Press Releases MARC AFFIRMS THE INSURANCE FINANCIAL STRENGTH RATING OF KURNIA INSURANS (MALAYSIA) BERHAD AT A+.

Monday, Jan 24, 2005

Kurnia Insurans (Malaysia) Berhad’s (Kurnia) insurance financial strength rating has been affirmed at A+ to reflect the Company’s expanding share of the local general insurance market; its ability to maintain its leadership position in the motor insurance segment, realize its business strategies and improve its business operations; as well as its continuous efforts in introducing innovative products and services. The rating, however, is moderated by Kurnia’s high business concentration on motor and weaker underwriting results in FY2004.
In 2002/2003, Kurnia held 13.4% and 22.6% share of the industry’s total net premiums and motor net premiums respectively, making it the largest general and motor insurer in the country. The strength of Kurnia’s motor business is based on its extensive distribution network, strong relationships with agents and other business associates, aggressive marketing approach and effective claims management. Kurnia aims to capture 30.0% share of the local general insurance market as early as year 2010, by actively expanding its non-motor business whilst maintaining its leadership in the motor segment. The IPO listing of Kurnia Asia Berhad, Kurnia’s new holding company, in January 2005 will enhance Kurnia’s brand awareness and customer acceptance, and help boost business volume going forward.
Kurnia’s overall underwriting profit deteriorated by 70.1% to RM30.9 million due mainly to the higher charge on unearned premium reserve and the increase in net claims incurred during the year. Claims and total expense ratios stood at 68.0% (FY2003: 57.4%) and 26.6% (FY2003: 29.3%) respectively. Lower underwriting profit, coupled with the RM31.1 million impairment loss on goodwill, led to a 45.9% decline in the pre-tax profit to RM89.2 million.

In FY2004, Kurnia raised its equity exposure to 18.2% (FY2003: 11.0%), leading to a corresponding decline in the composition of liquid assets to 67.4% (FY2003: 72.6%). The higher investment leverage of 60.7% (FY2003: 28.6%) contributed to the improvement in total investment return to 6.9% (FY2003: 6.4%).

Kurnia’s total cash flow position strengthened to 113.4% in FY2004 (FY2003: 112.2%). The liquid assets coverage of both technical reserves and liabilities also improved to 76.6% (FY2003: 75.6%) and 71.8% (FY2003: 69.5%) respectively, owing to the increase in the level of liquid assets to RM900.3 million (FY2003: RM763.0 million).

Kurnia’s share capital remained at RM200.0 million as at 30 June 2004; double the regulatory requirement. Total shareholders’ funds, however, declined marginally by 3.8% to RM412.8 million due to lower net profits and high dividend payment during the year.