Despite some progress, congressional investigators on Monday cast doubt on whether efforts by American International Group Inc (AIG)to restructure its operations and pay back the government will ever prove successful.
Still, the companys shares jumped more than 20% after the head of the House Committee on Oversight and Government Reform said that panel would examine a plan to reduce the AIG bailout package.
In the biggest taxpayer-funded bailout of a single company, the Federal Reserve and Treasury Department have provided $182.3 billion to the insurance giant.The Government Accountability Office said that as of early September, AIGs outstanding balance of aid was $120.7 billion.
The GAO found some progress in AIGs ability to repay the federal assistance.
But improvement in the companys stability depends on its long-term health,market conditions and continued government support.
The report concluded that the ultimate success of AIGs restructuring and repayment efforts remains uncertain.
Responding to the report, AIG spokesman Mark Herr said:AIG remains committed to reducing risk and repaying taxpayers.
Fearing that AIGs collapse could take down the entire US financial system and the broader economy, the Fed first came to AIGs rescue last September.
The original $85 billion aid package came one day after Lehman Brothers filed for bankruptcy, the largest in US corporate history.
AIG burned through the first lifeline,though, and continued to haemorrhage cash. It needed help three more times from the government, which owns about 80% of the company because of the bailout.
Congressional investigators acknowledged that the federal assistance has helped stabilise AIGs financial situation. But they said the government remained exposed credit and investment risks that could result in the Federal Reserve and Treasury not being repaid in full.
Rep Edolphus Towns, chairman of the House Oversight Committee, will have that panel study a proposal by AIGs former chief executive officer Maurice Hank Greenberg to reduce and restructure the companys bailout package, a committee spokeswoman said on Monday.
Towns, who has not spoken to the Treasury Department about the plan,met with Greenberg last week, the spokeswoman said.
Greenberg was ousted as CEO in 2005 amid an accounting scandal. He still holds millions of shares of AIG stock through a privately held investment company called CV Starr & Co.
Standard & Poors equity analyst Catherine Seifert upgraded her rating on AIGs stock to hold from sell on Monday,saying Towns review of Greenbergs plan should boost the insurers stock price in the near term.
Seifert raised her price target on the stock to $45 from $30.
AIG shares have been extremely volatile in recent months as investors bet on whether the New York-based company will be able to pay off its government debts and fully recover from the economic downturn. Its shares jumped $8.49, or 21.3%, to $48.40 on Monday.
Friday, September 25, 2009
Tuesday, September 22, 2009
AIA launches Care Giver
American International Assurance-Thailand has Launched a personal accidental policy called AIA Care Giver that ensures continued financial support to the parents of policyholders.
"The product offers policyholders who are dead or suffer from permanent disability due to accidents and can no longer afford their parent's cost of living three types of benefits," Sataya Tephunternag, general manager for agency distribution at AIA Thailand, said yesterday.
The first benefit is coverage at 60 per cent or 100 per cent of the sum insured as specified in the policy due to accidental death, dismemberment, loss of sight or total permanent disability.
If total permanent dismemberment occurs within 12 months after the accident, the policy's benefit will be 100 per cent of the sum insured.
Second is hospital benefits due to the accident and third is a monthly living benefit for the insurer's father or mother of up to Bt10,000 for 60 straight months.
PA Care Giver is available for people aged 16-60 who have a regular monthly income. AIA Thailand offers policyholders four product plans with an insured sum of Bt300,000 Bt500,000, Bt800,000 or Bt3,000, Bt5,000, Bt8,000 or Bt10,000 respectively.
The policies can be renewed until the age of 75.
"The product offers policyholders who are dead or suffer from permanent disability due to accidents and can no longer afford their parent's cost of living three types of benefits," Sataya Tephunternag, general manager for agency distribution at AIA Thailand, said yesterday.
The first benefit is coverage at 60 per cent or 100 per cent of the sum insured as specified in the policy due to accidental death, dismemberment, loss of sight or total permanent disability.
If total permanent dismemberment occurs within 12 months after the accident, the policy's benefit will be 100 per cent of the sum insured.
