wmafendi.com

PETALING JAYA: While the consolidation in the insurance industry will result in stronger insurance entities that will instil greater confidence among consumers, industry players feel proper incentives are lacking to facilitate mergers and acquisitions (M&As).

An industry source said Malaysia still lacked proper tax breaks for successful M&As.

“Last year, Bank Negara announced allowing higher foreign shareholding (up to 70%) if the foreign-owned insurance companies help in consolidating the general insurance industry. However, the Government can further incentivise by giving some tax breaks for insurers that take over vulnerable or loss-making insurance companies.

“Some tax breaks will accelerate the consolidation exercise in the industry. Some shareholders are worried about the amount of money needed to take over or revive the loss-making insurers.

“If no relevant tax incentives are provided for the takeover of the vulnerable and small companies, the acquiring insurer may end up in trouble too. Incentives such as three to five years’ tax-exemption will reduce the worries of the shareholders and may hasten the consolidation exercise,” the source told StarBiz.

An industry observer agreed. He said Malaysia should look at the more successful models on M&As in developed countries and apply them by giving incentives for foreign insurers to acquire smaller local ones.

He said the incentives unveiled in the financial sector liberalisation plan last year, such as raising the foreign ownership cap to 70% from 49% and the flexibility to open more branches, were not sufficient for effective consolidation.

“Bank Negara can probably allow full equity ownership and control to foreign insurers and some tax breaks for acquirers to accelerate the takeover of smaller ones,’’ the observer added.

Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz told a media briefing in conjunction with the release of the central bank’s 2009 Annual Report on Wednesday that the country’s insurance sector should consolidate to have a more significant role in the local financial system.

Consolidation was encouraged as there were still a number of small and vulnerable firms, she said, adding that there were already incentives for the sector to consolidate.

There are currently 40 insurance companies in Malaysia, of which 24 are general insurers, nine life insurers and seven composite insurers.

General Insurance Association of Malaysia executive director C.F. Lim said the ideal driver for consolidation in any industry was free market forces which inherently channelled players into maintaining a healthy and sustainable business environment.

While the risk-based capital (RBC) requirements, which were introduced in January 2009, would facilitate the consolidation process, it was still too early to assess the effectiveness of RBC as a stimulus for consolidation.

Lim added: “The continuing liberalisation of the financial services sector, including insurance, is an additional factor stimulating consolidation as it enhances entry opportunities for foreign insurance companies via M&As.

“However, the disturbances created by the global crisis did have a turbulent effect on any pending consolidation initiatives due to difficulties in establishing values and the changing circumstances impacting both buyers and sellers alike.”

The fact that the industry was still considered “fragmented” in terms of number of players, coupled with positive outlook for significant growth in many areas of the industry, meant further consolidation of this sector involving domestic or international players should not be discounted, Lim noted.

Taking an optismistic view, TM Asia Life Malaysia Bhd CEO Kenneth Wong said there were enough incentives for the sector’s consolidation and long-term growth.

Raising the foreign ownership cap, allowing insurers to establish branches nationwide and the flexibility to employ specialist expatriates were factors that would facilitate consolidation, he said.

Source: The Star;daljit@htestar.com.my

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Best lagu ni wooo..teringat balik memori masa tengah study kat Bangi dulu

Invest ahead to generate extra money after retirement.

WHEN I was growing up, I aspired to join the Government. The main reason so was that I could be eligible for a pension scheme. This came from the fact that my parents were both civil servants and they got to enjoy the benefits of a pension when they retired. They still do.

While it’s not much, it’s comforting for them that at their age, they would continue to have an income for as long as they lived. I wanted to be able to look forward to that as well.

Alas, fate – or was it free will? – had a hand to play in my career choice and I ended up taking a job in the private sector. Seeing as I’m having fun doing what I do, I don’t see myself switching careers any time soon. So there goes my plan of getting a pension.

Time to switch to Plan B, namely, the Employees Provident Fund (EPF). It is intended to help employees from both private and non-pensionable public sectors save a fraction of their salaries in a contribution scheme. The contributions are invested to generate income and the funds in the contributors’ accounts are to be used in the event that the employee is temporarily or no longer fit to work.

It primarily applies to retirement, but sickness, disabilities or unemployment are also covered. The EPF also provides a framework for employers to meet their obligations to employees.

As a retirement plan, money accumulated in EPF savings can only be withdrawn when members turn 50, during which they may withdraw only 30% of their balance. Members who are 55 or older may withdraw the entire sum.

Recently, the EPF board declared a dividend of 5.65% for the financial year ended Dec 31, 2009, up 115 basis points over the 4.5% paid for 2008.

