Oct
14
AIA Reports New Business in Asia
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AIA Group Ltd, Asia’s third largest insurer, has posted record numbers in terms of new business performance for the third quarter ending August 31 2011, driven in part by sustained premium income growth in Malaysia and China over the past year. The Hong Kong-based insurance company has been able to build on the strong sales momentum garnered earlier in the year to provide life insurance protection and savings solutions to an increasing number of clients worldwide.
In a company statement released to the Hong Kong Stock Exchange today, AIA reported that the value of its new business (VONB) had risen by a remarkable 53 percent during the three months ending in August. The insurer’s VONB, a key indicator of projected future profitability for new business, improved to US$245 million, its highest-ever quarterly value and up from the US$160 million reported from a year earlier. The underlying VONB margins meanwhile rose by 4.5 percentage points to 36 percent from a year ago. These figures all managed to beat out a consensus of industry analyst’s estimates, which roughly anticipated a 30 percent increase to around US$200 million in new business value for AIA during the quarter.
AIA’s strong third quarter performance has come on the back of a particularly productive year for the pan-Asian insurance giant. Through the first nine months of the year, AIA’s new business value has grown by an aggregate of 39 percent, upwards from the 32 percent hike presented in the company’s half-year report. According to the company statement, annualized new premiums (ANP), a periodic gauge for new business sales, grew by 52 percent up to US$766 million in the third quarter. AIA’s nine-month ANP totals now stands at US$1.86 billion, up 34 percent on last year’s figures. Total weighted premium income (TWPI), which measures long-term business volume, meanwhile improved by 14 percent to US$3.75 billion in past three months and US$10.5 billion for the year.
AIA attributed the substantial increase in new business value to an improved agency force, productivity enhancements, product pricing improvements and margin expansion over the past year. Under the company’s Premier Agency strategy, AIA has continued to develop and improve its agency model in the large Asia Pacific insurance markets it operates in. The company stated that the number of active agents had increased during the third quarter and that productivity had also risen, although exact figures were not released. AIA has then in turn been introducing the traditional higher-margin life, health and accident insurance policies into these large developing markets and encouraging agents to sell more riders and supplemental products to these populations with newfound disposable income.
AIA has also worked hard in the past year to increase the number of its regional bank partners and improve its alternative bancassurance and direct promotion and distribution platforms, which currently account for about a quarter of the company’s business. AIA has now launched bancassurance partnerships with several prominent firms in the Asia Pacific region, including Australia’s ANZ Bank and Citibank, who have branches in 14 major Asian markets. In addition, AIA has both upgraded the value of and increased sales of its banacassurance products by adjusting and re-pricing the products sold through its bank partners. According to AIA’s half year report, these measures have helped the insurer’s bancassurance business to grow by almost 20 percent so far this year. Overall, during the third quarter AIA was able to expand its margins and boost earnings though new product launches targeting under-penetrated markets, repricing existing protection products and improving its product mix towards regular premium products with greater insurance content.
While AIA recognized that every geographic region had contributed to its strong sales momentum in 2011, the insurer singled out Malaysia and China for their market’s performance in the second half of the year. Malaysia’s insurance market, in conjunction with sustained overall macroeconomic development, has reacted particularly well to ongoing repricing actions, enabling AIA to improve their margins in the South Asian country. AIA also noted an increase in sales of investment-linked and life protection products as more Malaysian become aware of the benefits of stable and secure investment solutions. The Chinese market meanwhile saw its strong growth rate in new business value continue, with increased sales in AIA’s innovative comprehensive protection products a particular highlight. China has become AIA’s third largest growth driver in the past year. The value of AIA’s new business portfolio in China grew by 47 percent in the first half of 2011 to US$44 million. AIA’s ability to continually reprice and move away from lower margin products in these Asian economies would continue to boost earnings.
Going forward, AIA remain committed to developing their business in the Asia Pacific region in lieu of deteriorating economic prospects in Europe and the United States as well as prolonged concerns over European sovereign debt issues. In AIA’s opinion, Asian economies, with their generally younger populations and higher savings rates, remain in a more secure foundation for sustained premium growth and appear more willing than their Western counterparts to enact appropriate economic stimulus measures after a summer of heightened global financial market volatility and considerable catastrophe losses. The rise in per capita wealth and affluence in Asia has come in conjunction with skyrocketing global healthcare costs and demands for secure and stable long-term savings and investment solutions. “Against this backdrop, AIA continues to focus on the key business fundamentals and executing its growth strategy. AIA is in a unique position within the region to meet this rising demand and we remain highly confident about AIA’s growth prospects in Asia,” AIA said in the statement.
Asia’s promising long-term economic projections, in conjunction with the region’s favorable demographics, will continue to fuel a substantive demand for AIA’s savings, investment-linked and life protection products. The company has been able to maintain limited exposure to the sovereign debt problems in the United States and in Europe. Going forward, AIA has intimated that the majority of the company’s investment rests in Asia in order to match its assets and liability locally. AIA CEO Mark Tucker concluded in the statement that there would be much more to come from the Asian insurance giant as it aims to close the trillion dollar gap in coverage between the West and the East. “We remain confident that the [Asia Pacific] region’s dynamic economic growth and vast demand for savings and protection products will continue to provide the Group with significant profitable growth opportunities for many years to come.”
Insurance Company Mentioned
AIA
AIA is a Hong Kong-based life insurance company doing business across Asia that has been in business since 1919. They service over 20 million policies through 23,000 employees and 300,000 agents throughout markets in Asia, including: Vietnam, Thailand, Taiwan, South Korea, Singapore, Philippines, New Zealand, Malaysia, Macau, Indonesia, India, Hong Kong, Mainland China, Brunei and Australia.
May
25
AIG Raises $8.7 Billion through Share Sale
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On Tuesday, American International Group Inc. (AIG) sold its first new stock offering since its near-collapse and ensuing United States government bailout in 2008, moving 300 million shares priced at US$29 each, to raise a total of US$8.7 billion for the insurance giant.
The AIG sale included 200 million shares held by the US Treasury, which picked up US$5.8 billion for the Federal Government, lowering American taxpayers’ stake in AIG to 77 percent from a previous 92 percent. AIG’s other 100 million shares, sold for US$2.9 billion, according to a company statement.
Treasury Secretary Timothy F. Geithner said that the offering was “an important milestone” for the Obama Administration in its efforts to sell its stake in AIG and recover bailout capital.
“The decision to provide this assistance was exceptionally difficult, but it’s clear today that it was essential to stopping a financial panic, preventing a severe economic collapse and helping save American jobs,” Geithner added.
The US Federal Government turned a small profit of around US$60 million from the sale. That amount could rise if the underwriters from the stock offering exercise their option within the next month to purchase up to an additional 45 million shares from the government’s AIG holdings.
AIG was left devastated by the global economic crisis. Fueled by risky bets on subprime-mortgage securities, the insurer reported the largest quarterly losses in US corporate history in the fall of 2008 and posted almost US$100 billion in net losses for the entire year.
A Federal bailout effort was necessitated after international trading partners demanded payment on derivates contracts. AIG was declared a “systemically significant failing institution” by the US Treasury and was the only company to receive bailouts through a special facility created for such classified firms.
Starting in September 2008, AIG was rescued by the US taxpayer to the tune of US$182 billion through a complex, multi-step bailout package issued by the US Treasury Department and the Federal Reserve. Governmental assistance came through a US$60 billion Federal credit facility, a Treasury investment of up to US$69.8 billion and a further US$52.5 billion limit to buy mortgage-linked assets held or backed by AIG.
The New York-based insurer has been gradually repaying the Fed as it restructures its operations and sells off some of its global assets, chiefly its large non-U.S. life insurance companies, including Japanese insurance arms AIG Star Life Insurance and AIG Edison Life Insurance to US insurance rival, Prudential Financial. However, while AIG continues its streamlining, it has retained its profitable Asian arm, the American International Assurance Group (AIA), which has remained the leading life insurer in the lucrative Asia-Pacific region.