Second is hospital benefits due to the accident and third is a monthly living benefit for the insurer's father or mother of up to Bt10,000 for 60 straight months.
PA Care Giver is available for people aged 16-60 who have a regular monthly income. AIA Thailand offers policyholders four product plans with an insured sum of Bt300,000 Bt500,000, Bt800,000 or Bt3,000, Bt5,000, Bt8,000 or Bt10,000 respectively.
The policies can be renewed until the age of 75.
Sunday, September 20, 2009
Non-life insurers adopt RBC
So far, 34 non-life-insurance companies out of the 63 existing ones are employing the risk-based internaitonal standard for gauging capital adequacy, after the Office of the Insurance Commission set a 2011 deadline for compliance.
"In 2011, risk-based capital will be used but not 100 per cent," Nittaya Piriyathamwong, director and secretary of the Insurance Premium Rating Bureau (IPRB), said yesterday.
"It depends on the OCI whether they will be very strict about RBC. They can use it gradually and extend full compliance to five years," she said.
The 34 general insurers, both large small, have started calculation their capital in line with the RBC, a model for the capital standard of insurers earlier used in Malaysia and Singrpore to ensure risks are managed.
Insurance compaines are required to maintain capital in order to support possible or unexpected losses, ensure stability and financial strength, ensure their ability to cope with unexpected liabilities and provide better risk management.
The risks for insurers include credit, market, liability, group, operating and liquidity risk.
When the RBC trial run ends next month, the IPRB would send all the information on it to the OIC.
According to the guideline, non-life insurers must maintain capital of at least 150 per cent or 1.5 times their policy liability. The OIC will provide advice for insurers whose capital is less than the requirement.
Nittaya said unlike other businesses, the capital for insurers would be calculated based on unexpected liability. Thus, mostly it is calculated from experience and statistics.
The remaining 29 non-life isurers do not disclose their figures to the OIC, but their financial strength will be finally evaluated along with the other insurers.
"In 2011, risk-based capital will be used but not 100 per cent," Nittaya Piriyathamwong, director and secretary of the Insurance Premium Rating Bureau (IPRB), said yesterday.
"It depends on the OCI whether they will be very strict about RBC. They can use it gradually and extend full compliance to five years," she said.
The 34 general insurers, both large small, have started calculation their capital in line with the RBC, a model for the capital standard of insurers earlier used in Malaysia and Singrpore to ensure risks are managed.
Insurance compaines are required to maintain capital in order to support possible or unexpected losses, ensure stability and financial strength, ensure their ability to cope with unexpected liabilities and provide better risk management.
The risks for insurers include credit, market, liability, group, operating and liquidity risk.
When the RBC trial run ends next month, the IPRB would send all the information on it to the OIC.
According to the guideline, non-life insurers must maintain capital of at least 150 per cent or 1.5 times their policy liability. The OIC will provide advice for insurers whose capital is less than the requirement.
Nittaya said unlike other businesses, the capital for insurers would be calculated based on unexpected liability. Thus, mostly it is calculated from experience and statistics.
The remaining 29 non-life isurers do not disclose their figures to the OIC, but their financial strength will be finally evaluated along with the other insurers.
Friday, September 18, 2009
Tax cuts: For whose benefit?
Achance to claim higher tax refunds must be a good thing.Viewed in a broader context,however, this sure-fire soundsgood proposal may not be that simple to judge.
The Office of Insurance Commission (OIC) recently proposed that a larger sum of insurance premium be allowed to claim a deduction in personal income tax. The office hoped to encourage more long-term savings through life-insurance policies.
The proposal is to allow buyers of life-assurance policies attached to investment or financial instruments to get higher deduction with a limit of 100,000 baht in the first year,200,000 baht for the second year and 500,000 baht for the third year.
Just last year, the government let lifeinsurance policy holders double their tax refund eligibility to 100,000 baht the request had hung in the air for many years. Insurance companies then rushed to pitch their products to customers,mostly those who already meet the 50,000 baht ceiling under the tax year 2007.
Let's consider who benefits from the current regulation before examining the new proposal.