According to Fundsupermart.com Malaysia, over the past five years, EPF has been distributing an average annual dividend of 5%. The average real dividend rate for the past five years was 1.7%, after reflecting an average inflation rate of 3.4%.

With that, the important question to ask is: Will the savings from our EPF be enough to sustain us in our retirement years?

Expert advice

In his Personal Investing column, “Enough money for retirement?” last year, MRR Consulting investment adviser and managing partner Ooi Kok Hwa says as the average Malaysian lived to about 75, those who retire at 55 would need to manage their EPF savings for 20 years. But most retirees spend all their EPF money within three years of retirement, he claims.

Ooi provides a breakdown of how a retiree can manage his EPF savings for 20 years.

“We will assume a starting pay of RM1,500, growing at the rate of 8% per annum; an average bonus of two months per annum, average EPF returns of 5%, total EPF contribution of 23% (employer: 12%, employee: 11%) and inflation rate of 3%.

“Our analysis shows that if we are able to live with just one-third (or 33%) of our last drawn salary, the EPF money should be able to support us for 20 years until we pass away at 75.”

According to Ooi, if a person’s last drawn salary is RM13,976 at 55, he can only afford to spend one-third or RM4,612 per month after retirement (1/3 x RM13,976).

He stresses, however, that the computation was based on the assumption that a person would still be able to generate 5% returns after retirement.

“Everyone has different financial situations. If possible, we need to build our own investment portfolio apart from the EPF savings. We may need to seek some part-time jobs after retirement if our financial resources do not permit us to stop working,” he wrote.

“Besides, we need to clear all our outstanding debts before retirement. We also need to buy enough life and medical insurance for ourselves as well as set up education funds for our children.”

Financial planner Wilson Low says a person who’s concerned about his or her future financial well-being has one clear option – invest.

“Anyone who’s worried about not having enough money in their old age should do something about it, to make sure that you do have money to sustain you when you’re old and not working any more,” he adds.

“The obvious thing to do is to invest in something that can help generate an income for you when you’re older. There are various investment avenues out there and with proper planning and research, financial independence is not an impossibility.”

What some have done

Rita (not her real name), is a retired nurse. After working for the Government for 30 years, she worked in the private sector for a further nine years because she needed the money.

However, she admits that without her pension, it would be difficult to make ends meet. “There are things like your children’s education or repairs to the house that you need to think about. Without the pension, the EPF definitely would not be enough.”

Rita adds that as a former civil servant, she will always be eligible for free treatment at government hospitals. “This is especially important since most medical expenses will come up as one gets older,” she says.

Rita adds that EPF also used to declare higher dividends, between 6% and 7% in the 1990s.

Kamala (not her real name) was a former employee of the Rubber Research Institute of Malaysia. A Government-based organisation initially, it was privatised in the 1990s and its employees were asked to chose either a pension or EPF scheme as a retirement option.

Kamala chose the EPF scheme, a decision she claims she regrets. “The money finished quickly as I had many financial obligations like my children’s education and housing loan. I also had to undergo an expensive operation, the cost of which would not have been an issue if I were a civil servant.”

She is however thankful that today, her children have all grown up and give her husband and her money on a monthly basis. “We have also invested our money in property. So financially we are all right.”

Meanwhile, Kong, an information technology executive in his early 40s, says he spends about RM4,000 a month on household expenses, his children’s education and an outstanding home and car loan, among other financial obligations.

“I’m spending so much every month that I hardly have enough to save. Fortunately my wife is also contributing. After 55, it’s definitely not going to be easy. I’ll probably have to continue working until my kids can support themselves,” he adds.

Source: The Star;eugenicz@thestar.com.my

I just found this video that posted on Facebook by my nephew; Mohd Imran Wan Hassan. It’s cool!

PETALING JAYA: Malaysia has the most number of billionaires in South-East Asia with tycoon Tan Sri Robert Kuok leading the pack as the 33rd richest man in the world with a net worth of US$14.5bil (RM48.1bil).

The former Sugar King, 86, was among nine Malaysians who made it into the 2010 Forbes List of the World’s Billionaires which listed 1,011 billionaires.

He shared the 33rd spot with US-based Microsoft Corp’s Steven Ballmer.

The Kuok Group patriarch, up from his 62nd spot last year, was also named the seventh richest man in Asia.

The second-richest billionaire from South-East Asia after Kuok was at a distant 201st spot, from the Philippines.

With a net worth of US$7.6bil (RM25.2bil), telecommunications giant Tan Sri Ananda Krishnan was listed as the 89th richest man in the world and the 14th richest in Asia. He shared the 89th spot with three others.