AIG has also sold off some of its domestic holdings, such as its Alico subsidiary to US rival Metlife for US$16.2 billion and 21st Century Insurance Co., an auto insurance arm that AIG sold to Farmers Insurance Group in Los Angeles two years ago for US$1.9 billion.
AIG still owes the Treasury Department US$53.1 billion. In addition, the Federal Reserve holds US$23.6 billion in loans tied to the AIG bailout, which is backed by the company’s remaining assets. The Treasury plan to continue selling stock to eventually recoup all the money given to AIG but have agreed not to trade any additional shares for the next 120 days. The remaining shares need to sell at an average of about US$28.73 apiece to break-even on the remaining US$47.5 billion investment.
In November last year, the Congressional Budget Office projected that the Treasury Department could lose up to US$14 billion from the AIG bailout. Obama Administration officials, however, remain optimistic that taxpayers would eventually break even.
Tim Massad, the Treasury Department’s acting assistant secretary for financial stability, told reporters there was no “specific timetable” for disposing of the rest of AIG’s shares. The official remained confident that taxpayers’ investment will be recovered. “Two and a half years ago, nobody thought we’d get a dime back, so we’re very happy,” Massad said. “We didn’t make these investments to make a profit in the first place.… We’re hopeful we can recover all the investment we made, but whether we can will depend on market conditions going forward.”
“We’re going to sell in a way to maximize value to the taxpayer,” Massad added.
The rebounding US economy has enabled The Treasury Department to unwind bailouts from 2008 and 2009 that were neccesary to rescue the banking sector and protect American jobs. The government has already cut its stake in auto-manufacturers GM and Chrysler and sold its remaining Citigroup stock for US$10.5 billion in December, making over US$12 billion on its investment in the New York-based bank, counting dividends. AIG has thus far been the only insurer that hasn’t repaid its government bailout.
In January, Treasury Department concluded a deal with AIG to begin unwinding the US government’s tenure of ownership over the insurer. The agreement involved converting most preferred shares the Treasury received as part of the bailout package into nearly 1.7 billion shares of common stock.
That move helped recapitalize AIG so it could begin repaying the US$47 billion it owed to the Federal Reserve Bank of New York. The Treasury Department is now left with US$20.3 billion in preferred stock and an additional US$47.5 billion worth of common stock. Before Tuesday’s share sale, AIG had already redeemed US$9 billion of its preferred stock.
AIG Chief Executive Officer Robert Benmosche told shareholders at the company’s annual meeting on May 11 that the insurer may begin to repurchase stock as early as next year. AIG, once the world’s largest insurer, delivered improved results for 2010 and could ultimately emerge from its government rescue in a sound state.
Insurance Companies Mentioned
AIG
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.
AIA
AIA is a Hong Kong-based life insurance company doing business across Asia that has been in business since 1919. They service over 20 million policies through 23,000 employees and 300,000 agents throughout markets in Asia, including; Vietnam, Thailand, Taiwan, South Korea, Singapore, Philippines, New Zealand, Malaysia, Macau, Indonesia, India, Hong Kong, Mainland China, Brunei and Australia.
MetLife
Possessing over 140 years of insurance expertise, MetLife aims to be an innovator in the field of international Life insurance. Globally, MetLife is able to offer its clients accident and health insurance, life insurance, disability income protection, and retirement and savings products.
Alico
Alico provides a broad and innovative range of insurance and savings products to individual customers, corporate clients and high net worth customers. With products to support every aspect of their customers’ lives, and provide comprehensive cover for the employees and commercial needs of their business clients.
Prudential
Prudential has been in the insurance and financial services business since 1848. Today they operate throughout the UK, US and Asia offering international health insurance and retirement planning services, supported by 27,000 employees worldwide.
May
9
Reinsurance Fallout from Q1 Catastrophes Continues
Filed Under AIG | 8 Comments
The unprecedented first quarter of 2011, with a prevalence of severe natural catastrophes hitting the Asia Pacific region, has impacted the global reinsurance industry substantially. More established players in the reinsurance market are set to release their quarterly accounts and reassess their capacity to now meet annual growth targets.
The world’s biggest reinsurance group, Munich Re, is soon expected to post negative results for the first quarter. The company has committed to an estimated €2.7 billion (US$3.9 billion) in natural catastrophe insurance claims resulting from recent natural disasters including the two earthquakes in Japan and New Zealand as well as the severe flooding in Australia. In lieu of extensive disaster claims, Munich Re has already abandoned its full-year €2.4 billion (US$3.45 billion) net profit targets.
Last month, Nikolaus von Bomhard, chief executive of Munich Re, addressed company loss concerns in a statement: “The losses from natural catastrophes mean that the result for the first quarter will be clearly negative,” he said.
Industry analysts predict Munich Re will report a US$1.5 billion first quarter net loss. This would be the German reinsurer’s first net loss since the third quarter of 2008, when the company posted a €3 million (US$4.3 million) net loss in the middle of the global financial crisis. Industry forecasts further show Munich Re making a €1.2 billion (US$1.72 billion) operating loss, which would be the first operating loss reported since fourth quarter 2002, when the company was hurt by the crash of the technology bubble in the stock market.
Munich Re is not the only multinational reinsurer to feel the financial burden of large catastrophe payouts. Other major reinsurance companies have posted mixed results for the first quarter of 2011.
Swiss Re Group, the world’s second largest reinsurer, last week posted a US$665 million quarterly loss, which was ultimately less than the US$1 billion analysts had anticipated.
Hannover Re meanwhile, managed to turn a surprise first quarter profit largely on the back of a tax rebate, increases in investment returns and the freeing up of reserves once used to cover past claims. Despite remaining cost-effective so far, Hannover Re declared that it too would cut its net profit forecast from €650 million (US$912 million) down to €500 million (US$702 million) for the year. The German reinsurer confirmed that the previous profit targets would be no longer attainable because the full-year budget for major claims had already been exceeded due to first quarter catastrophe costs.
American International Group Inc. (AIG) suffered an 85 percent decrease in first-quarter profits primarily due to costs tied to claims from the earthquakes in Japan and New Zealand and to restructuring its bailout from the US government. Since receiving the government bailout, AIG has been restructuring its global operations, selling off international insurance subsidiaries to generate sufficient capital to repay the US taxpayer. AIG’s general insurance business subsidiary, Chartis International, notably incurred an operating loss of US$463 million compared to an operating income of US$879 million in the first quarter the previous year. The loss is attributed to large claims from the Japanese earthquake and 2011’s cumulative catastrophe losses of US$1.7 billion compared to US$0.5 billion during the same period a year ago.
AIG president and CEO Robert H. Benmosche remained positive despite Chartis’ quarterly results: “At Chartis, our worldwide property-casualty business, first quarter results were affected by significant catastrophe losses related to the Japan earthquake and subsequent tsunami, while overall net premiums increased, customer retention remained strong, pricing was stable, performing better than industry averages, and our reserve positions tracked our expectations,” he said in a statement.
The heavy catastrophe claims from the Asia Pacific region also impacted profits at Warren Buffett’s conglomerate Berkshire Hathaway Inc, which is also a major reinsurance player. Net earnings for the first quarter are estimated to be US$1.5 billion, down from the US$3.6 billion earned for the first quarter of 2010.
The frequency of natural disasters early this year has hurt global reinsurance companies’ ability to adequately provide a financial backstop to insurance companies facing heavy claims. Industry analysts have begun to speculate how much worse 2011 could become.
Reinsurance companies typically face their biggest catastrophe damage claims in the second half of the year, when the North Atlantic hurricane season is in full effect. 2010 was a relatively quiet year on the US coastlines; hurricanes remained largely offshore, sparing US coastal properties and captive insurers. This year could be different. Weather Service International forecasters have predicted an active 2011 Atlantic hurricane, with 15 named storms, eight of which are expected to become hurricanes.
