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.
Nov
22
Prudential Funds Purchase of AIG’s Japanese Insurance Units
Filed Under AIG, Insurance Company, Life Insurance, MetLife | 6 Comments
American insurance group Prudential Financial Incorporated has announced completion of financing transactions to contribute to the purchase of Japan-based insurers AIG Star Life Insurance Co and AIG Edison Life Insurance Co from its American rival AIG.
Prudential Financial, one of America’s largest life insurers, raised roughly US$ 2 billion (€ 1.45 billion) through the sale of over 18.3 million shares of Prudential Financial common stock, together with a public offering of US$500 million (€363 million) 4.50 percent senior notes and US$500 million (€363 million) 6.2 percent 30 year senior notes. The financing transactions by the US insurer helping to fund the purchase the two Japan-based insurance companies.
The sale of AIG’s two Japanese assets will help the US insurer repay the US Treasury and the Federal Reserve of New York for the bailout it received at the height of the global financial crisis in 2008; this amounted to approximately US$182 billion (€132 billion) at the time. The deal is expected to be completed in the first quarter of 2011.
The New Jersey based insurer Prudential Financial is aiming to pay US$4.2 billion (€3 billion) in cash and absorb US$600 million (€435 million) in debt from the two Japanese insurance businesses currently held by AIG.
The deal came to light earlier in the year, with Prudential Financial working towards generating additional capital to fund the purchase of AIG’s Star Life Insurance and AIG Edison Life Insurance from AIG. AIG Star Life is engaged in life and retirement plans for individuals and groups. AIG Edison Life offers life insurance services within Japan; the Japanese insurer has established distribution channels operating throughout the country. Prudential Financial stated that current policyholders with Star and Edision will not be affected by the future transaction.
AIG recent released third-quarter earnings for 2010, reporting small gains in core business activities. However, the troubled US insurer posted a loss of more than US$2 billion (€1.45 billion) related to sales linked to the AIG group’s restructuring program. The latest figures indicate the difficulties the AIG group has experienced in generating funds to repay the US government for its bailout.
The Prudential Financial Incorporated announced third quarter 2010 results with net income attributed to its financial services business amounting to US$1.2 billion (€872 million), which is equal to US$2.46 per (€1.7) common share.
Earlier this month John Strangfeld, Chairman and Chief Executive Officer of Prudential Financial, said about the future deal “With our acquisition of AIG Star Life and AIG Edision Life expected to close in the first quarter of 2011, we look forward to augmenting our footprint as a leading foreign life insurer in Japan service protection and retirement needs and building on our success in the Japanese insurance market”.
Earlier in 2010, AIG’s disinvestment program included the sale of Alico – another Japanese subsidiary – to MetLife for US$15.5 billion (€11.2 billion). The move by MetLife allowed it to strengthen its presence in the Japanese insurance industry and to substantially increase its global reach.
The acquisition of the Japanese companies AIG Star Life Insurance and AIG Edison Life Insurance will mean the US insurer Prudential Financial is expanding its reach in a mature Asian market, but in an economy which has struggled to gain stability since the financial tsunami took effect in 2007-2008. Prudential Financial – the second largest life insurer in the US – currently has assets amounting to roughly US$750 billion (€545 billion) under management, with businesses stretching across the USA, Europe, Latin America and Asia providing a range of indemnities which including life insurance, retirement products, mutual funds, investment products and property services.
The acquisitions by Prudential Financial will boost the US-based insurers reach in the world’s third largest economy; “The addition of these operations to our existing businesses in Japan will increase our presence and give us opportunities to provide our quality service to more customers. We look forward to working with the management and employees of Star and Edison to ensure a smooth transition,” said John Strangfeld, chairman and CEO of Prudential Financial Inc.
In June 2010, the Japanese life insurance industry had 47 life insurance companies operating in the country, with the major players being: Alico Japan, ING, Manulife, Midori, Lifenet, SBI AXA Life, Japan Post (Kampo) and AIRIO. The Japanese life and non-life insurance industry is facing difficult times as, similar to the positions of Western Europe and North America, where the insurance market has matured with limited potential for writing new business, compounded by aging populations and declining numbers of younger inhabitants.