Three other Malaysians made it into the top 300 list of billionaires with IOI Corporation Bhd’s Tan Sri Lee Shin Cheng, 70, ranked 189th with US$4.4bil (RM14.6bil).

Hong Leong Group’s Tan Sri Quek Leng Chan and Public Bank’s Tan Sri Teh Hong Piow shared the 277th spot with their US$3.4bil (RM11.3bil).

YTL Group executive chairman Tan Sri Yeoh Tiong Lay, 80, and family came in 421st with their US$2.3bil (RM7.6bil) family fortune while 58-year-old Tan Sri Syed Mokhtar Al-Bukhary of the Al-Bukhary Foundation was ranked 655th for his US$1.5bil (RM4.98bil).

Berjaya Group’s Tan Sri Vincent Tan was ranked 828th with US$1.2bil (RM3.98bil) while Tan Sri Tiong Hiew King of Rimbunan Hijau Group was ranked 937th with his US$1bil (RM3.3bil).

According to the latest list, Malaysia had the most billionaires in South-East Asia, followed by Indonesia which had seven, Singapore (four), Thailand (three) and the Philippines with two.

The world’s top billionaire is Mexican tycoon Carlo Slim Helu and his family who edged out Microsoft founder Bill Gates with a net worth of US$53.5bil (RM177.6bil).

Gates, who held the richest man in the world title for the past 14 years, came in second with US$53bil (RM176bil) while American Warren Buffett was third with US$47bil (RM156bil), the magazine said.

The youngest billionaire is Facebook founder Mark Zuckerberg, 25, who is ranked 212th with US$4bil (RM13.3bil).

For the first time, China (including Hong Kong) had the most number of billionaires outside the United States with 89. However, India had 10 of the 25 spots for Asia’s richest, the magazine said.

“This year the world’s billionaires have an average net worth of $3.5bil (RM11.6bil), up $500mil (RM1.66bil) in 12 months.

“The world has 1,011 10-figure titans, up from 793 a year ago but is still shy of the record 1,125 in 2008.”

According to Forbes, there were 97 new billionaires, of which 62 were from Asia, a vast majority of whom made their own money.

“Of the 97 new members, only 16% are from the United States. By contrast, Asia made big gains. The region added 104 moguls and now has just 14 fewer than Europe, thanks to several large public offerings and swelling stock markets,” the report stated.

The report also points out that Americans only accounted for 40% of the world’s billionaires and that 13 members of last year’s list had died.

Source: The Star; florenceasamy@thestar.com.my

PETALING JAYA: The proposed sale of American International Group Inc’s (AIG) crown jewel, American International Assurance (AIA), to Prudential Plc will not have an immediate impact on Prudential’s operations in Malaysia.

“The (proposed) takeover of AIA will, at the moment, have zero impact on our operations here and business is as usual for now,” said Prudential Assurance Malaysia Bhd (PAMB) CEO Charlie E. Oropeza in an interview with StarBiz. “As for board changes in the company, I myself don’t have a firm grasp on the changes that will happen at this stage as it is still to early to tell.”

An observer with close ties to the company said it was stilll too early to talk at this stage on integration plans, adding that the acquisition would not focus on any cost-cutting measures but on growth strategy as the aim was to have a bigger market in Malaysia.

Charlie E.Oropeza

According to Oropeza, the company’s 12-month goals and strategic plans would stay put despite the proposed acquisition of AIA.

He said the recent visit to Malaysia by Prudential Plc’s group chief executive Tidjane Thiam and Prudential Corp Asia chief executive Barry Stowe further underscored the need for PAMB to work harder on implementing and executing plans to strengthen its business.

“He (Thiam), since his appointment on Oct 1 last year, has visited Malaysia four times as he firmly believe Malaysia is a good market for the group. The (proposed) acquisition will also see Prudential and AIA maintaining their brands and keeping their businesses and brands separate, but consumers can expect stronger and broader product range,’’ Oropeza said.

AIG agreed to sell its Asian life insurance unit, AIA, to Britain’s Prudential Plc last Monday for US$35.5bil in the largest insurance deal ever, paving the way for Prudential to become South-East Asia’s biggest insurer.

AIA currently serves more than 20 million customers in Asia whereas Prudential has more than 11 million life insurance customers in the region, according to news reports.

Meanwhile, PAMB yesterday unveiled its latest results – a record performance that saw a 24% increase in new business sales amid challenging market conditions.

The insurer posted new business annual premium equivalent of RM817mil for the financial year ended Dec 31, 2009, compared with RM659mil registered in the same period in 2008. Its fourth-quarter (2009) performance was equally good with a significant 69% increase in new business premiums compared to the same quarter in 2008, according to Oropeza.