The current tumultuous environment however is not entirely bad news for reinsurers and their insurance company clients. Big damage payouts combined with low interest rates and other factors enable reinsurance companies to justify and exact higher cover rates in areas where risk will remain high
Munich Re noted that the adjustments made since the Japan earthquake and tsunami may not be reflected in the annual reinsurance contracts renewed from April 1, but price increases should filter through in the rest of the year. Munich Re Chief Executive Nikolaus von Bomhard noted: “At any rate, we expect general price increases in the current financial year.”
Swiss Re confirmed that the pricing environment was now predicted to harden and turn to the reinsurance companies’ market advantage. “We expect the market hardening that we previously forecast for 2012-2013 to take place much sooner,” Swiss Re Chief Financial Officer George Quinn added in a statement.
The global reinsurance industry has faced a tumultuous year thus far. Many companies have had their annual claims budgets overwhelmed by the cost of a series of unprecedented natural disasters in the Asia Pacific region. The disaster in Japan alone is one of the costliest natural disasters in the history of the global insurance industry, having caused estimated insured losses of between US$12 billion and US$25 billion, according to catastrophe risk modeling firm Eqecat. In the aftermath of these disasters, reinsurance will continue to be in demand services to help minimize potential losses for companies operating in all regions across the globe.
Insurance Companies Mentioned
AIG
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.
Berkshire Hathaway
Berkshire Hathaway is a conglomerate holding company that oversees and manages a number of subsidiary companies worldwide. Its core insurance subsidiaries include GEICO, National Indemnity, and reinsurance giant General Re. Berkshire Hathaway was founded in 1955 and is headquartered in Omaha, Nebraska, United States.
Chartis
Chartis has over 45 million policyholders in 160 countries worldwide. With more than 90 years experience in the insurance industry, and a range of progressive products, Chartis aims to help clients comprehensively manage risk
Hannover Re
Hannover Re is the third-largest reinsurer in the world, with a gross premium of around EUR 10 billion. It transacts all lines of non-life and life and health reinsurance and maintains business relations with more than 5,000 insurance companies in about 150 countries. Its worldwide network consists of more than 100 subsidiaries, branch and representative offices on all five continents with a total staff of roughly 2,100.
Munich Re
Munich Re focuses on providing financial stability, and consistent risk management based on its extensive solution-based expertise. It operates in all lines of insurance, with around 47,000 employees throughout the world. Especially when clients require solutions for complex risks, Munich Re is a much sought-after risk carrier. The primary insurance operations are mainly concentrated in the ERGO Insurance Group. In international healthcare business, Munich Re pools its insurance and reinsurance operations, as well as related services, under the Munich Health brand.
Swiss Re
Swiss Reinsurance Company Ltd was established in 1863 and is present in more than 20 countries. Swiss Re provides reinsurance products and financial service solutions. It offers various reinsurance products covering property, casualty, life, health and special lines – such as agricultural, aviation, space, engineering, HMO reinsurance, marine, nuclear energy, and special risks.
Mar
7
Sale Of Nan Shan Life Moves Closer
Filed Under AIG, Insurance Company, Life Insurance | Leave a Comment
The protracted sale of the American International Group’s (AIG’s) Taiwanese life insurance arm – Nan Shan Life – is now set for review by Taiwan’s financial regulator; this is expected to be completed within the first half of 2011.
The Financial Supervisory Commission (FSC) in Taiwan is evaluating the US$2.16 billion bid by the locally based Ruentex Group for AIG’s Taiwan’s life insurance operation; the bid was accepted by AIG earlier this year after the insurer invited interested parties to bid for Nan Shan Life.
The proposed sale is the second attempt by AIG in the last two years to offload Nan Shan Life after an initial US$2.15 billion bid by the Hong Kong-led consortium Primus Financial Holdings Ltd was blocked. This bid was rejected by the Taiwanese regulatory authority on the grounds that the potential owner was not committed to the long term interest of the insurer and cited concerns about the financial capability of Primus.
The Taiwan FSC has requested that the Ruen Chen Investment Company – the group leading the bid to acquire Nan Shan Life – submit all necessary paperwork by the 24th March 2011 to enable the Taiwanese insurance authorities to make its initial assessment of the planned take-over.
AIG is still working towards generating capital to repay the US government for the US$182 billion bailout loan received at the height of the global financial crisis in 2008; this saved the international insurance giant from financial collapse.
Since receiving the bailout loan from the US tax payer, AIG has sold off some core insurance brands, including Alico – to rival insurers Metlife – for US$16.2 billion and its Japanese ventures AIG Edison Life and AIG Star Life to Prudential Financial for approximately US$4.8 billion.
Along with the divestment of the international insurance brands, AIG’s flagship Asian arm – American International Assurance (AIA) – was floated on the Hong Kong Stock Exchange in October 2010 generating US$ 17.9 billion; this followed the major British insurer – Prudential – dropping a US$35.5 billion bid for AIA after a revolt by Prudential’s shareholders.
AIG announced net income for the fourth quarter of 2010 of US$11.2 billion. This was helped by the substantial cash generated from the selling off of core brands. Total yearly earnings for the group amounted to US$7.8 billion in 2010 – a major improvement on the loss of US$10.9 billion reported in 2009.
Previously the Taiwan FSC has stated that any potential buyer of Nan Shan must demonstrate adequate financial resources, necessary experience and commitment to criteria set out by the regulators to ensure all parties involved in the transactions will benefit from the long term success of the Taiwanese life insurer. The FSC’s concern is to safeguard the insurance industry in Taiwan, with guarantees on commitments to the needs of Nan Shan’s policyholders and staff.
If the Nan Shan deal is completed within the first half of this year, it will mean AIG remains well placed to achieve its strategic restructuring programme goals, enabling it to become a leaner and more efficient global insurer.
The Ruentex Group successful acquisition of Nan Shan will add to the Taiwanese conglomerates network, which currently includes interests in finances, distribution and textiles.
Companies Mentioned:
AIG
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.
Nan Shan
Nan Shan Life Insurance Company, Ltd. was established in July 1963. After its restructuring in January 1970, Mr. K.K. Tse, the then Chairman of American International Underwriters, became the first Chairman of the company. In forty years, Nan Shan has become a super insurance company with the most professional management, the best operational performance, and a solid financial foundation. Its agency force has been recognized as the best in Taiwan’s life insurance industry.
Primus
Primus is an Asia-based private equity fund focused on acquiring financial services companies. Members of the Primus Group include PFH Partnership Holdings and PMN Capital. Primus is a strategic operator in financial services with significant permanent capital, deep operational experience, and long-term financial capabilities.
Prudential
Prudential has been in the insurance and financial services business since 1848. Today they operate throughout the UK, US and Asia offering international health insurance and retirement planning services, supported by 27,000 employees worldwide.
MetLife
Possessing over 140 years of insurance expertise, MetLife aims to be an innovator in the field of international Life insurance. Globally, MetLife is able to offer its clients accident and health insurance, life insurance, disability income protection, and retirement and savings products.
Prudential Financial Inc
Prudential Financial Inc. is a financial services leader, with approximately US$750 billion of assets under management as at September 2010. Prudential Financial operates in the United States, Europe, Latin American and Asia, with approximately 42,000 employees worldwide
Feb
25
AIG Reports Improved Results
Filed Under AIG, Chartis, MetLife | 6 Comments
The American International Group (AIG) reported net income of US$11.2 billion for the fourth quarter period in 2010, which ended on 31st December 2010. The bailed out insurer’s income included the sale of assets as it restructures its business in order to repay the loan received from the US government in 2008 following the global collapse of financial markets.
The New York based insurer’s full year earnings for 2010 totaled US$7.8 billion, reversing the loss in 2009 which amounted to US$10.9 billion. AIG’s fourth quarter 2010 earnings of US$11.2 billion compares with the loss of US$8.87 billion in the same period last year.
