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MALAYSIA’S financial sector is on a much better footing than before, characterised by stronger capital levels and profitability positions.

Reforms and capacity-building measures will continue to be instituted to enable our financial institutions to withstand shocks.

Ongoing efforts to explore new markets and businesses for expansion and income diversification amidst a more challenging global financial outlook would position Malaysia’s financial sector strategically over the long run.

The emphasis in the months to come will be to reinforce the role of the financial sector in playing its intermediation function and ensuring adequate financing is being channelled to support viable economic activities.

Efforts will also be focused on strengthening the core foundations that accord resilience to the financial system.

These will be complemented by strengthened prudential regulations to mitigate excessive risk-taking and enhanced surveillance and oversight functions.

Cooperation arrangement within Malaysia will continue to be strengthened, establishing clear and unambiguous responsibilities to enable prompt and decisive measures to be taken, where appropriate.

To place Bank Negara in a greater state of readiness to face future challenges, the holistic review of the Central Bank of Malaysia Act 1958 was completed during the year.

The proposed Central Bank of Malaysia Act will provide clarity of the central bank roles and functions. It articulates the regulation and supervision of financial institutions and the promotion of a sound and progressive financial system.

In tandem with this, Bank Negara is also reviewing all key legislations governing financial institutions and intermediaries. The review was expected to be finalised by the end of this year.

The next phase of development for the financial sector will be spearheaded by Bank Negara’s liberalisation roadmap, in line with Phase 3 of the Financial Sector Master Plan.

Malaysia’s competitive advantage in Islamic finance will be strengthened, expanded and developed as opportunities emerge.

JOSEPH Lee heaved a sigh of relief in between grimaces. His insurance company will cover all the medical expenses he will rack up due to a spinal slipped disc. For the past two weeks, he has been in a private hospital, suffering excruciating pain after various treatments have failed. Now he is scheduled for surgery.

His hospital bill has grown to a few thousand ringgit and there will be even larger charges for his upcoming surgery and post-operative care.

Lee is one of the more fortunate Malaysians who have medical insurance to lean on amid escalating medical and healthcare costs.

These costs have risen by an estimated 30% to 40% over the last three years, mainly due to the increase in the utilisation of medical services and advancements in medical technology.

Prudential Assurance Malaysia Bhd chief marketing officer Thomas Wong sees it as an uphill task to mitigate, let alone bring down, high medical costs, as this will need the collective effort of insurers, healthcare providers and the Government.

“Higher medical claims will definitely affect premiums in the long run because premiums are meant to be able to cover claims, and claims paid are meant to cover inflating medical costs.

“But any premium increase usually comes with an increase in benefits in the medical plan,” he says, adding that Prudential Assurance’s medical claim incidences have increased by around 20% annually for the past three years.

Most insurers, however, feel that medical insurance is still fairly affordable in Malaysia. ING Insurance Bhd president and chief executive officer Datuk Dr Nirmala Menon says this is because a medical insurance package will always offer the option of accessing care at public as well as private hospitals.

“Public hospitals are subsidised by the Government and therefore, medical costs are much lower at these hospitals, which also provide good medical treatment,” she adds.

For example, cash plans (which pays a fixed cash benefit for each day the customer is hospitalised) are typically cheap, ranging from RM40 per annum for RM100 daily cash benefit to RM200 per annum for RM400 daily cash benefit, depending on the age of the customer at the time of purchase.

Reimbursement plans, however, are relatively more expensive and depend on the age of the customer, which room the customer prefers to stay in during hospitalisation and the amount of claims he can make in a year should hospitalisation occur (annual limit).

A reimbursement plan covers the hospitalisation charges, consultation before hospitalisation and post-treatment after hospitalisation and may also include outpatient treatment such as day surgery, cancer treatment and kidney dialysis.

For example, premiums for Prudential’s PRUmajor med 5 can range from about RM505 per year for the cheapest room plan with an annual limit of RM50,000, to about RM5,000 per year for the most expensive room plan with a RM150,000 annual limit.

Great Eastern Life Assurance (M) Bhd’s Great MediCare offers medical coverage at an affordable premium ranging from RM500 to RM800 a year, depending on the age and plan selected.

Executive vice-president and chief marketing officer Loke Kah Meng says depending on the policyholder’s selected plan, medical expenses can be reimbursed in one lump sum up to an annual limit of RM200,000 and a lifetime limit of up to RM1.6mil.

According to General Insurance Association of Malaysia, medical expenses insurance generated close to RM485mil in gross premiums, which represented only about 5% of the general insurance market in 2007.

Executive director Lim Chia Fook says growth in the medical insurance sector has been very encouraging, averaging at least 15% over the last few years with expectations of continued strong growth going forward.

“This is indicative of the greater awareness among individuals, employers and corporations of medical insurance protection as an effective and affordable means of financing these costs,” he says.

Nevertheless, Lim says general insurers in Malaysia expect a difficult 2009 as the global economic slowdown takes its toll on premium growth in this sector, in particular.

“This view is balanced somewhat by the fact that many are now even more aware of the greater need for medical insurance in difficult financial times,” he adds.

Wong is still optimistic about the outlook for the medical insurance sector as only about 40% of the Malaysian population is insured as at 2007.

“The market certainly has plenty of room for growth. There are opportunities for insurance players to continue to introduce new products that not only meet consumers’ protection and savings needs, but are affordable as well,” he says.

To Wong of Prudential, comprehensive healthcare protection should ideally have a hospitalisation and surgical insurance plan, a critical illness plan and a disability income plan designed to cover one’s day-to-day expenses in the event one is unable to work due to an accident or illness.

“More importantly, review your medical insurance plans at least on an annual basis. With healthcare increases continuing to outpace the general inflation rate, chances are the plans that you have bought years ago are unlikely to be enough to meet future needs,” he stresses.

