Abstract
We have revised down our 2009 growth forecast for Malaysia from 3.1% to 1.4%
after the latest
industrial production data revealed that factory output
contracted at its fastest pace in seven years during
November 2008. Output
fell 7.7% year-on-year (y-o-y) to compound October' s 3.1% decline and
September' s 1.7% fall, as weakening global demand and tumbling commodity
prices saw all components
of the index shrink for a second month in a row.
Mining output (which accounts for 23.4% of the index)
contracted by 2.8%
y-o-y, while electricity output (which holds a 6.0% weighting) fell by 2.8%.
Most
significantly, manufacturing output declined by a whopping 9.4%.
Manufacturing makes up more than 70% of the overall industrial production
index. More importantly, the
sector contributes almost 30% to GDP, and
employs over 1mn people (1,065,278 as of October 2008),
equal to
approximately 10% of the labour force. Manufactured goods also account for
over 50% of
Malaysia' s total exports. Thus, the sector' s importance to the
overall economy is evident. However, in the
current global economic
climate, where consumers are continuing to retrench, demand for
manufactured
products is set to continue waning.
With the global
economy unlikely to pick up until 2010, we have also revised down our 2010
growth
forecast from 4.6% to 3.2%. While we expect global growth to begin
picking up in the first half of 2010,
we are nonetheless anticipating
economic activity to remain sluggish throughout much of the year. Thus,
while we acknowledge the positive effects of 2009 setting a low base, BMI
consequently expects the
Malaysian economy to fall short of its 2008
performance in 2010.
The global financial crisis is likely to affect the
various segments of the global insurance industry in
different ways. In
many countries - especially in Europe - the coming recession points to
softness in the
non-life segment. In many cases, the numbers of policies
may fall; there should be downwards pressure
on premiums. By contrast, the
main problem for the life segment - in almost all countries - is the
extreme
volatility of financial markets. Over the longer term though, the
fortunes of life insurance will recover -
thanks to the secular growth of
organised savings in most countries. China, where the larger insurance
companies continue to achieve double digit growth in premium income, is a good
example of this. Some
particular niches should also do well in the current
environment, such as legal liability insurance.
In the Asia Pacific, we
profile 23 companies. These are AEGON, AIG, Allianz, Aviva, AXA, Cardif,
Fortis, Generali, Groupama, HDI-Gerling, HSBC Insurance, ING Group, Liberty
Mutual,
Manulife, MetLife, Prudential Financial, Prudential plc, QBE, RSA,
Sun Life Financial, The
Hartford, Principal Financial Group and Zurich
Financial Services.
Over the course of 2008, actual/estimated total
premiums in Malaysia rose by 10% to MYR36,354mn.
Non-life premiums rose by
5% to MYR12,623mn, while life premiums rose by 14% to MYR23,732mn.
Between
now and the end of the forecast period, we expect that annual non-life
premiums will grow by
MYR6,439mn, while annual life premiums should grow
by MYR12,568mn.
Growth in non-life premiums should be driven by the
general growth of nominal GDP plus a rise in nonlife
penetration from the
current level of 1.77% to 2%.
Growth in life premiums should be driven by
the change in the overall population and a rise in life
density from
US$240.34 to US 420,00 per capita. BMI' s Insurance Business Environment Rating
is 64.1.
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