Let me first say that I am perplexed as to why this has happened. Although AIG does have many problems I would think that AIA was something that they should have held on to. It is significant that after trying to rebrand themselves for the past year, AIA now has to relinquish it's brand to Prudential, making it perhaps the largest foreign insurer in Asia. Let's look at what would actually happen in the context of the Singapore market.
A lot could be saved on operations. Advertising, business development, underwriting. This would mean savings being passed on (hopefully) to the consumers. Also, there would be a lot of money and energy saved on trying to "outbrand" and "outmarket" each other. More time and resources could be channeled towards providing better customer service to customers. On top of that, Prudential and AIA clients should gain access to customer service from both brands.
However, I would think that this move was motivated more for the shareholders rather than the consumers. A larger sales force would equate to Prudential having a better standing in the eyes of possible investors. If all works well, Prudential would be in a better position to negotiate with investors, regulatory bodies and would be able to be the de facto market leader whereby it would be the one to innovate financial products and the other companies would be playing catch up by immitating.
Here's why I think this merger would be more disasterous than beneficial for everyone.
1) More often than not, there's a limit to how big a company can grow. With the huge and sudden influx, there is so much Prudential can do to accomodate so many agents under one brand. People will feel left out and they will leave. Imagine AIA's top group going from perhaps number 1 in the company to becoming number 10 or more after the merger or vice versa. As a top team you do get special bargaining power. Top teams will leave as they cannot accept playing second fiddle and having a smaller voice once the merger is complete.
2) AIA has a very long standing tradition and reputation. To be "eaten up" by one of it's fiercest rivals would be a slap in the face for many AIA agents. Some of whom would rather leave than to try to eat humble pie and accept Prudential's culture.
3) Prudential will have a hard time trying to assimilate commission schemes. There will definitely be some who will end up short changed. This is unavoidable. Also, many AIA products are rather similar to Prudential in terms of characteristics but differ in the payout schemes. Certain policies take 6 years to fully payout their commission. Imagine having to merge both accounting systems under one umbrella.
4) AIA has a very good retirement package. Prudential, in my opinion, is more geared towards immediate payout. This has to be sorted out. It's either one or another. To continue with the good retirement scheme and lower the immediate returns or vice versa, never both. Money just doesn't grow on trees for insurance companies.
5) Prudential's target client has always been one of higher net worth. For example, their shield plans only cater for private or A wards. They do not have the lower end plans like what NTUC or Aviva has for the masses. Does AIA have the same target audience? If it doesn't it would mean realigning the salesforce to gear them towards a single goal.
6) Most importantly, in my opinion, this is going to be a fantastic time for the other insurers in Singapore to step up and be prepared to catch whatever falls out from this mess. If I could use a metaphor to describe the situation then Prudential is like an apple picker who has already filled his basket with apples to the brim and yet is intent on stuffing even more apples into that already bursting basket. Great Eastern, NTUC, AXA, HSBC, Manulife and all the independent financial advisory firms have to walk behind and pick up the apples that are dropping out of the basket. For all you know, the ones that drop out of the basket could be much sweeter than the ones inside!
For those who have championed for this deal, I believe that this benefits the company more than the clients. In my opinion, after the merger, the total value of the single entity will be lesser than the total value if they were seperate. Premiums will not drop and customer service will not be optimal.
A better move would be to save the money on this merger and acquisition and develop a general insurance arm to try to add value to the consumer. However, this was perhaps not pursued due to the fact that many aspects of general insurance like motor insurance are a bleeding business. Sometimes you have to bleed for the customer to show him that you care.
Anyone thinks this is anti-competition?
Tuesday, March 02, 2010
Thursday, February 18, 2010
Private home sales have risen... again...
Am I missing something or are Singaporeans really that rich?
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1037971/1/.html
Foreigners perhaps? Then what is left for Singaporeans?
It really perplexes me to know that property is being snapped up at such an alarming rate.
http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1037971/1/.html
Foreigners perhaps? Then what is left for Singaporeans?
It really perplexes me to know that property is being snapped up at such an alarming rate.
Wednesday, February 03, 2010
Housing on the rise!!!
