This article first appeared in The Edge Malaysia Weekly on August 26, 2024 - September 1, 2024

PRUDENTIAL plc considers Malaysia a core market despite its population of only 34 million, which is small when compared with some of its neighbours. Solmaz Altin, managing director of the insurer’s strategic business group, describes the country as a “small but beautiful” market on account of its high level of sophistication.

“Not only do we see Malaysia as a market [with huge protection and health gaps], it is also a hub with a huge amount of talent available for us to source from. We have a shared service operation here, so we are serving our group functions out of Malaysia, especially in terms of finance and risk management. Therefore, Malaysia is one of our key markets in Southeast Asia and the second-biggest market after Singapore,” he tells The Edge in an interview.

Altin says the country’s importance stems from having a well-developed market with the support of Bank Negara Malaysia, which has implemented “strong regulations” for the insurance industry.

Malaysia is one of Prudential’s four core markets in Asia when it comes to health and life insurance. The insurer is focused on the health and life segment, and is not in the general insurance space. Its other core markets are Hong Kong, Singapore and Indonesia. Combined, the four markets contribute 95% of its health business.

Notably, the insurer with a British heritage decided to split its business operations in 2018, demerging its UK and Europe division from its international operations to create two separate listed entities.

M&G Prudential, its UK and Europe savings and investment business, has morphed into a standalone entity focusing on capital-efficient and customer-focused financial services. Meanwhile, Prudential was to operate and grow its markets in Asia, Africa and the US. It announced another demerger in 2021, this time from its US business. Since then, its focus has been solely on its operations in Asia and Africa.

In this country, the insurer operates as Prudential Assurance Malaysia Bhd. For its financial year ended Dec 31, 2023, Prudential Assurance reported a net profit of RM963.47 million, a 68% increase from RM572.16 million the year before. It has one of the largest market shares in the life insurance and takaful space in Malaysia, about 18% and 22% respectively.

“I hope that over time, this will grow. We are investing in Malaysia and we do see the macro environment being very benign for the future economic development of the country and for us … A key measure for us is the penetration rate,” says Altin, who declines to reveal further information on the group’s growth targets and plans for the country.

The Prudential group announced that it would invest US$1 billion (RM4.4 billion) from 2023 to 2025 across its three strategic pillars of customer, distribution and health, including technology and data, which will also benefit its Malaysian operations.

Altin highlights that the insurer’s investment in the country is not merely in the form of its business operations but it is also a big long-term investor in the country, be it in the equity or fixed income market, as it seeks to guard and grow the monies of policyholders over the long term. 

“We are managing our assets and liabilities on a long-term basis because what we are doing is providing protection for people for 20, 30 years and sometimes a 100 years. That means we would invest in the local economy, so that could be government bonds and we’re looking at a group level more and more into investing in alternatives, for example like infrastructure energy projects or energy transition projects, because we also have it in our agenda to support the green transition in all the markets that we’re operating in,” he explains, adding that Prudential has also invested in financial literacy for the B40 segment (bottom 40% income group).

“So in this way, we are contributing and being a positive contributor to the development of Malaysian society at large, from the perspective of an insurer and as a responsible investor.”

According to him, insurance as a share of gross domestic product (GDP) is relatively low in Malaysia, at less than 2%. Whereas it is more than 5% in markets such as Singapore and Hong Kong, highlighting the protection gap in the local market.

“There’re still a lot of out-of-pocket expenses in terms of health being paid by Malaysians. We would like to reduce that over time and we have put in investments for new products and systems to keep our market share growing,” says Altin.

For insurers, the rate at which a country’s middle-income group is growing is an important indicator of the sector’s potential. As income earners in this group usually have some disposable income in hand, they would typically start taking out insurance policies.

Prudential is also looking to make further inroads into the B40 segment. Currently, the insurer has four protection solutions for this group, three of which are through tie-ups with Bank Simpanan Nasional and one is its own initiative. In 2023, there were 570,000 policies and certificates issued under these four programmes.

Prudential is working closely with non-governmental organisations, resident associations and community representatives to support the B40 community. It is also exploring partnerships with organisations interested in offering inclusive protection plans to this segment.

Ultimately, the support of the government and regulators would be needed to increase the insurance penetration rate among the B40 group. Prudential believes that government subsidies and partnerships with other industry players, whether fellow insurers or those from other industries, will be essential to insuring more of the B40 group.

As for the local economy as a whole, Prudential believes it will continue to grow and the insurer wants to do its part by investing in the country, says Altin. “We’re ready to invest and we see ourselves as a core part of Malaysian society. Having been here for 100 years, we are part of the fabric of Malaysian society and we will support the growth of the country.”

In Malaysia, Prudential Assurance is 100% held by Sri Han Suria Sdn Bhd, which in turn is 50.99% owned by Prudential Corp and 49% by Detik Ria Sdn Bhd, while the remaining 0.01% is held by PCA IP Services Ltd. Detik Ria is jointly owned by 10 entities, each holding a 10% stake. They are Berjaya Capital Bhd (a 100%-owned unit of Berjaya Corp Bhd [KL:BJCORP] as at Oct 2, 2023), Ekuiti Spektrum Sdn Bhd, Seahouse Capital Sdn Bhd, Antara Merdeka Sdn Bhd, Pentas Sentral Sdn Bhd, Arah Juara Sdn Bhd, Cangkat Selasih Sdn Bhd, Persada Majestik Sdn Bhd, Serata Setia Sdn Bhd and Gabungan Majestik Sdn Bhd.

The 49% stake has been disputed in court, where Prudential Corp’s bid to wholly own the operations in Malaysia failed, with the court ruling that Detik Ria had no obligation to sell its 49% stake in Sri Han Suria, which owns Prudential Assurance.

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