For people who can pay a premium of 100,000 baht a year or around 8,333.33 baht a month, how much would their monthly salary be? Let's assume that this case is for a person free from housing or automobile loans. To be able to comfortably pay the monthly premium, the person may need around 25,000-30,000 baht of net income after contributions to the legally required Social Security Fund and voluntary savings scheme such as a provident fund.
The question is, how many people in this country are free from servicing housing or automobile loans?
Taxpayers who have already reached the current ceiling of 100,000 baht annual life-insurance premium will enjoy tax savings ranging from 10,000 baht to 37,000 baht depending on their tax bracket. At this rate, the beneficiaries of this policy are likely to be middle-income earners.
As for the OIC's new proposal, who will benefit from the policy if the government approves it?
The first question is: How many people in Thailand can afford to pay 500,000 baht a year for insurance premiums, or 41,666.66 baht a month?
Although the government and insurance firms keep on touting the advantages of life insurance policies to the country's development, they have not been successful in raising personal savings through this mechanism.Thailand's life insurance business currently accounts for only 3.5% of the country's gross domestic product, much below that of developed markets in which the industry contributes up to 9-10% of their GDP.
While the OIC maintains that buying life insurance would help policy holders prepare for their retirement, its proposal seems to favour those whose insurance policies will be tied to investment in financial products.
Also last year, the government approved the proposal to raise the tax refund ceiling for those who invest in longterm equity funds (LTF) and retirement mutual funds (RMF) to 700,000 baht,from 500,000 baht. But it maintained the 15% limit on portion of income to be eligible for this benefit.
This means that the maximum amount of LTF a person can use to claim a tax refund is capped at 15% of his or her total annual income. For example, a maximum LTF amount a person with 1 million baht income per year should buy to enjoy a maximum tax refund benefit is 150,000 baht.
This also means that unless the person is super-rich, the raising of the ceiling is likely to mean nothing. To enjoy the 700,000 baht ceiling, a person's annual income must be around 4.66 million baht per year, or 388,888.88 baht a month.
Again, may I ask, how many taxpayers are earning this much income?
If these ultra-rich taxpayers manage their tax plan well - utilising the maximum deductions for LTF, RMF and current deduction for insurance premiums - they can save around 555,000 baht of tax annually, based on the highest tax rate of 37%. It's true that this group of people still pays a lot of tax, but the amount that they can save is much higher than the per capita income of Thai people which was estimated at 84,122.83 baht in 2007, according to the National Economic and Social Development Board.
It appears to me that the latest amendment in tax deductions is aimed only at helping the rich to get richer, as they can save a huge sum of tax. The government's always saying it wants to increase the money in people's pockets, but I wonder whose pockets is it talking about?
The Office of Insurance Commission (OIC) recently proposed that a larger sum of insurance premium be allowed to claim a deduction in personal income tax. The office hoped to encourage more long-term savings through life-insurance policies.
The proposal is to allow buyers of life-assurance policies attached to investment or financial instruments to get higher deduction with a limit of 100,000 baht in the first year,200,000 baht for the second year and 500,000 baht for the third year.
Just last year, the government let lifeinsurance policy holders double their tax refund eligibility to 100,000 baht the request had hung in the air for many years. Insurance companies then rushed to pitch their products to customers,mostly those who already meet the 50,000 baht ceiling under the tax year 2007.
Let's consider who benefits from the current regulation before examining the new proposal.
For people who can pay a premium of 100,000 baht a year or around 8,333.33 baht a month, how much would their monthly salary be? Let's assume that this case is for a person free from housing or automobile loans. To be able to comfortably pay the monthly premium, the person may need around 25,000-30,000 baht of net income after contributions to the legally required Social Security Fund and voluntary savings scheme such as a provident fund.
The question is, how many people in this country are free from servicing housing or automobile loans?
Taxpayers who have already reached the current ceiling of 100,000 baht annual life-insurance premium will enjoy tax savings ranging from 10,000 baht to 37,000 baht depending on their tax bracket. At this rate, the beneficiaries of this policy are likely to be middle-income earners.