Recently there has been much debate about whether prices of housing in Singapore have become too expensive. I personally feel that it is too expensive but I do not believe that there will be a correction in the near future. (I do hope there will be one though as I am personally looking to purchase a unit) One sticking point is that there are too many foreigners and permanent residents pushing the prices up north. Everyone has to have a say on this issue and so do I. It must be noted that I am giving a personal opinion and not a professional one.
Our government will have a specific population goal that they will target. It may or may not be what is declared to the press but I believe that they do. I believe that they targeted the Singapore population to hit about 5 million sometime in 2010-2012. The thing is that Singaporeans in general are not helping the government's plan. Due to the high cost of bringing up children, Singaporeans do not give birth to sufficient babies to hit the government's population target. The easiest way to alleviate this situation would be to import foreigners. Foreigners who could contribute to the economy would help the country move prosper economically. The thing about this would be that the government is substituting an infant with an adult. An infant would demand for housing in 20-35 years time but an imported adult would need to settle his lodging from the moment he stepped foot in Singapore. This increase in demand is not organic and was not anticipated and perhaps overlooked.
Moreover, this increase in the demand for residential housing coincided with the building of the 2 integrated resorts and the shortage of raw materials needed to build residential housing for the increased demand. Planners perhaps overlooked this aspect as well. In times of extreme prosperity, even planners seem to overlook that excess demand for raw materials could result in a shortage and thus made no contingency for if raw materials like sand and steel became more scarce.
Yes foreign workers have contributed to our nations growth and they should be given due credit. However, the state should not neglect the basic needs of it's citizens in it's pursuit for greater prosperity. Yes housing is still affordable if you compare it as a single entity that eats into a person's take home pay. However once you add in other expenditures like food, education and leisure, Singapore is becoming an increasingly difficult place to live in. I am one for a better quality of life and I believe that we as a country are spending too much of our income on housing repayments. So much so that I feel that our quality of life has taken a serious beating.
Yours Sincerely,
Daryl Lum
Our government will have a specific population goal that they will target. It may or may not be what is declared to the press but I believe that they do. I believe that they targeted the Singapore population to hit about 5 million sometime in 2010-2012. The thing is that Singaporeans in general are not helping the government's plan. Due to the high cost of bringing up children, Singaporeans do not give birth to sufficient babies to hit the government's population target. The easiest way to alleviate this situation would be to import foreigners. Foreigners who could contribute to the economy would help the country move prosper economically. The thing about this would be that the government is substituting an infant with an adult. An infant would demand for housing in 20-35 years time but an imported adult would need to settle his lodging from the moment he stepped foot in Singapore. This increase in demand is not organic and was not anticipated and perhaps overlooked.
Moreover, this increase in the demand for residential housing coincided with the building of the 2 integrated resorts and the shortage of raw materials needed to build residential housing for the increased demand. Planners perhaps overlooked this aspect as well. In times of extreme prosperity, even planners seem to overlook that excess demand for raw materials could result in a shortage and thus made no contingency for if raw materials like sand and steel became more scarce.
Yes foreign workers have contributed to our nations growth and they should be given due credit. However, the state should not neglect the basic needs of it's citizens in it's pursuit for greater prosperity. Yes housing is still affordable if you compare it as a single entity that eats into a person's take home pay. However once you add in other expenditures like food, education and leisure, Singapore is becoming an increasingly difficult place to live in. I am one for a better quality of life and I believe that we as a country are spending too much of our income on housing repayments. So much so that I feel that our quality of life has taken a serious beating.
Yours Sincerely,
Daryl Lum
Tuesday, January 19, 2010
Bonds Versus Equities
People who plan for others should be aware of what they are doing and what they are planning. I have someone (a financial advisor who has been at his position for the last 8 years) who told me that bonds are the safest bet today after what has transpired globally over the last 2 years. He told me that equities are all bad for someone who doesn't want to lose money. In short, put all who are fearful of losing money in the short term into bonds. Let's take some time to analyse this shall we?...
A bond is actually a debt instrument whereby a company or even the government of a certain country takes up a loan from the public. The bond usually consists of some interest payments over the course of the bond period and at the end of it the whole principle sum will be repaid.
Example:
A bond that costs me $1000 (face value) with interest (coupon payments) of 2% per annum (ie. $20 will be credited to me every year) for 10 years. At the end of the 10 years, my $1000 will be returned. If there is a wish to sell off the bond before maturity, one can do so but the market will take the bond in at what it deems accurate (Example below).