SAN FRANCISCO: IBM Corp. plans to lay off about 5,000 U.S. employees in a new round of job cuts, the Associated Press has learned.

The move reflects IBM’s aggressiveness in shifting labor to lower-cost regions like India and keeping its profits aloft at a time when other technology companies’ earnings are tumbling.

An IBM manager knowledgeable about the plans said the cuts will come from the services division and workers will be informed Thursday.

The person spoke on condition of anonymity Wednesday because he was not authorized to discuss the plan publicly.

The layoffs were reported earlier by The Wall Street Journal.

The cuts will affect about 4 percent of IBM’s U.S.-based work force, which totaled 115,000 at the end of 2008.

In a sign of how quickly IBM is staffing up in emerging markets, last year IBM had nearly as many workers in Brazil, China, India and Russia – 113,000 – as it did in the U.S.

IBM now has about 400,000 employees worldwide.

Unlike many other tech companies that have recently announced layoffs, IBM has managed to become more profitable despite the recession.

IBM’s cost-cutting, global footprint, and focus on services and software, which are often more lucrative than hardware, are key reasons why.

IBM’s net income was up 18 percent last year to $12.3 billion.

In January, Armonk, N.Y.-based IBM cut thousands of U.S. jobs in sales, software and hardware.

IBM didn’t give the precise number, saying it fell below an amount that would require disclosure.

Other tech companies are also doing big layoffs.

Hewlett-Packard Co. is slashing 24,600 positions, 8 percent of its 320,000-employee work force, in a three-year restructuring as part of its acquisition of Electronic Data Systems Corp.

HP paid $13.9 billion for EDS in a bid to compete better against IBM for technology-services contracts.

Microsoft Corp. said in January it was cutting 5,000 jobs, the first mass layoffs in the company’s history, after profit in the latest quarter fell 11 percent to $4.17 billion – AP

NEW YORK: Berkshire Hathaway Inc. is at risk of losing its “AAA” credit rating from Standard & Poor’s after the ratings agency revised its outlook on billionaire Warren Buffett’s company to “negative” from “stable.”

Citing worsening market conditions that have hurt Berkshire’s financial condition and investment portfolio, S&P said late Tuesday that it assigned the “negative” outlook to the Omaha, Nebraska-based parent company.

The “negative” outlook also applies to Berkshire Hathaway Finance Corp., and Berkshire’s core insurance companies, including Berkshire Hathaway Assurance Corp. Berkshire Hathaway’s Class A shares fell $1,650, or nearly 1.9 percent, to close at $86,850 apiece on Wednesday.

Those shares are still the most expensive U.S. stock, but have lost nearly 43 percent of their value since setting a high of $151,650 in December 2007.

S&P credit analyst John Iten said a decline in stock values this year “has reduced the statutory capital of the insurance operations.”

The negative outlook signals that downgrades could be possible if business conditions worsen.

S&P meanwhile affirmed all of its ratings on the Berkshire companies, including its “AAA/A-1+” counterparty credit rating on Berkshire.

S&P said its negative outlook applies to the next 12 months. S&P said Berkshire could regain a stable outlook if its stock holdings “were to stabilize or improve during this period, or if it appears that the group will be able to rebuild its capital position back to a level commensurate with the current ratings.”

A lower rating could be triggered if stock markets continue to deteriorate and further erode Berkshire’s capital position, S&P said.

A lower rating also could be triggered if Berkshire’s insurance group is unable to restore capital back to the “AAA” level through capital contributions from non-insurance operations or other outside sources.

“We do not currently anticipate that any possible downgrade of the insurance company ratings would be by more than one notch,” S&P said.

Meanwhile Moody’s Investors Service on Wednesday cut the debt ratings of Bank of America Corp., and sent its rating of the bank’s preferred stock into junk territory, citing an increasing risk that government intervention may be needed to bolster the bank’s capital position.

Also, Bank of America’s chief executive said in an interview published Wednesday in the Los Angeles Times that the bank wants to begin repaying $45 billion in federal bailout funds next month.

Unlike Moody’s junk-level downgrade of its rating on the bank’s preferred stock, the cuts involving Bank of America’s debt kept those ratings within investment-grade range.

Moody’s lowered its senior debt rating on the Charlotte, North Carolina-based bank down a notch to “A2″ from “A1.”

Bank of America’s senior subordinated debt rating was also cut one notch, to “A3″ from “A2,” and the junior subordinated debt rating fell four notches to “Baa3″ from “A2.”

The preferred stock rating fell to “B3″ from “Baa1″ – a drop of eight notches, to a level six steps below investment grade, and considered indicative of high credit risk.

Moody’s also lowered the financial strength rating of Bank of America N.A., the parent company’s primary bank subsidiary, to “D” from “B-”.

The deposit and senior debt ratings of the parent company’s U.S. banking subsidiaries were lowered to “Aa3″ from “Aa2,” and its subordinated debt rating to “A1″ from “Aa3″ – all within investment grade.

Moody’s assigned a “negative” outlook for the preferred stock and junior subordinated debt, as well as the bank’s financial strength rating, signaling the possibility of further downgrades should business conditions worsen.

Moody’s said the negative outlooks reflect its belief that Bank of America “remains vulnerable to further declines in its tangible common equity due to rising credit losses.”

Such declines “could lead the bank to seek additional capital support from the government,” Moody’s said.

Also Wednesday, a report in The Wall Street Journal said the bank was folding its Premier Banking unit into Merrill Lynch’s Global Wealth Management unit, laying off several hundred workers.

According to the report, client managers were among those notified of layoffs last week.

Shares of Bank of America rose 48 cents, or nearly 6.7 percent, to close at $7.70 on Wednesday.