As for the OIC's new proposal, who will benefit from the policy if the government approves it?
The first question is: How many people in Thailand can afford to pay 500,000 baht a year for insurance premiums, or 41,666.66 baht a month?
Although the government and insurance firms keep on touting the advantages of life insurance policies to the country's development, they have not been successful in raising personal savings through this mechanism.Thailand's life insurance business currently accounts for only 3.5% of the country's gross domestic product, much below that of developed markets in which the industry contributes up to 9-10% of their GDP.
While the OIC maintains that buying life insurance would help policy holders prepare for their retirement, its proposal seems to favour those whose insurance policies will be tied to investment in financial products.
Also last year, the government approved the proposal to raise the tax refund ceiling for those who invest in longterm equity funds (LTF) and retirement mutual funds (RMF) to 700,000 baht,from 500,000 baht. But it maintained the 15% limit on portion of income to be eligible for this benefit.
This means that the maximum amount of LTF a person can use to claim a tax refund is capped at 15% of his or her total annual income. For example, a maximum LTF amount a person with 1 million baht income per year should buy to enjoy a maximum tax refund benefit is 150,000 baht.
This also means that unless the person is super-rich, the raising of the ceiling is likely to mean nothing. To enjoy the 700,000 baht ceiling, a person's annual income must be around 4.66 million baht per year, or 388,888.88 baht a month.
Again, may I ask, how many taxpayers are earning this much income?
If these ultra-rich taxpayers manage their tax plan well - utilising the maximum deductions for LTF, RMF and current deduction for insurance premiums - they can save around 555,000 baht of tax annually, based on the highest tax rate of 37%. It's true that this group of people still pays a lot of tax, but the amount that they can save is much higher than the per capita income of Thai people which was estimated at 84,122.83 baht in 2007, according to the National Economic and Social Development Board.
It appears to me that the latest amendment in tax deductions is aimed only at helping the rich to get richer, as they can save a huge sum of tax. The government's always saying it wants to increase the money in people's pockets, but I wonder whose pockets is it talking about?
Monday, September 14, 2009
Sexual preference not a factor, says SCNYL
Siam Commercial New York Life Insurance (SCNYL) has said that sexual preference is never a factor in its underwriting process in reaction to recent news report on an insurance application rejection.
SCNYL said it was aware of the news report of the insurance policy rejection for Natee Teerarojjanaphongs, a prominent gay-rights activist and an HIV/Aids advocate. Natee recently claimed that he was his insurance application because he is gay.
Below is SCNYL's statement in response to Natee's claim.
"[As] a matter of principle and legal confidentiality, we never discuss individual customer policies or applications. Sexual preference is never a factor in our underwriting process. However, there are numerous risk factors we consider in the health underwriting of any life insurance policy," SCNYL said.
The company said it had a long history of projecting "foundational values" of humanity and integrity in all of its business dealings, and treated every applicant impartially, with the respect they deserve. SCNYL conducts its business according to high standards of integrity and a code of conduct, and under the strict supervision of the Office of the Insurance Commission, the insurer said in its statement, released late last week.
SCNYL said it was aware of the news report of the insurance policy rejection for Natee Teerarojjanaphongs, a prominent gay-rights activist and an HIV/Aids advocate. Natee recently claimed that he was his insurance application because he is gay.
Below is SCNYL's statement in response to Natee's claim.
"[As] a matter of principle and legal confidentiality, we never discuss individual customer policies or applications. Sexual preference is never a factor in our underwriting process. However, there are numerous risk factors we consider in the health underwriting of any life insurance policy," SCNYL said.
The company said it had a long history of projecting "foundational values" of humanity and integrity in all of its business dealings, and treated every applicant impartially, with the respect they deserve. SCNYL conducts its business according to high standards of integrity and a code of conduct, and under the strict supervision of the Office of the Insurance Commission, the insurer said in its statement, released late last week.
Friday, September 11, 2009
Southeast in rebranding drive
The Southeast business group, owned by liquor billionaire Charoen Sirivadhanabhakdi, is preparing to invest about 400 million baht over the next four years in rebranding, information technology infrastructure and product and distribution expansion.