He attributed the strong performance to the strength of the company’s agency and non-agency distribution channels, its commitment to provide innovative products to meet customer’s needs coupled with the strong Prudential brand name and continued product innovation .

One of such innovation include PRUhealth, a revolutionary medical insurance plan that rewards healthy policyholders with an annual No Claims Bonus.

Oropeza said the company’s systematic implementation of sales and marketing efforts to improve agency activity, which includes promoting the use of innovative point-of-sales tool amongst agents, had helped increase the average productivity of its wealth planners and agents from RM67,000 in 2008 to RM69,000 in 2009.

PAMB currently has an agency network of more than 11,000, of which 3,800 are bumiputra agents.

It recently opened two new branches in Kajang and Skudai, Johor, bringing the company’s total branches to 41 nationwide.

Source: The Star

Financial freedom is a distant dream for the vast majority of working people, it is made almost unattainable by the generally low wages and inflationary pressure that many here have to struggle with.

An observer says it has become increasingly difficult to rely on just a day job to achieve that freedom as wages here have not kept up with inflation.

This person has a day job and several side incomes including running a dragon fruit farm and being involved as an agent in the Malaysia My Second Home programme.

Some, like Ginger Leong, say “forced savings” is their path to financial freedom. However, she acknowledges that whatever is saved now may not be enough due to inflation and other commitments.

Many also find it hard to even start on the path to financial freedom as they are confronted by a plethora of investment instruments available as well as the endless numbers of books and blogsites on financial management.

What most people need is guidance on how to sift through all the information out there and come up with what Whitman Independent Advisors Sdn Bhd managing director Yap Ming Hui says should be a “down-to-earth” and sensible view on achieving these goals.

He tells StarBizweek that most people “dream of achieving financial freedom” but “they don’t have a workable or concrete plan”.

Yap, who wrote a book, Roadmap to Financial Freedom, says defining goals – a “self-defined good life” for attaining financial freedom – is important.

“Not everyone can become wealthy but everyone can achieve financial freedom, however those who want to achieve it must have a roadmap as a guide to know what is the optimum investment that needs to be made,” he says, adding that even people with average assets and incomes can attain their financial goals.

Yap defines financial freedom generally as “an optimum financial position whereby your wealth is optimised to match your optimum financial needs and wants”. In this respect, “wealth” can also be defined as “assets”.

He realises that individuals have different goals, needs and wants but says this can be simplified to two components for the purpose of mapping out a roadmap – optimisation of assets and identifying and managing financial needs and wants.

Yap says needs and wants should not be viewed strictly from the financial context alone but from a bigger picture – the higher context of life.

“Most people will just concentrate on optimising their wealth but just concentrating on making more money is not true financial freedom if needs and wants are not defined,” he says.

Yap says when a person embark on the path to achieving financial freedom, some of the questions to ask are: How far is that person from their goals? If situations come around that will impact finances, what will that person do? What’s a person’s next move suppose to be?

Standard Financial Planner Sdn Bhd chief executive officer Alfred Sek says that freedom has been achieved as long as there is no stress from financial problems or commitments.

“Achieving it is a gradual process, people adjust as they go along, so if they earn more then they adjust their goals, similarly if they earn less than they adjust too,” he says.

Sek says in his experience advising clients on their finances, flexibility is important. “There are no real yardsticks, personal situations and needs are different,” he says.

Source: The Star Online

THE war of the smartphones has definitely begun!

History has proven that dominance cannot be enjoyed by one party for too long. So indeed, while Maxis had enjoyed monopolistic dominance on iPhone over the last one year, this will soon come to an end with DiGi.Com Bhd also tying up with Apple Inc for the rights to distribute the world’s most exciting phone.

DiGi expects to start selling iPhone 3G and 3GS in the “coming months”, chief executive officer Johan Dennelind said in a Bloomberg News report. Reports have also indicated that Celcom Axiata Bhd may consider doing the same.

A HTC smartphone (left) and an Apple iPhone seen at a mobile phone shop.The iPhone phenomenon has revolutionised the global mobile phone industry.

The iPhone will be sold by DiGi before mid-year which may spark a price war on services and packages in the smartphone market.

On its website, DiGi said that those already with an iPhone could switch to any of DiGi’s existing postpaid and prepaid rate plans.

Celcom chief executive officer Datuk Seri Shazalli Ramly said the company’s infrastructure can support the device but a big hurdle to securing the iPhone deal is the commercial terms that both parties cannot agree on.