However, after disregarding income generated from the sale of AIG assets in 2010, the insurer had an operating loss of US$2.2 billion from its global operations, compared to an operating loss of US$1.3 billion last year.
The troubled insurer received a total of US$182 billion from the US federal government to rescue the insurer from the brink of collapse in 2008, after the US sub-prime mortgage crisis triggered a domino effect in the world financial markets. Since receiving the US government bailout, AIG has been restructuring global operations, which has included selling off international insurance subsidiaries, in order to generate capital to repay the US taxpayer.
Robert H. Benmosche, AIG’s President and Chief Executive Officer, said: “We completed several key restructuring milestones in the quarter and we remain focused on long-term growth and building value at our ongoing insurance operations and other businesses.”
Included in AIG’s fourth quarter earnings was a net charge of US$4.2 billion for AIG’s property insurance arm Chartis. The injection of capital was necessary to strengthen Chartis’ provision against losses as the insurer is expected to face stiff competition in this segment of business. Chartis worldwide net premiums written amounted to US$7.6 billion in the last quarter of 2010.
AIG has sought to restructure the specialist property insurance business with Chartis by rationalizing activities and concentrating on less volatile markets, seeking to write more business with higher margins.
Part of AIG’s restructuring programme saw the insurer sell its Alico subsidiary for US$16.2 billion to US rival Metlife, with the cash from the sale – included in the fourth quarter 2010 results – going towards repaying the US Federal Reserve Bank.
AIG also negotiated the sale of its Japanese insurance arms AIG Star Life Insurance and AIG Edison Life Insurance to another US insurance rival, Prudential Financial, for approximately US$4.8 billion; the sale being completed on the 1st February 2011. The proceeds from the sale will be used to make further repayments to the US government.
Meanwhile in Taiwan, AIG had a bid for its Nan Shan Life company from a Hong Kong led consortium, Premium Financial, rejected in September 2010. This was on the grounds that it did not meet local regulatory criteria. However, in January 2011 a US$2.16 billion cash bid from Taiwan-based Ruen Chen was accepted by AIG for the Nan Shan operation, with the funds again being used to help repay the outstanding US government loan.
Speaking on the future of AIG, Mr. Benmosche said: “In 2011, as we emerge from our restructuring, AIG will focus on growing our already strong businesses domestically and around the world, risk and capital management, strategic asset management, and cost savings throughout the organization.”
AIG’s restructuring of its global insurance network has meant that it has divested business operations in foreign and domestic ventures which did not offer significant returns for the New York based insurer. However, while AIG continues its streamlining, it has retained its profitable Asian arm – the American International Assurance Group (AIA) – which is the leading life insurer in the dynamic Asian region.
AIA is seen as AIG’s jewel in the crown, with the latest company report reflecting the importance this market holds for the group as full year profits jumped by 54 percent in 2010 to reach a total of US$2.7 billion. In 2010, AIA was subject to a US$ 35.5 billion takeover bid from the major UK insurer Prudential; this was finally dropped by the British insurer because shareholders were not prepared to underwrite the initial bid price and a lower bid was not acceptable by AIG. This subsequently lead to AIA being floated on the Hong Kong Stock Exchange in October 2010 in one of Hong Kong’s largest initial public offerings (IPOs), which generated US$17.9 billion. As a result of the better than expected trading results for the year ending 30th November 2010, shares in AIA valued the company at US$32.6 billion at the close of trading on the Hong Kong stock exchange on the 24th February 2011.
Although AIG, along with other insurers, is facing challenging trading conditions in 2011 – particularly in the mature markets in the USA and Europe – with the effects of government imposed austerity measures likely to impact on disposable incomes, the group is well placed in the emerging growth market which exists in the Asia-Pacific region through its AIA business.
The AIA operation is now well placed to exploit the growth potential in the emerging markets in China, Thailand, Vietnam, Indonesia and Malaysia and is expected to make a significant contribution to AIG’s financial results in 2011.
Insurance companies mentioned:
AIG
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.
AIA
The AIA Group is a leading life insurance organisation in Asia Pacific that traces its roots in the region back more than 90 years. It provides individuals and businesses with products and services for life insurance, retirement planning, accident and health insurance as well as wealth management solutions. Through an extensive network of more than 320,000 agents and approximately 23,500 employees across 15 geographical markets, the AIA Group serves the customers of over 23 million in-force policies in the region. The AIA Group has branch offices, subsidiaries and affiliates located in jurisdictions including Australia, Brunei, China, Hong Kong, India, Indonesia, Macau, Malaysia, New Zealand, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam.
Chartis
A leading property-casualty and general insurance company, Chartis has over 45 million policyholders in 160 countries worldwide. With more than 90 years experience in the insurance industry, and a range of progressive products, Chartis aims to help clients comprehensively manage risk
Prudential Financial Inc
Prudential Financial Inc. is a financial services leader, with approximately US$750 billion of assets under management as at September 2010. Prudential Financial operates in the United States, Europe, Latin American and Asia, with approximately 42,000 employees worldwide
Prudential
Prudential has been in the insurance and financial services business since 1848. Today they operate throughout the UK, US and Asia offering international health insurance and retirement planning services, supported by 27,000 employees worldwide.
MetLife
Possessing over 140 years of insurance expertise, MetLife aims to be an innovator in the field of international Life insurance. Globally, MetLife is able to offer its clients accident and health insurance, life insurance, disability income protection, and retirement and savings products.
Nan Shan
Nan Shan Life Insurance Company, Ltd. was established in July 1963. After its restructuring in January 1970, Mr. K.K. Tse, the then Chairman of American International Underwriters, became the first Chairman of the company. In forty years, Nan Shan has become a super insurance company with the most professional management, the best operational performance, and a solid financial foundation. Its agency force has been recognized as the best in Taiwan’s life insurance industry.
Feb
11
Chartis Insurance Bids For Full Control of Fuji Fire & Marine
Filed Under AIG, Chartis, Insurance Company | 5 Comments
American International Group’s (AIG) general insurance arm Chartis has announced that it has made a cash tender offer to complete a full take-over of Fuji Fire & Marine Insurance of Japan.
Currently Chartis holds a controlling stake of 54.66 percent in Fuji Fire & Marine, which it acquired in 2010. Chartis will spend approximately US$ 571 million (¥47 billion) to acquire 100 percent control of the Japan based insurer. Chartis has offered a purchase price of US$1.7 (¥ 146) per-share, representing a near 30 percent premium over Fuji Fire & Marine closing price at the end of share trading on the 9th February 2011.
The directors of Fuji Fire & Marine support the tender offer as it will reinforce the insurers operations in Japan. Shareholders of Fuji Fire and Marine – the Orix Corporation – an international financial service company, which currently holds a 15.53 percent share in the insurer, are expected to offer their stake in the Japanese based insurer.
Following the tender offer, Fuji Fire & Marine, will be delisted from the Tokyo Stock Exchange. The tender offer is scheduled to commence from Monday the 14th February and run through to March the 24th 2011. The transaction will benefit both parties, with Chartis consolidating its position in Japan – the second largest insurance market in the world. Fuji Fire and Marine will strengthen its presence through Chartis’ global network, financial capacity and product range.
Jose A. Hernandez, CEO of Chartis Far East Holdings K.K. Said: “Including Fuji Fire and Marine as a full member of the Chartis group is a natural progression of the excellent partnership we have developed over the past ten years, most recently as Fuji Fire and Marine’s majority shareholder. Our expanded distribution platform enables us to accelerate our delivery of innovative products and superior services through our loyal agency force to a broader range of Japanese customers.”
The offer is still subject to regulatory approval from the Financial Service Agency in Japan. When the deal is completed Chartis expects to operate under the Fuji Fire and Marine brand in Japan.
