Kurnia Insurans (Malaysia) Berhad’s (Kurnia) general insurance strength rating has been upgraded to A+ to reflect the Company’s ability to maintain its leadership in the Malaysian motor insurance industry for the past eight consecutive years, realize its business strategies, improve its business operations, as well as its continuous success in introducing innovative products into the market. The rating, however, continues to be moderated by high concentration in the motor business.
Kurnia is the largest general and motor insurer in the country with a 13.4% share of the market’s total net premiums and 22.6% share of its motor net premiums respectively. The strength of Kurnia’s motor business is attributable to its continuous marketing efforts, strong relationships with agents and other business associates, the success of its customer loyalty programs, provisions of value-added services such as Kurnia Auto Assist (KAA), and effective claims management. Over the next two years, Kurnia targets to capture 30.0% share of the local motor insurance market. This is deemed achievable given the anticipated improvement in new vehicle sales in 2004, strong economic growth forecast and attractive hire purchase terms. Moreover, Kurnia’s proposed listing will enhance Kurnia’s brand image and customer acceptance. Kurnia is also moving actively into non-motor sectors, evidenced by the 32.9% increase in non-motor gross premiums to RM79.9 million in FY2003.
Kurnia’s overall underwriting results improved by 39.6% to RM103.6 million (FY2002: +11.1%). Expense ratio was also marginally lower at 27.4% (FY2002: 27.7%) due to management’s strict cost control measures. Nevertheless, the growth in pretax profits has moderated to 8.1% compared to FY2002 (+ 76.5%). This was attributable to the weak investment performance resulting from the unfavourable stock market condition and low interest rate environment during FY2003.

In FY2003, Kurnia increased its composition of liquid assets to 72.6% (FY2002: 66.2%) and reduced its composition of equity and PDS to 11.0% and 11.4% respectively. The lower investment leverage of 32.0% (FY2002: 45.7%) has contributed to the marginal reduction in investment yield to 4.2% (FY2002: 4.6%). Nevertheless, investment leverage is expected to increase and investment performance is expected to improve in FY2004.

Kurnia’s total cash flow position remained strong in FY2003, despite a slight reduction to 123.0% (FY2002: 133.3%). The 11.7% increase in the level of liquid assets to RM763.0 million (FY2002: RM682.9 million) also contributed to the improvement in liquid assets coverage of technical reserves and liabilities to 0.76x and 0.70x respectively.

Kurnia’s share capital remained at RM200.0 million as at 30 June 2003, double the regulatory requirement. Total shareholders’ funds rose by 12.4% in FY2003 to RM429.1 million due to higher net profits registered during the year amounting to RM117.3 million (FY2002: RM104.5 million). This has led to an improvement in the Company’s operating and investment leverages to 2.0x and 32.0% respectively.