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.
AIG Star Life Insurance
AIG Star Life Insurance Co. Ltd. is involved in providing life insurance coverage and retirement pension plans to the individual and group policyholders.
AIG Edison Life Insurance
AIG Edison Life Insurance Company provides life insurance services in Japan. AIG Edison Life Insurance has 8,000 sales agents and 17 bancassurance partners in Japan. The company is also providing new distribution channels for AIG which includes, corporation, unions and government agencies
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.
Oct
29
Chinese Bank ICBC Gains Access to Life Insurance Sector
Filed Under AIG, Allianz, China, China insurance, Income Protection, Insurance Company, Life Insurance | 7 Comments
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 42.6 billion yuan (US$ 6.4 billion) up from 33.6 billion yuan (US$ 5.05 billion) in the previous year.
ICBC – the world’s largest bank by market value – will invest 1.2 billion yuan (US$180 million) for a 60 percent stake in the French joint venture company AXA-Minmetals Assurance. The deal will subsequently mean the company being named ICBC-AXA Life Insurance Company. The general management of the business will headed by the AXA-appointed president.
The deal struck by ICBC and AXA-Minmentals will strengthen the company’s presence in an ever developing insurance market. Henri de Castries, Chief Executive of AXA said “AXA has full confidence in the business growth opportunities in the Chinese market and this cooperation with ICBC is ideal to increase our respective interests and presence in the Chinese insurance market.”
The link with AXA-Minmetals will facilitate ICBC’s entry into the Chinese life insurance market and add to its non-banking business, gaining access to the health, retirement, education, children and wealth insurance products.
ICBC chairman Jiang Jianqing said regarding the deal: “ICBC boasts a strong customer base, complete service network and increasingly expanding influence in both domestic and global markets. ICBC’s investment in AXA-Minmetals is an important initiative to promote the comprehensive operation strategy and build core competitiveness. ICBC will fully leverage our leading advantages in banking industry to fully promote this strategic cooperation. We believe this strategic cooperation of ICBC with AXA and Minmetals will bring sound investment returns to the shareholders as well as quality and all-round financial services to customers.”
ICBC’s substantial stake in AXA-Minmetals will provide a sound basis for the newly formed company to penetrate the expanding insurance market in China, which has seen company consolidations in 2010, and will enable it to compete with dominant domestic players such as Ping An and China Life in order to gain market share.
China’s second largest insurer Ping An announced plans to merge with the Shenzhen Development Bank in September 2010. This will increase Ping An Insurance’s presence across the country linking with Shenzhen Development Bank’s outlets, expanding the reach of Ping An Insurance and improving prospects for market growth.
ICBC continues the trend of large corporations investing in the Chinese insurance industry reflecting the value of the market which is estimated to be worth US$100 billion. Businesses have been keen to bolster their presence in the world’s second largest economy which is set to continue to grow. Since the onset of the 2007-2008 financial tsunami and the adverse impact on global markets – followed by the subsequent partial recovery – international insurers, banks and finance institutions have been looking for new avenues to develop income growth; China has emerged at the forefront of business opportunities in this direction.
In the same week, ZURICH Financial Services (Zurich) announced that it will maintain a 20 percent stake in New China Life Insurance (NCI) worth US$420 million – a move justified in order to keep a foothold in China’s fast-growing insurance sector. Also Taiwanese based Fubon Life has agreed to enter into a joint venture with China based Nanjing Zijin Investment to create a life insurance company.
Insurers have been particularly active in 2010 looking for opportunities to increase their presence in the Chinese insurance market. This recognizes the prospects derived from a country with a population exceeding 1.3 billion people, composed of an increasingly more prosperous middle-class sector looking for financial and life protection as their personal wealth increases. Also, the Chinese economy has been confirmed as the second largest in the world in 2010, providing global insurers with a large degree of confidence that ventures into this market is justified.