In Malaysia, market research company IDC claims that Maxis last year sold 91,000 units since the launch in March 2009 and the shipments included both the iPhone 3G and iPhone 3GS.

The iPhone phenomenon has revolutionised the global mobile phone industry, with operators in matured markets such as Britain and the United States benefiting from increased usage of data services. Based on the packages signed up by Maxis iPhone users, average revenue per users is significantly higher.

“I spend a lot more money on my monthly phone bills and use a lot more of the services connected to the device. I now use close to 25Mb per month from almost zero previously,” says an analyst who is an iPhone user.

Huge brand penetration

For DiGi, the iPhone deal could help boost its non-voice revenue, which now makes up less than 20% of group revenue. This segment contributes over 30% to Celcom and Maxis.

For the last two years, mobile operators have increased their focus to sell more wireless broadband services, including unlimited data packages for smart phones and lap tops.

In Maxis’ and DiGi’s bid to outwit each other in the war of the iPhones, analysts don’t expect to see major price reductions.

“I don’t expect there to be a major price war happening anytime soon. Telco operators rarely benefit from waging a price war that would entail further value destruction. In the case of the iPhone, the differentiating factor could be the ‘perceived value’ of the plans that will be offered which could potentially be bundled with voice and data” says OSK telecommunications analyst Jeffrey Tan.

He feels that DiGi will reposition its plans and leverage on its value propositions to offer more attractive packages, to cater to the youth market for instance.

“There is pentup demand for iPhones, especially in countries where there is a large addressable youth segment which are technology receptive and technically savvy. In Malaysia, the steep price points of the handset and plans are key deterrents. Hence, I don’t see DiGi’s entry into the iPhone market colliding with Maxis head-on,” says Tan.

In fact, he feels that DiGi may open a whole new market segment for the iPhones.

A telco analyst from a local house feels that end consumers will be the main beneficiaries.

“Operators still need to incur huge capital expenditures for their respective networks, so I doubt anyone of them will embark on fierce price ways,” says a telco analyst from a local house.

An analyst from a bank-backed research says that the iPhone will help DiGi compete with other players. However, its efforts may be hampered if it does not improve its 3G coverage.

“DiGi still needs to address its issues of providing a better and faster network as well as better customer service,” he says.

“For instance, an iPhone user who stays in Kota Damansara will continue using Maxis services because in that area, DiGi does not have 3G coverage,” he says.

He adds that while there will initially be some competition, eventually data plans in terms of pricing and packages will almost be similar.

“I don’t believe the iPhone will change the market share position of the players too much. As it is, cracked iPhones in the last one year have already been operating on DiGi’s and Celcom’s network,” he says.

Nonetheless, this analyst believes that the iPhone will be able to improve DiGi’s as well as Maxis’ average revenue per user.

The Android

The iPhone, too, won’t enjoy single dominance for long. Another Smartphone is coming to town. Google’s Android phone is set to make its debut in the second half of this year.

While many feel that Apple’s iPhone first-mover advantage will still render it the most popular phone in Malaysia, it’s possible for the Android to steal a sizeable amount of market share from the iPhone.

For one thing, Apple has a closed system, which is exclusive only to the iPhone. The Android, however, operates on an open-source operating system which means it can be used by a wider array of phones.

Companies that make phones that run on this system include Taiwan-based HTC, which also makes phones for AT&T (T), Sprint (S), T-Mobile, Verizon (VZ) and US Cellular.

“Apple does have a headstart. It now has close to 140,000 applications and is growing everyday. Over the longer run, however, Apple’s closed system may make them more as a niche player while the open Android system may become more mainstream. But the Android will eventually catch up,” says one telco analyst.

Another analyst agrees.

“Its biggest weakness (which is also its biggest strength) is that there is only one iPhone. It’s a cool branding and has hype surrounding it. The Android will very likely run on hundreds of devices, in every market in the world, and is the only platform other than the iPhone that has a proper applications market. So, yes, it will give the iPhone a run for its money,” he says.

He admits though, that Google will need time and investments to roll out its applications.

He also points out that Apple’s strategy has never been to appeal to the mass market. Right from the start, it was targeting the high price markets with higher margins. It was never the plan to go after the lower mass priced market.

“Unlike the iPhone, the Android will most likely have the highest chance of ‘casual buyers’ – people who just browse into a store with no idea of what phone to buy,” says the analyst.

Right now, the iPhone is sold in 85 countries and has about 140,000 applications that can be downloaded.

A recent report released by Gartner said Apple iPhone’s sales had doubled in 2009, with 24.9 million units sold in 2009 against 11.4 million units in 2008.

Source: Tay Lin Say linsay@thestar.com.my