The AIG group recently retreated from the Japanese life insurance market by selling AIG Star Life Insurance and AIG Edison Life Insurance to US insurance rival Prudential Financial for US$4.8 billion (¥437.7 billion). AIG, the US-based insurer, will now increase its presence in the Japanese insurance market through the Chartis brand and the full acquisition of Fuji Fire and Marine – a Japanese insurance company which was established in 1918 and now has a national distribution network.
AIG has been going through a period of transition since the world financial markets experienced a recession during 2007, which subsequently lead to the global insurer requiring a US$182 billion (¥15 trillion) bailout package from the US federal government in 2008. Since then AIG has been restructuring its global operations, which has seen them sell-off the Alico brand to Metlife and place Nan Shan its Taiwanese insurance arm up-for-sale – in addition to the recent sale of Star Life and Edison Life to Prudential Financial.
As AIG works towards streamlining its international operations through divestment – as part of a process to repay the US government for the bailout loan – the insurance company has been keen to consolidate its business in core insurance markets that produce substantial written premiums for the group. Along with AIA – AIG’s lucrative insurance arm in Asia – Chartis has become a pivotal general insurance business for the group with a global reach that generated operating income of US$1.1 billion (¥ 98 billion) in the third quarter of 2010.
Chartis has emerged as one of the world’s leading property-casualty and general insurers with more than 45 million clients worldwide. The insurer offers personal line products including: travel, automotive, home and accident care. In business line insurance, Chartis offers: risk solution, special risk cover, travel, accident and healthcare.
AIG has reported that it will boost Chartis’ reserves following the credit rating agency – Fitch Rating – downgrade of the property and casualty insurers status from a +A to A. The grade was made as Fitch believes the insurer may not be able to underwrite strong results as in previous years.
Insurance companies mentioned:
Chartis
A leading property-casualty and general insurance company, Chartis has over 45 million policyholders in 160 countries worldwide. With more than 90 years experience in the insurance industry, and a range of progressive products, Chartis aims to help clients comprehensively manage risk.
Fuji Fire and Marine
The Fuji Fire and Marine Insurance Company Limited was founded in 1918 and through its subsidiaries offers life and non-life insurance products and services for individuals and small and medium-sized companies across Japan.
AIG
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.
Prudential Financial Inc
Prudential Financial Inc. is a financial services leader, with approximately US$750 billion of assets under management as at September 2010. Prudential Financial operates in the United States, Europe, Latin American and Asia, with approximately 42,000 employees worldwide
Feb
7
Prudential Financial Completes Purchase of AIG’s Star Life and Edison Life Companies
Filed Under AIG, Insurance Company, Life Insurance | 4 Comments
Prudential Financial Incorporated has announced the finalization of transactions for the acquisition of AIG’s Japan-based insurance companies – AIG Star Life Insurance and AIG Edison Life Insurance Companies.
The US insurer’s take-over of AIG Star Life Insurance and AIG Edison Life covers the purchase of both companies for a total price of approximately US$4.8 billion. This is comprised of US$4.2 billion in cash and US$0.6 billion in third-party debt. The deal has been under discussion since September 2009.
Speaking on the completion, John Strangfeld, Chairman and Chief Executive Officer of Prudential Financial said:”With the successful conclusion of this transaction, we look forward to maximizing synergies and realizing the benefits generated by our greater scale to further enhance our services and strengthen our competitive position in this market. This will enable us to bring our products and services to more customers in Japan. The addition of the Star and Edison operations solidifies Prudential’s status as the top foreign life insurance company in Japan based on in-force policy values. “
The take-over will see AIG Star Life Insurance and AIG Edison Life Insurance operate as subsidiaries of Gibraltar Life Insurance – a Prudential Financial life insurance company already operating in Japan. Now the deal has been finalized – subject to local regulatory approval – Star Life and Edison Life bancassussurance operations will be integrated with Prudential Gibraltar Financial Life Insurance (PGFL) bancassurance channels in Japan immediately, with full cut-over of the Star Life and Edison Life core businesses by early 2012.
With the completion of the acquisition, Toru Matsuzawa, previously vice chairman of PGFL has been named president and CEO of Edison Life; Star Life will continue to be led by current president and CEO Norio Tomono.
Prudential Financial has confirmed that existing policyholders with AIG Star Life Insurance and AIG Edison Life will not be materially affected by the change in ownership.
The capital raised from the sale of AIG’s two Japanese life businesses will be used towards paying back the bailout loan of US$182 billion received by AIG from the US federal government in 2008 in order to save the international insurer from financial insolvency as the worldwide collapse of financial institutions took hold. AIG and the US government recently agreed terms for the insurer to pay back the remaining US$21 billion owed.
The New York based insurer AIG has stated that it will continue with its other Japan-based operations in order to provide continued access to the second largest insurance market in the world.
In addition to the completed sale of the two Japanese ventures, AIG is currently working towards selling its Taiwanese life insurance business – Nan Shan – in a bid to raise further capital as part of the repayment process to the US government. AIG has already sold its Alico brand to US rival insurers MetLife as part of its divestment strategy and long-term profitability.
Insurance Companies Mentioned:
Prudential Financial Inc
Prudential Financial Inc. is a financial services leader, with approximately US$750 billion of assets under management as at September 2010. Prudential Financial operates in the United States, Europe, Latin American and Asia, with approximately 42,000 employees worldwide
AIG
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.
Jan
6
Japan Post Insurance and Axa SA Top A M Best Lists of Major Insurance Companies
Filed Under AIG, Allianz, Aviva, Insurance Company, Life Insurance | 75 Comments
The Japan Post Insurance Company and AXA SA are identified as the world’s leading insurers in the latest report issued by renowned credit rating agency A.M. Best. The Japanese and French insurers emerged as the biggest insurance companies in a list registering the top 25 worldwide insurers measured by asset values and net premiums written.
The Tokyo-based Japan Post Insurance Company was reported holding assets totaling US$1.1 trillion in 2009, making it the largest insurer by asset value, although it was only ranked fourth in terms of net premiums written at US$81 billion. The French insurer AXA SA took top spot for net premiums written.
The ranking by assets was dominated by life insurance companies, with non-life insurers dominating the net premium written table. The latest A.M. Best report is based on insurers’ financial results for the year ending 2009, reflecting differences in each country’s regulatory and reporting requirements. The rankings take into account currency values for consistency purposes.
The total value of the 25 insurers ranked by assets amounted to US$25 trillion, while the value of the 25 insurers ranked by net premiums written totaled US$1.3 trillion at the end of 2009.
The Japan Post Insurance Company is government-owned although its parent company – the Japan Post Holdings Company – was slated to be privatized, but proposals were subsequently scrapped when a new Japanese government – The Democratic Party of Japan (DPJ) – took office in August 2010. The company specializes in the provision of life insurance products and services sold through post offices and directory managed stores.
Within the list of the 25 largest insurance companies there were 13 European-based insurers ranked by asset values, while North America and Asia were each represented by 6 insurers in this category. In terms of the specific countries in which these companies were based; Japan had 6, the United States 5, the UK 4 and France 3, with the residual 7 companies based in the Netherlands, Germany, Italy, Switzerland and Canada.
In the ranking of companies by net premiums written there were 9 European and 9 North American based insurers, with 7 Asian based insurers – including 5 in Japan – making up the 25 largest insurance companies globally.
A.M Best recognized that rankings could have changed since 2009, with the subsequent completion of mergers and acquisitions between insurers and some restructuring of operations. Most notably, the positioning of AIG – ranked third by asset value with US$847.6 billion and sixth by written premiums totaling US$62.2 billion in 2009 – will change as it seeks to sell-off companies such as AIG Edision Life Insurance and AIG Star Life Insurance in Japan as well as Nan Shan in Taiwan as part of its divestment strategy – having already sold Alico to American insurance rival Metlife. While AXA is set to expand its global reach after bidding for AXA Asia Pacific Holdings Ltd in late 2010 to increase the French insurer’s exposure in the region.