Since tight restrictions on financial trading where lifted in September 2009, the Chinese financial services market has opened up, leading to an influx of international and domestic investment transactions, with global players spearheading business ventures.
The AIA Group, through its pan-Asian life assurance subsidiary AIG, plans to target middle class citizens in China by opening up offices in second and third tier cities to capitalize on sales. This follows their much published floatation on the Hong Kong Stock Exchange.
In 2010, insurers already established in China have boosted their paid up-capital; this includes Allianz China General Insurance – a subsidiary of multi-national Allianz – and the joint venture between ING and Bank of Beijing. These moves by insurers are in anticipation of the Chinese insurance market offering a scope for premium increase.
Domestic China insurers – China Life Insurance (CLI), Ping An Insurance Group of China (PAIGC) and China Pacific Insurance Corporation (CPIC) – have continued to be robust this year, although the market has been more competitive with new entrants to the Chinese insurance industry. The China Insurance Regulatory Commission (CIRC) has also granted existing insurers in China permission to expand operations in different provinces. This has benefitted the likes of Taiping Life, Liberty Insurance Company Limited (LICL), Manulife-Sinochem, MetLife, Chubb and other established insurers enabling them to improve the disposition of their operations and reach across China.
Since the Chinese Financial Regulator’s lifting of restrictions on banks from investing in the insurance sector in September 2009, there has been a surge in business activities in the insurance market in China. This has been lead by Chinese banks, looking to gain access to this lucrative and expanding sector. Notable transactions include the Bank of Beijing acquiring a 50 percent stake in ING Capital Life and Bank of China agreeing terms for a 51 percent stake in Heng An Standard Life.
The Government of the People’s Republic of China has eased restrictions and regulations within the country’s financial markets, with the aim of liberalizing the market in order to facilitate the country becoming a leading world financial hub. As a result, direct foreign investment is expected to continue to be attracted to the Chinese insurance markets.
Companies Mentioned:
AXA-Minmetals Assurance
AXA-Minmetals Assurance is the first Sino-French insurance company in China and also the first life insurer approved by China Insurance Regulatory Commission. Established in Shanghai in May 1999, the company has boasted stable and sustainable development with its ambition of Becoming the Preferred Company. In September 2010, AXA-Minmetals has achieved a total premium income of RMB 830 million, increased by 54% compared to the same period of last year and its new business volumes have also increased by 75%.
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.
Zurich
Headquartered in Zurich, Switzerland, Zurich Financial Services Group is an insurance-based financial services provider with a network of subsidiaries and offices 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.
Allianz
Allianz Group is one of the leading global services providers in insurance and asset management. With approximately 153,000 employees worldwide, the Allianz Group serves approximately 75 million customers in about 70 countries. On the insurance side, Allianz is the market leader in the German market and has a strong international presence.
AIG
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.
Oct
22
Global Insurers Exit Taiwan Insurance Market
Filed Under AIG, Insurance Company, Life Insurance, MetLife | 3 Comments
MassMutual has announced the intention to dispose of their 39 percent stake in joint venture company MassMutual Mercuries Life, which, if successful, will mean the exit of another global insurer from the Taiwanese insurance industry. MassMutual will follow in the foot-steps of other global insures in exiting a life market which is projected to remain volatile in the foreseeable future.
MassMutual has joined AIG and MetLife in attempting to exit the Taiwanese life insurance market, as business is adversely affected by poor financial returns and inadequate prospects. This strategy being partly due to historical policies negotiated at base interest rates which are no longer sustainable.
Compared to the insurance market in neighboring China – which has seen a significant increase in foreign investment in the insurance sector – the Taiwanese counterpart business is not seen as an attractive financial proposition. AIG, Metlife and MassMutal have all put their Taiwanese life insurance businesses up-for-sale in a move to exit a market which has been stagnant in recent years.
Current investors are deterred by a life market which has been struggling to achieve a reasonable financial return in recent years and which has a forecast of low returns in the future. This is combined with the stringent approach adopted by the insurance sector regulators – the Financial Supervisory Commission (FSC).