HEADLINE NEWS (If you're still living in a turtle shell)
1) Interest rates are SUPER low. In the near to medium term they will head up! I can get a housing loan today with current rates of 1.6% interest per annum. Lower than what HDB has to offer.
2) The world is inter connected to the US market. When the US market sneezes, we get a cold. Currently there is much talk about the Federal Reserve in the US raising the interest rates to combat a devaluing currency and to stop this artificially low interest rate environment.
Lets take a look at what will happen
Fearful of losses client purchases a bond with face value of $1000, interest rate is at 2% per annum and thus will receive $20 every year. This bond will mature in 10 years and at that point in time his $1000 will be returned to him.
2 years down the road, interest rates WILL have risen to perhaps 5%. At that point in time a similar bond with 10 years maturity and 5% interest will also cost $1000 but then will return $50 every year till it matures.
What will happen to the client? He will be stuck with a low yielding bond. Others put up $1000 and get back $50 a year while he puts up the same amount and gets back $20 a year.
What if he sells? The market will demand 5% interest (coupon rate) for bonds. His $20 coupon will be the 5% interest. Therefore he can only sell his bond for $20 / 5% x 100% = $400. MUCH MUCH lower than what he bought it for. This equates to a $600 loss!!!
To those who are selling bond related products: Know what you are selling at this current point in time before making a recommendation.
A bond is actually a debt instrument whereby a company or even the government of a certain country takes up a loan from the public. The bond usually consists of some interest payments over the course of the bond period and at the end of it the whole principle sum will be repaid.
Example:
A bond that costs me $1000 (face value) with interest (coupon payments) of 2% per annum (ie. $20 will be credited to me every year) for 10 years. At the end of the 10 years, my $1000 will be returned. If there is a wish to sell off the bond before maturity, one can do so but the market will take the bond in at what it deems accurate (Example below).
HEADLINE NEWS (If you're still living in a turtle shell)
1) Interest rates are SUPER low. In the near to medium term they will head up! I can get a housing loan today with current rates of 1.6% interest per annum. Lower than what HDB has to offer.
2) The world is inter connected to the US market. When the US market sneezes, we get a cold. Currently there is much talk about the Federal Reserve in the US raising the interest rates to combat a devaluing currency and to stop this artificially low interest rate environment.
Lets take a look at what will happen
Fearful of losses client purchases a bond with face value of $1000, interest rate is at 2% per annum and thus will receive $20 every year. This bond will mature in 10 years and at that point in time his $1000 will be returned to him.
2 years down the road, interest rates WILL have risen to perhaps 5%. At that point in time a similar bond with 10 years maturity and 5% interest will also cost $1000 but then will return $50 every year till it matures.
What will happen to the client? He will be stuck with a low yielding bond. Others put up $1000 and get back $50 a year while he puts up the same amount and gets back $20 a year.
What if he sells? The market will demand 5% interest (coupon rate) for bonds. His $20 coupon will be the 5% interest. Therefore he can only sell his bond for $20 / 5% x 100% = $400. MUCH MUCH lower than what he bought it for. This equates to a $600 loss!!!
To those who are selling bond related products: Know what you are selling at this current point in time before making a recommendation.
Wednesday, December 23, 2009
Self Actualisation
Some time back I attended a gathering with a few friends for a short meal and I noticed one very glaring characteristic about people. At the table there were different characters from various walks of life. Lawyers, doctors, teachers, bankers, HR managers, etc... Some abliet were doing much better than the rest and I noticed a very distinct characteristic about them. It is the ability not to complain and take whatever life throws at them. Then I thought about it for a while. If one were to complain about his or her plight day in and day out, he or she would not have enough time to notice that there were others around that needed a little listening to. The ability to listen is only inherent in people who are not tied up with their own social disgruntlement.
I would say that man management is an extremely challenging task. I for one would attest to the fact that I am not excelling in this aspect and am still learning to improve on this. Focus and being single minded in the quest to achieve one's goal is very essential. Let this focus go and life starts spiralling out of control. Everyone has their own unique problems. Never discount others' problems as trivial in comparison to yours. If you could, would you trade yourself in for any random person's out there without knowing who you were trading with? No one would. Be thankful that you are given the gift to live as normally as you have done so and yet be sympathetic to those around you who are born with less favourable gifts than yours.