The net premium written rankings includes China Life and the Life Insurance Corporation of China and India in the list representing two of the largest insurers from the two most populated countries in the world; both countries having fast growing economies. Asia, especially China and India, have emerged in recent years as significant growth markets for global insurers with home domiciles in Europe and North America. Insurers such as AXA, Aviva, Prudential, Aegon, Zurich, Allianz and Generali have all highlighted the Asian region for expansion of operations, particularly for life and health insurance products, often forming joint ventures with locally based insurers.
In traditional, more established markets, insurers will be seeking to optimize opportunities for changes in the provision of healthcare services, particularly in the United Kingdom and the USA, and to redress shortfalls which have occurred in the pension industry.
A.M Best: World’s Largest Insurers
Largest Insurers Ranked by Assets (2009)
1. Japan Post Insurance Co. Ltd. (Japan)
2. Axa S.A. (France)
3. American International Group Inc. (United States)
4. Allianz SE (Germany)
5. Assicurazioni Generali SpA (Italy)
6. Aviva plc (United Kingdom)
7. MetLife Inc. (United States)
8. Prudential Financial Inc. (United States)
9. Legal & General Group plc (United Kingdom)
10. Nippon Life Insurance Co. (Japan)
11. National Mut Ins Fed Agricultural Coop (Japan)
12. CNP Assurances (France)
13. Aegon NV (Netherlands)
14. Manulife Financial Corp. (Canada)
15. ING Groep NV (Netherlands)
16. Zurich Financial Services Ltd. (Switzerland)
17. Prudential plc (United Kingdom)
18. Munich Reinsurance Co. (Germany)
19. Dai-ichi Life Insurance Co. (Japan)
20. Hartford Financial Services Group Inc. (United States)
21. Predica-Prevoyance Dialogue du Credit (France)
22. Berkshire Hathaway Inc. (United States)
23. Meiji Yasuda Life Insurance Co. (Japan)
24. Standard Life Plc (United Kingdom)
25. Sumitomo Life Insurance Co. (Japan)
Largest Insurers Ranked by Net Written Premiums (2009)
1. Axa S.A. (France)
2. Assicurazioni Generali SpA (Italy)
3. Allianz SE (Germany)
4. Japan Post Insurance Co. Ltd. (Japan)
5. UnitedHealth Group (United States)
6. American International Group Inc. (United States)
7. National Mutual Insurance Federation of Agricultural Cooperatives (Japan)
8. Munich Reinsurance Co. (Germany)
9. WellPoint Inc. (United States)
10. State Farm Group (United States)
11. Nippon Life Insurance Co. (Japan)
12. Aviva plc (United Kingdom)
13. Zurich Financial Services Ltd. (Switzerland)
14. Kaiser Foundation Group of Health Plans (United States)
15. CNP Assurances (France)
16. China Life Insurance (Group) Co. (China)
17. ING Groep NV (Netherlands)
18. Dai-ichi Life Insurance Co. (Japan)
19. Prudential plc (United Kingdom)
20. Life Insurance Corporation of India (India)
21. Aetna Inc. (United States)
22. Humana Inc. (United States)
23. Tokio Marine Holdings Inc. (Japan)
24. Allstate Corp. (United States)
25. Berkshire Hathaway Inc. (United States)
Insurance Companies Mentioned
Japan Post Insurance
Japan Post Insurance Co., Ltd was founded in 2006 and is based in Tokyo. Japan Post Insurance is a subsidiary of Japan Post Holdings Co., Ltd and provides life insurance product and services.
AXA
AXA Group is a worldwide leader in Financial Services. Headquartered in Paris, the AXA Group companies are engaged in life insurance, health insurance and asset management services among others. AXA’s operations are diverse geographically, with major operations in Europe, North America and the Asia/Pacific area.
AIG
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.
Prudential
Prudential has been in the insurance and financial services business since 1848. Today they operate throughout the UK, US and Asia offering international health insurance and retirement planning services, supported by 27,000 employees worldwide.
Zurich
Headquartered in Zurich, Switzerland, Zurich Financial Services Group is an insurance-based financial services provider with a network of subsidiaries andoffices in North America and Europe and also in Asia-Pacific, Latin America and other markets. Zurich is one of the world’s largest insurance groups, and one of the few to operate on a truly global basis. With 60,000 employees serving customers in more than 170 countries, our business is concentrated in three business segments: General Insurance, Global Life, and Farmers.
Aviva
Europe’s fourth largest insurance company, with more than 300 years of experience in the global insurance industry, Aviva is committed to the safety and satisfaction of its customers. They sell a broad range of insurance products including motor and property insurance, protection and health insurance, business insurance, life insurance and pensions.
Assicurazioni Generali SpA
The Generali Group is one of the most significant participants in the global insurance and financial products market. The Group is a leader in Italy and Assicurazioni Generali, founded in 1831 in Trieste, is the Group’s Parent and principal operating Company. Generali is one of the leading global players in the assistance sector thanks to the Europ Assistance Group, active in more than 200 countries with services in the motor, travel, healthcare, home and family sectors. In recent years, the Group has made a significant return to 14 central-eastern European markets and has set up offices in the principal markets of the Far East, including China and India.
AEGON
AEGON is present in more than 20 countries in the Americas, Europe and Asia, employing 28,000 people and serving more than 40 million customers. AEGON’s ambition is to be a global leader in helping its customers secure their financial futures and, in doing so, to grow its businesses profitably and sustainably. AEGON products include life, pensions, life reinsurance, individual savings & retirement products
MetLife
Possessing over 140 years of insurance expertise, MetLife aims to be an innovator in the field of international Life insurance. Globally, MetLife is able to offer its clients accident and health insurance, life insurance, disability income protection, and retirement and savings products.
Jan
5
AIG Confirms Scope For Sale Of Taiwan Based Nan Shan Life Co
Filed Under AIG, Insurance Company, Life Insurance | 23 Comments
The major United States insurer American International Group (AIG) has informed US regulators – the Securities and Exchange Commission – that the company has received offers for its Taiwan based insurance unit – the Nan Shan Life Insurance Company as part of its strategic restructuring.
The prospective buyers of Nan Shan have approached AIG by providing the insurer with unsolicited letters of interest for the Taiwanese insurance venture. The offers range in value from US$2.15 billion to US$3 billion. AIG confirmed the preliminary offers in a letter to the Securities and Exchange Commission on the 12th November 2010, which was released by the US regulators in January 2011.
The New York based insurer has been trying to offload Nan Shan since October 2009 in order to generate capital as part of its attempt to repay the US government for its US$182 billion bailout received in 2008, after the collapse of the financial industry worldwide.
In the latter part of 2010, AIG invited interested parties to make an offer for Nan Shan, which has generated four possible proposals ranging from US$ 2.15 billion to US$3 billion. One of the bids from the Taiwan Secom Group – a home security company – is based on buying a stake in Nan Shan and for it then to be run as a joint venture with AIG as an alternative to the preferred outright sale of the life unit.
AIG had a US$ 2.15 billion bid by a consortium led by Hong Kong based Primus Financial and China Strategic Holdings blocked by Taiwan’s Financial Supervisory Commission in September 2010 on the grounds that it was not satisfied that the bidders were interested in providing a long-term commitment to the business and on its ability to fund the transaction.
Previously the Taiwan regulator asked AIG if it would consider placing Nan Shan Life on the Taiwan Stock Exchange, but this was rejected by AIG in favor of an outright sale.
Any potential buyer of Nan Shan has been told that it must meet five requirements set out by the Taiwan regulatory authority covering adequate financial resources, long term commitments, insurance experience, funding sources and protection of the existing Nan Shan employee and client base.
Since the US government bailed out AIG, the US insurer has been seeking opportunities to off-load global operations and is set to sell its two Japanese insurance units – the AIG Star Life Insurance Co and AIG Edison Life Insurance Co to Prudential Financial Incorporation. AIG has already sold Alico to US rival’s MetLife for US$15.5 billion in early 2010.