"Rebranding including new TV commercials, public relations and product and service development is expected to cost the group about 100 million baht in the first phase, which lasts about 12 months," said Chotiphat Bijananda, Mr Charoen's son-in-law and the chairman of the executive board of the Southeast Group.
"We are ready to invest a similar amount in phases over the next three years after that if the first phase proves successful."
The group includes Southeast Life Insurance, Southeast Insurance (2000)Co Ltd, and Southeast Capital Ltd.
The Southeast Group yesterday introduced its new corporate identity and TV commercials, its first brand investment in the last 13 years, as it aims to position itself as the country's leading insurance and financial service provider as it prepares for the economic recovery.The TV commercials start airing today.
The company also partnered with IBM Thailand to transform its IT systems to create a more dynamic infrastructure for better risk management and customer service enhancement. AIS also helped to develop new products and services,although details have not yet been disclosed.
According to Mr Chotiphat, the group's rebranding and organisational restructuring should enable its two insurance firms to rank in the top nine by 2013.
Southeast Life Insurance by 2013 is projected to see its written premiums for new business rise by 500%, with direct premiums of Southeast Insurance to increase by 140%.
Southeast Capital, which deals mainly with leasing, hire-purchase and operating leases, expects to see its car leases rise by 280%.
In 2008, according to the Office of the Insurance Commission, Southeast Life reported total premiums worth 1.72 billion baht, up 10% from a year earlier,but it registered first-year premiums worth 198 million baht, a rise of 49%from a year before.
The group's general insurance firm produced 1.82 billion baht, up 11.32%from a year earlier.
According to Mr Chotiphat, the life insurance business expects new premiums to grow 56.9% by the end of this year, with insurance firm production to grow by 11.51%.
The number of car leases by Southeast Capital is projected to rise by 15.67% to 1,970 units.
"Rebranding including new TV commercials, public relations and product and service development is expected to cost the group about 100 million baht in the first phase, which lasts about 12 months," said Chotiphat Bijananda, Mr Charoen's son-in-law and the chairman of the executive board of the Southeast Group.
"We are ready to invest a similar amount in phases over the next three years after that if the first phase proves successful."
The group includes Southeast Life Insurance, Southeast Insurance (2000)Co Ltd, and Southeast Capital Ltd.
The Southeast Group yesterday introduced its new corporate identity and TV commercials, its first brand investment in the last 13 years, as it aims to position itself as the country's leading insurance and financial service provider as it prepares for the economic recovery.The TV commercials start airing today.
The company also partnered with IBM Thailand to transform its IT systems to create a more dynamic infrastructure for better risk management and customer service enhancement. AIS also helped to develop new products and services,although details have not yet been disclosed.
According to Mr Chotiphat, the group's rebranding and organisational restructuring should enable its two insurance firms to rank in the top nine by 2013.
Southeast Life Insurance by 2013 is projected to see its written premiums for new business rise by 500%, with direct premiums of Southeast Insurance to increase by 140%.
Southeast Capital, which deals mainly with leasing, hire-purchase and operating leases, expects to see its car leases rise by 280%.
In 2008, according to the Office of the Insurance Commission, Southeast Life reported total premiums worth 1.72 billion baht, up 10% from a year earlier,but it registered first-year premiums worth 198 million baht, a rise of 49%from a year before.
The group's general insurance firm produced 1.82 billion baht, up 11.32%from a year earlier.
According to Mr Chotiphat, the life insurance business expects new premiums to grow 56.9% by the end of this year, with insurance firm production to grow by 11.51%.
The number of car leases by Southeast Capital is projected to rise by 15.67% to 1,970 units.
Sunday, September 6, 2009
AIG selling asset-management unit to Hong Kong firm
American International Group Inc says on Saturday it has reached a deal to sell a portion of its asset management business to a Hong Kong-based investment firm for $500 million.
The sale to Bridge Partners LP, which is owned by Pacific Century Group, includes about $300 million in cash at closing, additional future consideration that includes a performance note and a continuing share of carried interest.