It is rather difficult to be able to spot this glaring flaw but I think complaining about life in general is a sign that a person is not thankful for whatever he or she has.
moral of the story: look in the mirror and appreciate your life.
I would say that man management is an extremely challenging task. I for one would attest to the fact that I am not excelling in this aspect and am still learning to improve on this. Focus and being single minded in the quest to achieve one's goal is very essential. Let this focus go and life starts spiralling out of control. Everyone has their own unique problems. Never discount others' problems as trivial in comparison to yours. If you could, would you trade yourself in for any random person's out there without knowing who you were trading with? No one would. Be thankful that you are given the gift to live as normally as you have done so and yet be sympathetic to those around you who are born with less favourable gifts than yours.
It is rather difficult to be able to spot this glaring flaw but I think complaining about life in general is a sign that a person is not thankful for whatever he or she has.
moral of the story: look in the mirror and appreciate your life.
Tuesday, December 15, 2009
The shocking truth!!!
note: Thank goodness the exams are over!
Recently I quizzed a few of my friends about their insurance coverage and in particular their coverage against dread diseases. I was really amazed by the lackadaisical attitude most of my friends had towards the probable problem.
It is rather shocking to find out how few Singaporeans actually bother about insurance. ESPECIALLY HEALTH CARE!!!
In 2008, 29% of the deaths in Singapore were related to Cancer. Yet many are unaware of the threat this poses to them and their families. Be it financially or emotionally. Many of the people whom I've spoken to do not cover themselves with at least a basic critical illness cover. The worst thing about having such an illness is the preceding battle that one has to endure before passing on. The struggle is a long and winding toll on the finances of the individual and the family.
Many are aware of illnesses like cancer but very few are unable to put aside a little time and money to deal with the probable future problem.
Sad fact: MORE THAN 1 in 4 Singaporeans will die of cancer eventually. This number should rise with the type of lifestyle and diet all of us are having. Yet very few are willing to protect themselves. It's either "no time", "no money" or "don't care". The scary fact is that most of these people are unaware of the cost of treatment. If they did perhaps they'd stand up and take notice.
Recently I quizzed a few of my friends about their insurance coverage and in particular their coverage against dread diseases. I was really amazed by the lackadaisical attitude most of my friends had towards the probable problem.
It is rather shocking to find out how few Singaporeans actually bother about insurance. ESPECIALLY HEALTH CARE!!!
In 2008, 29% of the deaths in Singapore were related to Cancer. Yet many are unaware of the threat this poses to them and their families. Be it financially or emotionally. Many of the people whom I've spoken to do not cover themselves with at least a basic critical illness cover. The worst thing about having such an illness is the preceding battle that one has to endure before passing on. The struggle is a long and winding toll on the finances of the individual and the family.
Many are aware of illnesses like cancer but very few are unable to put aside a little time and money to deal with the probable future problem.
Sad fact: MORE THAN 1 in 4 Singaporeans will die of cancer eventually. This number should rise with the type of lifestyle and diet all of us are having. Yet very few are willing to protect themselves. It's either "no time", "no money" or "don't care". The scary fact is that most of these people are unaware of the cost of treatment. If they did perhaps they'd stand up and take notice.
Wednesday, November 25, 2009
Long time since the last posting
I've been really busy with work and studies recently hence the lack of posting. Here's some quotes to ponder on to maintain my existence and relevance.
It's better to hang out with people better than you. Pick out associates whose behavior is better than yours and you'll drift in that direction.
Warren Buffett
It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
Warren Buffett
Someone's sitting in the shade today because someone planted a tree a long time ago.
Warren Buffett
Quite interesting if you'd spend some time to think about it... There's a reason why he's where he is today.
Yours Sincerely,
Daryl
It's better to hang out with people better than you. Pick out associates whose behavior is better than yours and you'll drift in that direction.
Warren Buffett
It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
Warren Buffett
Someone's sitting in the shade today because someone planted a tree a long time ago.
Warren Buffett
Quite interesting if you'd spend some time to think about it... There's a reason why he's where he is today.
Yours Sincerely,
Daryl
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