After a failed bid by the UK insurer Prudential for AIG’s lucrative Asian arm, AIA, the business was placed on the Hong Kong Stock Exchange in October 2010 in order to generate income to repay part of the bailout loan from the US government.
Nan Shan Life is one of Taiwan’s leading insurance companies and had assets totaling US$56.5 billion in November 2010. Major players in the Taiwanese insurance market include Cathay Financial Holdings and Fubon Financial Holdings, however, a number of foreign insurers have been exiting the Taiwan insurance industry in recent years due to market stagnation and low profitability. Global insurers such as MassMutual, Prudential, Aegon and ING have taken action to divest operations in Taiwan, although the French financial services provider BNP Paribas has recently entered into a bancassurance joint venture with the locally based Taiwan Cooperative Bank.
AIG plans to continue with its restructuring focusing on building its core US domestic life insurance activities and global property / casualty cover. AIG reported a net loss of US$2.4 billion in the third quarter of 2010, which was primarily due to one-off restructuring costs.
In August 2010, AIG and the US government entered into a transaction agreement based on the US insurer accelerating repayments of the US$182 billion bailout received in 2008. The US government’s loan package for AIG, which was granted by the US Federal Reserve, is expected to be paid off in the near future, thus enabling the US tax payer to recover its ‘investment’ in AIG.
Companies Mentioned
AIG
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.
Nan Shan
Nan Shan Life Insurance Company, Ltd. was established in July 1963. After its restructuring in January 1970, Mr. K.K. Tse, the then Chairman of American International Underwriters, became the first Chairman of the company. In forty years, Nan Shan has become a super insurance company with the most professional management, the best operational performance, and a solid financial foundation. Its agency force has been recognized as the best in Taiwan’s life insurance industry.
Primus
Primus is an Asia-based private equity fund focused on acquiring financial services companies. Members of the Primus Group include PFH Partnership Holdings and PMN Capital. Primus is a strategic operator in financial services with significant permanent capital, deep operational experience, and long-term financial capabilities.
Fubon Life
Fubon Life was founded in 1993 and is based in Taipei, Taiwan. Fubon Life provides life insurance and health insurance services. Fubon Life Insurance Co. Ltd. was formerly known as Fubon Life Assurance Co., Ltd. and change its name to Fubon Life Insurance Co. Ltd. in June 2009. Fubon Life operates as a subsidiary of Fubon Financial Holding Co. Ltd.
Prudential
Prudential has been in the insurance and financial services business since 1848. Today they operate throughout the UK, US and Asia offering international health insurance and retirement planning services, supported by 27,000 employees worldwide.
MetLife
Possessing over 140 years of insurance expertise, MetLife aims to be an innovator in the field of international Life insurance. Globally, MetLife is able to offer its clients accident and health insurance, life insurance, disability income protection, and retirement and savings products.
Ageas
Ageas is an international insurance company with a heritage spanning more than 180 years. Ranked among the top 20 insurance companies in Europe, Ageas has chosen to concentrate its business activities in Europe and Asia, which together make up the largest share of the global insurance market. They are grouped around four segments: Belgium, United Kingdom, Continental Europe and Asia. It is an undisputed leader in the Belgian market for individual life and employee benefits, as well as a leading non-life player, through AG Insurance. Internationally Ageas has a strong presence in the UK, where it is the third largest player in private car insurance. The company also has subsidiaries in France, Germany, Turkey, Ukraine and Hong Kong. Ageas has a track record in developing partnerships with strong financial institutions and key distributors in different markets around the world and successfully operates partnerships in Luxembourg, Italy, Portugal, China, Malaysia, India and Thailand.
ING
ING provides banking, investments, life insurance and retirement services and operates in more than 50 countries. It serves more than 85 million private, corporate and institutional customers in Europe, North and Latin America, Asia and Australia.
Dec
22
The Insurance Industry: Mergers and Acquisitions 2010
Filed Under AIG, Aviva, BUPA, China, Health Insurance, International Healthcare, Life Insurance, United Kingdom | 5 Comments
A number of Mergers and Acquisitions (M&As) between insurance companies have been implemented during 2010 in a bid to strengthen business activities in both mature and emerging markets. These developments have taken place as insurers strive to capture an increase in profitable markets and penetrate new markets to capitalize on shifting global demands.
The M&As implemented are planned to facilitate improvements in the quality and range of services which can be provided to clients, together with uplifting profit margins and share values for companies as rationalization processes are implemented.
An appetite for mergers and acquisitions within the global insurance industry has been re-activated in the last 18 months. These activities have occurred in the wake of the global financial crisis – which started in 2007/2008; the financial crisis originating in the USA with a knock-on impact worldwide.
With the economies in the western hemisphere still feeling the effect of financial instability into late 2010, growth has been focused on Asia, Latin American and the Middle East as these regions have emerged more quickly out of recession than the established markets in North America and Western Europe. Asia – particularly China and India – has become pivotal for the insurance industry offsetting lacklustre returns from established markets.
While the USA and Western European countries are suffering from the impact of austerity measures, the major reforms of state provided healthcare services proposed in these major nations could be beneficial for private sector insurers. There is an expectation that populations may switch to private insurance in bigger numbers as standards and waiting times worsen in public sector provision. The out-sourcing of state funded medical treatments and procedures to private facilities with spare capacity may also be adopted as a more cost effective process in countries such as the United Kingdom.
Additionally opportunities for private insurers in western hemisphere countries could emerge from an attempt to rectify a estimated shortfall amounting to trillions of dollars in the pension and savings sectors in these nations; this deficit has been building up over many years and will need to be satisfied.
In the emerging markets of Asia and Latin America, the increasing wealth of the large populations has resulted in a demand for a broad range of insurance products. Insurance companies are poised to penetrate the market for micro-insurance, which is estimated to be worth some US$ 40 billion (£26 billion:€30 billion) of new premium business. A report issued by Swiss Reinsurance in December 2010 highlighted the potential demand for microinsurance primarily for low income populations in Asia, Latin America and Africa countries; the fledgling market being assessed at 4 billion policies covering a diverse range of products – 2.6 billion for people living on US$1.25 to US$4 a day plus the capability of a further 1.4 billion policies with the help of financial support from governments and international aid agencies.
Another niche market ready for expansion covers the development of takaful insurance primarily to populations in Islamic countries. This is based on the issue of mutually beneficial protection policies distinctly geared to markets in Middle Eastern and Asian countries.
Recent mergers and acquisitions in the insurance industry indicate that the combination of multi-national and local insurers is well placed to take advantage of these opportunities:
* Resolution Ltd is set to acquire Bupa’s Health Assurance business in a US$164 million (£102 million:€ 122 million) deal. As part of Resolution Ltd’s strategy to build a substantial share of the UK life insurance market, the company has reached an agreement with Bupa to acquire its life, income and critical illness insurance business. This enhances the previous acquisitions by the Clive Cowdrey formed company – Resolution Ltd – and follows the purchase of Friends Provident in 2009 for US$3.04 billion (£1.9 billion:€ 2.28 billion), and the US$4.4 billion (£2.75 billion:€ 3.3 billion) acquisition of AXA’s UK life assurance and savings arm earlier this year.
* UK based multinational insurance company Aviva plc has recently entered into an agreement with PT Asuransi Wahana Tata to purchase a 60% share of PT Asuransi Winterthur Life Indonesia (WLI). This is the first time Aviva has entered the Indonesian insurance market. Once the deal is finalized and Indonesian regulatory approval is given for the venture, Winterthur Life will be renamed PT Asuransi Aviva Indonesia. Aviva also operates in China, Hong Kong, India, Korea, Sri Lanka, Singapore, Taiwan, Malaysia and Australia.PT Asuransi Winterthur Life Indonesia is one of Indonesia’s top three health insurance providers and holds gross assets of approximately US$22.7 million (£14.5 million:€17.2 million), managing pension funds valued at US$63 million (£40 million:€48 million).