A forecast by rating agency Standard & Poor (S&P) in 2010 highlighted the difficult trading environment for the life insurance market in Taiwan and the challenging times ahead. The life-insurance market in Taiwan has remained sluggish and turbulent since the recent economic crisis and is inhibited by historic business secured at rates which are no longer profitable. While regional peers Thailand and Japan have seen profits and business growth return, the Taiwanese industry has been slow to recover from the 2007 – 2009 global economic downturn prompting some of the major life-insurers to re-evaluate their continued presence in the country.
An estimated total net worth of US$ 2.5 billion of Taiwanese based insurance assets are up-for-sale. The factors deterring current international insurers based in Taiwan is the lack of future growth opportunities, market volatility and strict accounting policies. Intervention by the Financial Supervisory Commission (FSC) – the Taiwanese regulators – has resulted in the potential sale of two life insurance business divestments – by Metlife and AIG – being blocked.
The sale of Metlife’s Taiwanese arm for US$116 million was blocked by the Taiwanese regulator. Waterland Financial placed a bid for this business in April 2010, which was subsequently blocked by the FSC in October 2010 on the grounds of disagreements among Waterland Financial shareholders and debt repayments plans.
The decision by the FSC to block the sale of the US-based MetLife business followed an earlier announcement that the America International Group (AIG) planned US$2.2 billion sale of its Taiwanese Nan Shan unit had been rejected by the regulators. Primus Financial Holdings Ltd saw their bid blocked for Nan Shan by the FSC on the grounds that it contravened Taiwan’s investment policies.
Following MetLife and AIG’s recent attempts to exit the Taiwanese insurance market, MassMutual is the latest global insurer to take steps to leave the life insurance sector in Taiwan. The US insurer has placed its 39 percent holding in joint venture MassMutual Mercuries Life for sale for an estimated US$97 million.
The trend for foreign insurers to withdraw from the insurance market in Taiwan in recent times is further reflected in global insurance players – Prudential, Aegon and the ING Group’s have all retreated from this market, which has experienced low growth in recent years. Nevertheless, insurer ACE Ltd has not been deterred by fellow counter-parts as they are in talks with New York Life to buy their Taiwanese branch.
Since the 2007 global financial crises took effect, international insurers have been evaluating business operations and repositioning activities worldwide to take advantage of developing and emerging growth markets and exiting sectors of business failing to deliver acceptable financial returns. These factors, combined with the Taiwanese authorities’ adoption of stricter accounting processes in the regulation of financial services in the country, have lead to actions by a number of the major players to seek withdrawal from the Taiwanese life insurance sector.
While global insurers are intent on exiting the Taiwanese insurance market – which is estimated to be worth US$52 billion and is the fourth largest in Asia – neighboring China and other emerging Asian markets have seen an increase in business activity in recent times benefiting from being able to initiate new business in line with current interest rates and projected growth predictions.
Insurance Companies Mentioned:
MassMutual
MassMutual Financial Group was established in 1895. MassMutual is a leading mutual life insurance company that is run for the benefit of its members and participating policyholders. Products include life , disability income, long term care and retirement insurance.
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.
Nan Shan Life
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.
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.
Ace
The ACE Group is one of the world’s largest providers of commercial property and casualty insurance. With its core operating insurance companies rated A+ for financial strength by Standard & Poor’s and A.M. Best, and with nearly US$78 billion in assets and more than US$19 billion of gross written premiums in 2009, the ACE Group is distinguished by its underwriting expertise, superior claims handling and global franchise, and has a physical presence in 53 countries and commercial and individual customers in more than 170 countries.
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.
MassMutual Mercuries Life Insurance
MassMutual Financial Group entered the Taiwan market as an equal partner with Mercuries & Associates Ltd to from MassMutual Mercuries Life Insurance. In 2002, the company accumulated NT $ 64 billion in assets and made a post-tax profit of as much as NT $ 1.04 billion.