The sale is just the latest for the troubled insurance giant.
AIG is trying to sell assets to repay billions of dollars in federal loans. The package, which helped it avoid failing,was worth up to $182.5 billion.
The latest units being sold operate in 32 countries and manage about $88.7 billion of investments by institutional and retail clients, AIG said in a release.
AIG will retain its in-house investment arm that oversees about $480 billion of assets under management.
Win J. Neuger will continue as CEO of the units being sold and the existing management team will remain in place,the company said. The transaction is subject to receipt of regulatory approvals.
AIG shares fell $1.70, or 4%, to $40.05 on Friday, then fell another 32 cents to $39.73 in after-hours trading.
The sale to Bridge Partners LP, which is owned by Pacific Century Group, includes about $300 million in cash at closing, additional future consideration that includes a performance note and a continuing share of carried interest.
The sale is just the latest for the troubled insurance giant.
AIG is trying to sell assets to repay billions of dollars in federal loans. The package, which helped it avoid failing,was worth up to $182.5 billion.
The latest units being sold operate in 32 countries and manage about $88.7 billion of investments by institutional and retail clients, AIG said in a release.
AIG will retain its in-house investment arm that oversees about $480 billion of assets under management.
Win J. Neuger will continue as CEO of the units being sold and the existing management team will remain in place,the company said. The transaction is subject to receipt of regulatory approvals.
AIG shares fell $1.70, or 4%, to $40.05 on Friday, then fell another 32 cents to $39.73 in after-hours trading.
Friday, September 4, 2009
OIC seeks new tax breaks
The Insurance Commission has asked the Finance Ministry to increase tax deductions for three insurance categories to boost the industry's growth.
Regulators recently completed a review of tax incentives offered against premium payments for different types of insurance, said Chantra Purnariksha,the secretary-general of the Office of the Insurance Commission (OIC).
The commission will propose that individual tax deductions for life insurance premiums be doubled to up to 200,000 baht per year to encourage longterm saving, she said.
Regulators will also propose that tax deductions for premium payments to investment-linked life insurance policies be doubled to up to 200,000 baht for the first year. From the third year of coverage,deductions should be made similar to tax incentives offered for contributions to long-term equity and retirement mutual funds, now set at up to 500,000 baht per year or 15% of income, whichever is lower.
The Insurance Commission also proposes that premium payments for health insurance riders to life insurance policies also be made deductable.
The Revenue Department currently disallows tax deductions for premiums paid to health insurance riders. Insurance regulators propose that premium payments of up to 50,000 baht per year for health coverage be made deductable from personal income tax.
In any case, tax deductions should be permitted only for life insurance policies with terms of at least 10 years.
Mrs Chantra said premium payments for life insurance currently amount to 300 billion baht per year, with another 100 billion paid for general insurance policies.
The commission projects premium payments at 5% of GDP within two years,up from 3.9% this year.
Regulators recently completed a review of tax incentives offered against premium payments for different types of insurance, said Chantra Purnariksha,the secretary-general of the Office of the Insurance Commission (OIC).
The commission will propose that individual tax deductions for life insurance premiums be doubled to up to 200,000 baht per year to encourage longterm saving, she said.
Regulators will also propose that tax deductions for premium payments to investment-linked life insurance policies be doubled to up to 200,000 baht for the first year. From the third year of coverage,deductions should be made similar to tax incentives offered for contributions to long-term equity and retirement mutual funds, now set at up to 500,000 baht per year or 15% of income, whichever is lower.
The Insurance Commission also proposes that premium payments for health insurance riders to life insurance policies also be made deductable.
The Revenue Department currently disallows tax deductions for premiums paid to health insurance riders. Insurance regulators propose that premium payments of up to 50,000 baht per year for health coverage be made deductable from personal income tax.
In any case, tax deductions should be permitted only for life insurance policies with terms of at least 10 years.
Mrs Chantra said premium payments for life insurance currently amount to 300 billion baht per year, with another 100 billion paid for general insurance policies.
The commission projects premium payments at 5% of GDP within two years,up from 3.9% this year.
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