* The second largest insurer in China, the Ping An Insurance Group Company (PAIGC) has joined with equity investment firm Newbridge Asia exchanging shares held by PAIGC with those held by Newbridge in the Shenzhen Development Bank.
* The inauguration of MaxBupa in February 2010 covered the joint venture between local Indian insurer Max India and global insurer and major healthcare provider Bupa, with an initial network of offices in six major metropolitan areas – Delhi, Mumbai, Bangalore, Hyderabad, Pune and Chennai.
* China Everbright formed a joint venture with Canadian owned Sun Life in 2002 resulting in a new company – Sun Life Everbright. The partnership generated 18 offices within China. A restructuring of Sun Life Everbright was approved in 2010 enabling additional investors to buy shares in the joint venture, which will ultimately turn the company into a wholly owned Chinese entity, although Canadian based Sun Life will continue to provide management and actuarial services.
* BNP Paribas entered into a joint venture with the Taiwan Cooperative Bank in April 2010 – split 49%, 51% respectively – in order to sell a diverse selection of life insurance products. The joint venture, named BNP Paribas Assurance TCB Life Insurance Co, uses the bank’s 300 outlets to distribute policies to clients in the difficult Taiwanese insurance market.
* In Malayasia, the Singapore listed company Great Eastern Holdings has acquired the Tahan Insurance Company in a transaction amounting to US$ 4.7 million (£3.3 million: €3.5 million); the takeover being completed by Great Eastern Holdings wholly owned Malaysia insurance company, Overseas Assurance Corporation Malaysia (OACM).
* The Danish Investment Bank FIH Erhvervsbank (FIH) has been taken-over by a consortium involving Danish based pension company ATP, PFA Pension, CPDyvig and Swedish insurer Folksam; the deal worth US$879 million (£567 million: €670 million) relieving FIH of liabilities incurred by its previous takeover of failed Icelandic bank Kaupthing.
* London based insurance company, Brit Insurance, is recommending acceptance of an offer by private equity groups Apollo Global Management and CVC Capital Partners Ltd, which would conclude an acquisition proposal under discussion since June this year. Brit Insurance – which specializes in the major insurance and reinsurance business – has decided to recommend to its shareholders acceptance of an approach by Apollo Management and CVC Capital Partners. The bid is valued at US$1.3 billion (£850 million:€900 million), with the potential for a further 2.3% increase in value if certain targets are achieved.
*.Prudential Financial Incorporated, one of American’s largest life insurers, raised US$2 billion (£1.3 billion:€1.45 billion.) through the sale of over 18.3 million shares of Prudential Financial common stock, together with public offering of senior notes to help fund the purchase of AIG Star Life Insurance Co and AIG Edison Life Insurance Co from its American rival AIG. The acquisition of the two Japan-based insurers increased Prudential Financial reach across the world’s third largest economy.
* The German based major insurer Allianz took control of Allianz Seguros its Brazilian subsidiary in January 2010, when it purchased the remaining 14 percent of the company from Ita’u Unibanco. The acquisition will provide Allianz with access to gross written premiums of approximately US$905 million ((£584 million:€689 million) per year primarily in the Brazilian property and casualty insurance markets.
*The private equity fund manager Horizon Capital has agreed the purchase of Fortis Life Insurance Ukraine, with Belgian based Ageas Insurance International. The transaction fits with Ageas continuing their portfolio restructuring and follows the sale of their Turkish life & pensions business to the insurance unit of France’s BNP Paribas in June 2010.
*The Industrial and Commercial Bank of China (ICBC) has agreed to buy a major stake in the French-Chinese joint venture AXA-Minmetals Assurance Company. The move by the Chinese Bank ICBC will make them the majority shareholder and add to its non-banking revenue stream. The initiative by ICBC to acquire the 60 percent share in AXA-Minmetals Assurance comes as the Chinese bank announced that it gained a 27 percent increase in profits during the third-quarter of 2010 with net income of US$ 6.4 billion (£4.1 billion:€4.8 billion) up from US$ 5.05 billion (£5.9 billion:€3.8 billion) in the previous year.
*Zurich Insurance Co. Ltd., a subsidiary of Zurich Financial Services AG, the Swiss insurer, announced the acquisition of Compagnie Libanaise D’Assurances (CLA), a privately-owned Lebanese insurance company founded in 1951, with branches in the United Arab Emirates, Kuwait and Oman. The Zurich Financial Services Group also announced that it has entered into an agreement with its Spanish partners Unnim to sell them its 50 percent stake in their Spanish joint venture life and general insurance operation. Zurich’s decision to sell its equal stake in the Spanish insurance venture follows the merger between Caixa Sabadell, Caixa Terrassa and Caixa Manlieu in July 2010 to form Caixa d’Estalvis Unió de Caixes de Manlleu, Sabadell i Terrassa – also known as Unnim.
The financial industry is predicting a growth in business mergers and acquisitions during 2011 as companies emerge from the 2007 – 2008 global financial tsunami, with cash reserves available for new transactions. The insurance industry is expected to continue to be involved in these initiatives.
Companies Mentioned:
Aviva
Europe’s fourth largest insurance company, with more than 300 years of experience in the global insurance industry, Aviva is committed to the safety and satisfaction of its customers. They sell a broad range of insurance products including motor and property insurance, protection and health insurance, business insurance, life insurance and pensions.
Bupa
Bupa was established more than 60 years ago in the UK and is now has ten million customers in over 190 countries, and over 52,000 employees around the world. Bupa is a leading international healthcare provider, offering personal and corporate health insurance, workplace health services and health assessments. As a provident association Bupa has no shareholders, because of this it uses its profits to invest in healthcare and medical facilities around the world. Bupa has operations around the world, principally in the UK, Australia, Spain, New Zealand and the US, as well as Hong Kong, Thailand, Saudi Arabia, India, China and across Latin America.
Prudential Financial Inc
Prudential Financial Inc. is a financial services leader, with approximately US$750 billion of assets under management as at September 2010. Prudential Financial operates in the United States, Europe, Latin American and Asia, with approximately 42,000 employees worldwide
AIG
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.
Zurich
Headquartered in Zurich, Switzerland, Zurich Financial Services Group is an insurance-based financial services provider with a network of subsidiaries andoffices in North America and Europe and also in Asia-Pacific, Latin America and other markets. Zurich is one of the world’s largest insurance groups, and one of the few to operate on a truly global basis. With 60,000 employees serving customers in more than 170 countries, our business is concentrated in three business segments: General Insurance, Global Life, and Farmers.
ICBC
By the end of 2008, ICBC had altogether 385,609 employees and 16,386 domestic and overseas branches, providing extensive and high-quality financial products and services to 190 million personal clients and 3.1 million corporate clients.
Ageas
Ageas is an international insurance company with a heritage spanning more than 180 years. Ranked among the top 20 insurance companies in Europe, Ageas has chosen to concentrate its business activities in Europe and Asia, which together make up the largest share of the global insurance market. They are grouped around four segments: Belgium, United Kingdom, Continental Europe and Asia. It is an undisputed leader in the Belgian market for individual life and employee benefits, as well as a leading non-life player, through AG Insurance. Internationally Ageas has a strong presence in the UK, where it is the third largest player in private car insurance. The company also has subsidiaries in France, Germany, Turkey, Ukraine and Hong Kong. Ageas has a track record in developing partnerships with strong financial institutions and key distributors in different markets around the world and successfully operates partnerships in Luxembourg, Italy, Portugal, China, Malaysia, India and Thailand.
Swiss Re
Swiss Reinsurance Company Ltd was established in 1863 and is present in more than 20 countries. Swiss Re provides reinsurance products and financial service solutions. It offers various reinsurance products covering property, casualty, life, health and special lines – such as agricultural, aviation, space, engineering, HMO reinsurance, marine, nuclear energy, and special risks.
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