Oct
4
American International Group Inc. (AIG) has recently announced it has reached an agreement with the US Government to repay the billions of US dollars it received during the credit crisis back in September 2008. The repayment plan could even return a profit to US taxpayers.
Up until now, AIG had been repaying the US government with money taken in from the sale of its assets, and there was no clear repayment schedule. Robert Benmosche, CEO of AIG, said in a statement: “This is a pivotal milestone as we deliver on our long-standing promise to repay taxpayers. We are very pleased that this agreement vastly simplifies current government support of AIG.”
Of all the companies affected by the credit crisis, AIG was one of the hardest hit and received a bailout from the US government to the tune of approximately US$180 billion (EUR 131.2 billion), in exchange for an 80 percent stake in the company.
AIG did not get into trouble due to its traditional insurance business, but for dealing in the complex market of derivatives and securities, in which many other financial companies got into trouble. The image of AIG was further tarnished when it continued paying hefty bonuses to its employees, after having received the bailout funds, including paying bonuses to employees who worked in the division that nearly caused the total collapse of the company.
After the legendary financial institution Lehman Brothers declared bankruptcy, the US government was convinced at the time that the collapse of AIG would cause irreparable damage to the credit markets around the world, since AIG was working with hundreds of financial companies globally.
The exit strategy devised and agreed to by both AIG and the US Treasury Department, calls for the swapping of the preferred shares the latter currently holds for common stock, which will then be sold throughout time. Additionally, as part of the deal AIG will repay the loans it received from the Federal Reserve Bank of New York.
The balance of the outstanding aid AIG still had as of 30 June 2010 amounted to US$132.1 billion (EUR 96.3 billion), including US$49.1 billion (EUR 35.8 billion) in loans from the Treasury Department. As a result of the new agreement, the Treasury will hold a stake equivalent to 92.1 percent in common AIG stocks.
In a separate announcement, AIG recently said that it had reached a deal to sell two Japanese insurance units to Prudential Financial Inc. for the equivalent to US$4.2 billion (EUR 3 billion) in cash. The proceeds of this sale will also be used towards repaying the government bailout.
Insurance Company mentioned:
American International Group, Inc. (AIG) is a leading international insurance organization with operations in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services around the world. AIG common stock is listed on the New York Stock Exchange, as well as the stock exchanges in Ireland and Tokyo.
Sep
27
AIG Gets IPO Approval, Releases 2010 Profit Estimate for AIA
Filed Under AIG, Hong Kong, Insurance Company | 7 Comments
American International Group Inc. (AIG) has recently been given approval to list its Asian life insurance unit, American International Assurance Group Ltd. (AIA), on the Hong Kong Stock Exchange, as per initial plans announced earlier this year by mid-July 2010. Additionally, AIG has released the estimated annual operating profit of AIA, which should reach at least US$2 billion (EUR 1.5 billion) by the end of the fiscal year ending 30 November 2010.
The initial public offering (IPO) of AIA may raise up to US$15 billion (EUR 11.1 billion) for AIG, with investor road-shows and marketing activities to start on 06 October 2010, followed by the pricing of the shares on 21 October 2010. It is lining up to become the second-biggest IPO of this year. Agricultural Bank of China already claimed the world’s largest IPO title back in August 2010, with a confirmed US$22.1 billion (EUR billion) raised when its shares were listed in the Hong Kong stock exchange in July 2010.
In regards to the operating profit estimates for the fiscal year 2010, AIG cited strong growth in Thailand and Korea, and an increase in insurance premium income realised by AIA that climbed 11.3 percent year-on-year to US$9.32 billion (EUR billion), in the nine months ended 31 August 2010, with Hong Kong accounting for the single biggest share at US$2.1 billion (EUR 1.56 billion), equivalent to a 3 percent increase compared to 2009, as per figures recently released in the unaudited results report.
AIG will likely use the proceeds of the AIA IPO towards the repayment of debt incurred by the US government bailout it received during the global financial crisis. It is estimated that up to half of AIA will be sold by AIG during the formerly mentioned IPO.
