Amidst AXA deal, what drew Generali towards Malaysia's P&C sector?

The insurer remains optimistic for the sector as it has shown strength despite the pandemic.

Generali’s acquisition of AXA’s assets in Malaysia not only has turned the former into the second-largest property and casualty (P&C) player in the country, it will also allow them to take advantage of Malaysia’s burgeoning P&C scene, which has been supported by strong capital adequacy and consistent underwriting profitability.

On 22 June, Generali agreed to purchase the majority of shares held by AXA and Affin in two respective life and general insurance ventures: a 70% stake in AXA Affin Life Insurance and approximately 53% stake in AXA Affin General Insurance. The total consideration for the combined deals is around $312m. In the P&C segment, Generali plans to merge the businesses of MPI Generali with AXA Affin General Insurance, a press note stated.

“This is an exciting time for Generali in Malaysia and for our growth strategy in Asia. Over the last five years, we have enjoyed working together with our business partner to reshape MPI Generali and now we can further optimise our strategic position, secure economies of scale for more efficient operations, and deliver even greater value for our customers,” Generali Asia Regional Officer Rob Leonardi said in the aforementioned press note.

Insurance Asia reached out to Generali regional officer for Asia Rob Leonardi to know more about what makes the Malaysian P&C insurance sector fascinating, the insurer’s initiatives in the country following the acquisition, how it would deal with risks and disruptions in the segment and its year-end outlook for the sector.

What makes the Malaysian P&C insurance sector interesting? What are its strengths relative to the overall APAC P&C industry?

Generali has a positive outlook on Malaysia’s insurance industry, and this aligns with our strategy of growing our business in high growth markets. Malaysia is home to a large and growing middle-class population and has an insurance penetration rate that is still relatively low compared to other more mature markets in Asia.

Our favourable outlook extends to the P&C insurance sector which is underpinned by robust capital adequacy and market players have enjoyed a track record of consistent underwriting profitability. In addition, several important initiatives have been taken in recent years to improve transparency, encourage product innovation, and expand channels for delivering insurance and takaful products and services. This will help expand insurance coverage to other sectors and demographics of the population, improving the prospects for achieving the 75% penetration target set under the Malaysian government’s Economic Transformation Programme.

In 2019, the non-life insurance penetration rate in Malaysia was 1.4%. Although this is slightly less than that of Thailand and Singapore, it is higher than most of its emerging Southeast Asia peers.

What aspects did you take into consideration regarding the deal with AXA?

Generali takes a very prudent and disciplined approach to M&A. The opportunity to acquire AXA Affin general and life insurance business is fully aligned with our global strategy of growing our business in our key markets and delivering even greater value to our customers in Malaysia and all our stakeholders. Once the transactions are completed, Generali will have secured one of the leading positions in the general insurance market and an opportunity to enter the life insurance market.

How will you take advantage of the fact that you are now Malaysia’s second-largest P&C player? What initiatives are at the forefront of your plans? 

Providing greater value to our customers has been the focus of our growth strategy. Once we receive regulatory approval to merge MPI Generali and AXA Affin General Insurance, the combined entity will trade under the “Generali” name and will become the number two general insurer by market share in Malaysia. We will integrate our businesses in a way that leverages the best of both companies to enhance our service for our customers and provide them with a more extensive range of products and points of sale.

We will also be able to leverage the know-how and expertise from Generali’s strong management team in the region and globally, to further enhance our customer offering.

Can you share your year-end outlook for the P&C sector in terms of new business and premiums? What factors support your prediction?

We maintain a positive year-end outlook for Malaysia’s P&C sector as it has remained resilient despite the challenges brought about by the COVID-19 pandemic. For example, according to AM Best, motor insurance experienced a 7% decline due to stalled new vehicle production and a slowdown in automobile sales during the pandemic environment. However, one of the silver linings from COVID-19 was that it accelerated market players to focus on enhancing data and pricing capabilities, digitalising their operations, such as claims processing and online distribution, and developing innovative products. 

In addition, the phased liberalisation has made the industry more competitive which has had an impact on pricing and customer experience. By making insurance more accessible it has broadened the market to the other demographics that make up Malaysia’s large and growing middle-class population, as well as new business sectors.

In addition, government initiatives are underway to align Malaysia’s regulatory regime with those of the most advanced economies in the world, to introduce more equity to insurance pricing and to evolve the country’s digital economy, as well as expanding insurance coverage to other sectors of the population.

We believe that these factors will ensure sustained profitability for the industry in the years ahead.

What disruptions are you expecting within the sector, particularly regarding risks, distribution and digitalisation? How are you going to respond to those?

There have been several significant disruptors to the insurance industry, most notably over the last five years that accelerated during the COVID-19 pandemic, and Malaysia has not been exempt from the impact. The most significant has been digital technology, new regulations, and changes in consumer behaviour. We anticipate the impact from these disruptors will accelerate over the next few years, further transforming our industry.

At Generali, our future ambition is to be a lifetime partner to our customers, offering innovative, personalized solutions thanks to our unmatched distribution network. In doing so, it requires us to look around and focus our attention on trends related to relevant topics, such as political, economic, social and legal, as well as disruptions. Through this approach, we are able to identify and properly manage risk and business opportunities. To highlight how we have responded: moving from protection to prediction and prevention; filling the insurance gap for SMEs; living the community; and empowering our people with new skills, just to name a few.

If we look at digitalisation, for example, we have long been building a culture of innovation and transforming the way in which we approach and interact with our customers. In many of our markets in Asia, we have been digitising our operations by focusing on simplification, automation, and artificial intelligence.

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