North Africa and South Asia, has grown significantly, particularly in Indonesia, Qatar, Saudi Arabia, the UAE and, of course, Malaysia