Insurance Companies mentioned:
American International Group, Inc. (AIG) is a leading international insurance organization with operations in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services around the world. AIG common stock is listed on the New York Stock Exchange, as well as the stock exchanges in Ireland and Tokyo.
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.
Sep
22
AIGs Japanese Insurance Business Targeted By Prudential Financial
Filed Under AIG, China, Insurance Company, Life Insurance, USA Health Insurance | 5 Comments
Early reports indicate that Pudential Financial Incorporated is nearing a US$4-5 billion (EUR 3-3.8 billion) deal to take over two Japanese Life insurers from the American International Group Inc (AIG).
Japanese life insurance companies AIG Edision Life Insurance Co and AIG Star Life Insurance Co have been highlighted as possible acquisition targets for the Prudential Financial Incorporated in a deal which could generate up to US$5 billion (EUR 3.8 billion) for AIG. If concluded, the sale would provide a significant contribution towards repaying the US$182.3 billion (EUR 137.3 billion) AIG owes to US taxpayers for the bailout of the company in 2008 following the global collapse of financial markets. Along with other financial institutions, which received government bailouts, AIG received US$182.3 billion (EUR 137.3 billion) from the US government resulting in the company being nearly 80% owned by the US taxpayer.
Prudential is the second-biggest U.S. life insurer and has been present in the Japanese insurance market for more than twenty years. It has been looking to further strengthen their presence in this market following the takeover of bankrupted Yamato Life Insurance Co in May 2009 – which subsequently changed its name to Prudential Financial Japan Life Insurance. If Prudential do acquire the two Japanese life insurers, it will mean that they will increase their presence in the Japanese life insurance market and will utilize their considerable expertise in this industry.
Rumours have been circulating about the potential sale of AIG’s two Japanese life insurance businesses as the US based company looks to create capital to repay the US government loan. Prudential Financial Inc has emerged as the front runner for the acquisition after suspected initial talks stalled earlier this year.
A buyer of the either of the Japanese life insurance companies would obtain a well established Japanese life insurance business. AIG Star Life Insurance Co Ltd provides life insurance coverage and retirement pension plans to individuals and group policyholders. AIG Edison Life Insurance operates as a subsidiary for American International Reinsurance Company Ltd providing life insurance services in Japan, with customers that include large corporations, unions and government agencies. If a takeover does go-ahead, it will see Prudential Financial Japan Life Insurance increasing their reach and life insurance product range in Japan.
AIG has been busy retrenching since the world financial crises took hold, while other rival insurers have been pursuing global expansion by re-positioning and entering new operating channels, as global financial markets stabilise and opportunities for restructuring emerge.
Earlier this year, AIG saw a potential deal worth US$2.15 billion (EUR 1.6 billion) blocked by the Financial Supervisory Commission (FSC) of Taiwan for the sale of the life insurance unit of AIF Taiwan by Primus Financial Holdings Ltd and China Strategic Holdings on the grounds of violation of investment regulations.
Recently American International Insurance (AIA), the Asian arm of AIG, entered into an agreement with Industrial and Commercial Bank of China (ICBC) to form a bancassurance partnership in China to develop a network for sales, marketing, telemarketing and wealth protection services in a deal which will strengthen AIG’s network in this fast growing economy.
There are also early reports that AIG Group Ltd has received approval to list Asian life insurance business American International Assurance (AIA) on the Hong Kong Stock Exchange (HKEX), which could generate up to US$15 million (EUR 11.3 million) from IPOs (Initial public offerings). AIG has progressed to the floatation on the HKEX after the collapse of the US$35.5 billion (EUR 26.7 billion) deal with Prudential earlier this year, which would have seen the British insurer acquiring AIA from AIG. AIG has sought numerous avenues to generate capital to pay back the Group’s US$182.3 billion (EUR 137.3 billion) debt to the US taxpayer after the government bailout in 2008.
In June 2010, the Life Insurance Association of Japan (LIAJ) reported that there were 47 life insurance companies operating in Japan with the main firms being: AIRIO, Midori, Lifenet, SBI AXA Life, Japan Post (Kampo), Hartford Life, ALICO Japan, ING, Manulife, AIG Edison and AIG Star. The Japanese insurance market experienced a premium decline of roughly 58% in 2008, although, in 2006, the total premium income generated in this market amounted to US$363 billion (EUR 273.2 billion) – which was nearly one-sixth of the total world life insurance premium income for the year. The Japanese life insurance market is now facing stiff competition from China and Indian markets; Japan has the oldest age profile population in the world and a declining young population, which has lead to a fall in life insurance customers.
Insurance Companies Mentioned:
AIG
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.
AIG Star Life Insurance
AIG Star Life Insurance Co. Ltd. is involved in providing life insurance coverage and retirement pension plans to the individual and group policyholders.
AIG Edison Life Insurance
AIG Edison Life Insurance Company provides life insurance services in Japan. AIG Edison Life Insurance has 8,000 sales agents and 17 bancassurance partners in Japan. The company is also providing new distribution channels for AIG which includes, corporation, unions and government agencies
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.
Sep
14
AIA and ICBC Agree On Strategic Bancassurance Partnership in China
Filed Under AIG, China, China insurance, Hong Kong, Insurance Company | 3 Comments
American International Assurance Co. Ltd. (AIA) is set to form a long-term and strategic bancassurance partnership with the Industrial and Commercial Bank of China (ICBC) with the aim of becoming a more prominent player in the Chinese insurance market.
The term ‘bancassurance’ is often used to refer to the Bank Insurance Model (‘BIM’), which describes the partnership or relationship between a bank and an insurance company whereby the insurance company uses the bank’s sales channels, including branch offices, in order to sell insurance products. Bancassurance allows the insurance company to maintain smaller direct sales teams as their products are marketed and sold through the bank to customers by bank staff. Replacing the role of an insurance salesperson, bank staff and tellers become the point of sale and contact for the customer. Bank staff are advised and supported by the insurance company through product information, marketing campaigns and sales training.
AIA, the life insurance operations in Asia of American International Group Inc. (AIG), and Beijing-based ICBC, have reached a working agreement to set-up a bancassurance platform. The purpose of which, according to a recent statement by Mark Tucker, Group executive chairman and chief executive-designate of AIA, would be to “further strengthen its business developments in China and provide innovative products and services to meet the protection and savings needs of the people of China.”
As set out in the bancassurance agreement, both companies will endeavour to develop systems covering sales and marketing under this platform, further grow direct marketing, telemarketing and wealth protection planning, whilst continuing pushing for product innovation, service quality and at the same time, strengthening its agency force.
ICBC, purportedly the largest listed bank in the world by market capitalisation, deposits volume and profitability, will work with AIA to continue developing its banking businesses including bank deposits, asset and cash management, investment banking, internet banking, credit cards, customer services, fund-raising, credit lending and staff training.
According to analysts and recent local media reports AIG is looking to spin off AIA through a listing in the Hong Kong stock market, after the collapse of negotiations with Prudential on the sale of AIA.
AIA has approximately 320,000 agents and 23,500 employees across 15 branches geographically dispersed across Asia, and in excess of 23 million policies in-force in the Asian region. It also possesses the bancassurance expertise on a range of models applied across several markets in Asia.
Companies mentioned:
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.
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.
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.
Sep
2
Taiwanese Regulators Reject Sale of AIG Unit to Primus
Filed Under AIG, China, Hong Kong, Life Insurance | 11 Comments
The Financial Supervisory Commission (FSC) of Taiwan has recently announced it has rejected the planned purchase of the life insurance unit of AIG in Taiwan by Primus Financial Holdings Ltd. It is believed the FSC had concerns about Primus, which is based in the Cayman Islands, may be backed by funds from mainland China, thus in violation of the Taiwan law that prohibits Chinese investment in the financial sector.
Primus has reiterated it does not have a Chinese sponsor.
Back in October 2009 American International Group Inc. (AIG) had announced the US$2.15 billion (EUR 1.7 billion) sale of Nan Shan Life Insurance Co. to a group of investors led by Hong Kong-based Primus Financial Holdings. Also part of the investors group led by Primus is China Strategic Holdings Ltd., also based in Hong Kong.
An official with the Investment Commission of Taiwan explained that the rejection of the sale was in part due to Primus having recently named several new shareholders during the past few months and that was perceived by the SFC as a lack of stability in their operations.
Upon gaining approval of the sale, China Strategic Holdings had a deal to sell to Chinatrust a 30 percent stake in Nan Shan for US$660 million (EUR 516 million). Chinatrust Financial Holding Co., is the third-largest financial company in Taiwan. Towards the end of June 2010, there was an announcement that China Trust intended to walk away from the Nan Shan deal { http://www.globalsurance.com/blog/chinatrust-walks-away-from-nan-shan-deal-with-aig-128320.html }, and now China Strategic is considering to launch an appeal against the decision of the FSC.
On a positive note, China Strategic has been cleared by the FSC of the Chinese funding rumours.
An appeal can be made to the Taiwanese Cabinet within 30 days of having received the official rejection notice. Neither Primus nor China Strategic have insofar received such official notification.
Companies mentioned:
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.
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 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.
Aug
30
MetLife Gets Approval for ALICO, DelAm Takeover
Filed Under AIG, Insurance Company, Life Insurance, MetLife | 7 Comments
The European Commission has given its approval for MetLife’s purchase of AIG subsidiaries American Life Insurance Company (ALICO) and Delaware American Life Insurance Company (DelAm), as part of MetLife’s takeover of AIG’s international life insurance business.
MetLife’s purchase of ALICO and associated subsidiaries was agreed upon early in 2010, and the company recently obtained approval to purchase ALICO’s Hungary-based subsidiary, AHICO, from Hungary’s financial markets regulator, PSzÁF, in the beginning of August, 2010.
The European Commission was looking at whether or not MetLife’s takeover of the two companies, ALICO and DelAm, would negatively impact competition in European markets. DelAm is part of AIG’s international life insurance operations. The purchase of DelAm, which provides wealth management services, retirement planning, life insurance and health insurance to individuals as well as commercial and institutional clients was considered not to pose any concerns, especially considering it does not provide services in the EU.
ALICO, which provides life insurance, retirement planning, wealth management, accident insurance and health insurance to individual customers and corporate clients, was found to have some overlap in activities with MetLife by the commission. MetLife and ALICO did overlap in some life insurance products in a few EU Member markets, however the combined market share of MetLife and ALICO in these markets would still be relatively small and the combined company would still face strong competition from other credible companies in the marketplace.
After MetLife’s acquisition of ALICO, it is expected that MetLife will be in a top-five position in many emerging markets, including those in central and eastern Europe, Latin America and the Middle East. MetLife is hoping to wrap up the deal with AIG by the end of 2010.
Insurance Companies Mentioned:
AIG
American International Group, Inc. (AIG), a world leader in insurance and financial services, is the leading international insurance organization with operations in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In addition, AIG companies are leading providers of retirement services, financial services and asset management around the world. AIG’s common stock is listed on the New York Stock Exchange, as well as the stock exchanges in Paris and Tokyo.
ALICO
The American Life Insurance Company, generally known as Alico, provides a broad and innovative range of insurance and savings products to individual customers, corporate clients and high net worth customers. With a wide range of products to support every aspect of their customers’ lives, and provide comprehensive cover for the employees and commercial needs of their business clients. Their products include; health insurance, life insurance, savings plans, accident insurance, retirement planning and travel insurance among others.
DelAm
Delaware American Life Insurance Company, or DelAm, participates in the accident, life and health insurance business, writing accidental death and dismemberment, group life, long term disability, dental, and medical business as part of AIG’s international life insurance sales operations. It was incorporated in 1964 and is based in Houston, Texas; it is a subsidiary of AIG.
MetLife Inc.
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.
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