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.
Dec
22
Private Medical Insurance Set for Review in the UK
Filed Under Aviva, BUPA, Health Insurance, Healthcare, Medical Insurance, United Kingdom | 8 Comments
Following the British’s government’s announcement that it will be embarking on major reforms and an overhaul of its long established National Health Services (NHS), the country’s independent body responsible for ensuring fair competition is maintained – the Office of Fair Trading (OFT) – has announced it will investigate the private healthcare sector in the country.
The formal investigation by the OFT will commence in Spring 2011 and will examine the nature of competition and barriers to entry affecting the private healthcare market in the UK; a market which is worth some £5.5 billion (US$8.5 billion) a year. The private healthcare market in the UK is set to grow in importance, with the impact of changes to the NHS emerging in the period between 2011 and 2015. The healthcare industry in the UK is also being stretched due to the needs of an ageing population and higher life expectancy levels.
The UK is a country where the majority of the population are only used to paying a basic contribution from earned income for medical treatment, which entitles a patient to treatment through the NHS for any ailment or procedure required. The purchase of private healthcare is a discretionary option primarily available to the more affluent element of the population or for employees of companies through corporate schemes; the NHS is itself a significant user of private healthcare facilities. However, following the government’s decision to overhaul the public healthcare system, the private medical market has come under the spotlight with the expectation that it will play an increasingly important role in the provision of healthcare services in the UK.
The OFT investigation will focus of the level of competition in the private healthcare market in the UK at national, regional and local levels and the possible restrictions on companies seeking to enter the market or expand within the market thus preventing the market from developing.
A fundamental issue to be investigated by the OFT concerns the application of network agreements between private medical insurers and private healthcare providers in the UK. This has lead to patient referrals being limited to a selected number of independent hospitals in the UK, although, the argument in favor of this approach, is that it minimizes costs by higher utilization of selected facilities. The other concern is that some smaller healthcare providers not in network agreements are being disadvantaged.
A contention is that if the UK healthcare sector opens up with more players entering the market, Private Medical Insurance (PMI) coverage will expand and be able to offer the British public lower costs for private healthcare.
The benefits of PMI compared with treatment under the NHS are that policyholders are able to get treatment more quickly with a choice of private high quality medical facilities.
A separate issue concerns the general purchase of private medical insurance. In the USA healthcare is exceptionally expensive with a local PMI policy being critical for patients to meet medical costs. The NHS reforms in the UK are not expected to result in a USA style healthcare system, however, similarities could arise with PMI and private health coverage being adopted on a more individual basis.
When comparing local and international PMI the difference in the scope of medical coverage is considerable, with international policies being more flexible. Local policies will often have more restrictions attached to the policy such as age limits set at 65, annual limitations on claims, higher medical exclusions, more pre-existing medical condition exclusions, geographical limitations and limited healthcare provider availability. Also, current policyholders of a local PMI policy may be barred from renewing cover if an insurer feels the client has become high risk.
The alternative to a local PMI policy is an international policy which will have a more comprehensive range of cover provided for policyholders. Although the premiums are higher compared to local PMI policies, fewer exclusions will apply and pre-existing conditions can normally be included for an additional premium. There is also likely to be a larger network of hospitals and medical centres available to policyholders, along with a wider variety of treatment options and maximum policy limits. International medical policies are also transferable around the world, including the USA if necessary.
There will be a difference in the calculation of renewal premiums between local and international PMI, with local PMI policies’ renewal premium usually based on the previous year’s claims made by a client, while international policies are normally renewed on a community rated basis. The benefit of the renewal criteria on a community basis is that premiums will allow for worldwide cover rather than a specific country.
If there are changes within the UK healthcare market it could lead to PMI becoming more affordable at a local level in the UK. Currently PMI obtained in the UK is predominately to supplement healthcare services or medications which are not covered by the NHS. Currently PMI in the UK is dominated by Bupa, Aviva, PruHealth and AXA PPP.
The benefits of PMI is that it provides the policyholder the ability to avail themselves of treatment for acute medical conditions, private healthcare services, surgery and in / out-patient services, including dental and optical treatments if specified. A comprehensive PMI will offer the policyholder a wide variety of healthcare cover, although the insured does have options to tailor the policy to their specific needs, with optional levels of excess payments. The network of private healthcare facilities will speed up patients’ waiting times, particularly in circumstances such as surgical procedures, compared to the use of the NHS system.
A key factor in choosing a private medical insurer is that the cheapest rarely offers the best value for money.
Insurance Companies Mentioned:
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.
AXA PPP
Originally known as PPP Insurance, the company became part of the Global AXA Group in 1999 and changed its name to AXA PPP in 2002. AXA PPP is now an international health insurance company with over 2 million customers around the world.
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.
PruHealth
PruHealth is part of a joint venture named Prudential Health Holdings Limited, between Prudential Assurance Company of the UK and Discovery Holdings. The joint venture was started in 2004 and offers private medical insurance in the United Kingdom. Currently Discovery Holdings owns a 75 percent stake in the joint venture while Prudential Assurance holds the remaining 25 percent.
Nov
17
Protection and Health Business Feature In AXA Growth Plan
Filed Under Aviva, China, China insurance, Health Insurance, Income Protection, Life Insurance | 2 Comments
Insurance giant AXA SA highlighted its 5 year strategy for growth at their autumn investor seminar held in Paris on the 16th of November 2010. The French insurer AXA gave investors a preview of plans to expand operations in emerging markets and to concentrate on high-margin protection policies to ensure future growth.
As one of Europe’s largest insurers, AXA’s strategic plan is to make the company more efficient by creating international growth. Part of the five year action plan proposed by AXA is to review the way the group manages its operational capital to facilitate and accelerate long term values.
“We want to implement a more aggressive allocation of capital towards emerging markets and towards specific segments, such as protection and health. We want also to increase our focus on free cash flow generation.” Henri de Castries, Chairman and CEO of AXA said at the investor seminar.
AXA aims to increase the amount of premiums generated through its protection and health business in the coming years by growing new business sales. AXA stated that the protection and health business typically returns a 40 percent profit margin compared to its life insurance sector which generates around a 20 percent return. Additionally, AXA see scope for opportunities in the investment and saving segment, alongside possibilities open in the property and casualty sectors.
The increasing activities within continental Europe’s investment and saving business was specifically mentioned, highlighting the opportunities present in satisfying European pension shortfalls which are estimated at US$2.6 trillion (€1.9 trillion). AXA’s British-based insurance rival Aviva has recently stated that it will also be engaged within continental Europe in order to take advantage of future saving needs in this insurance sector.
Emerging markets – especially in the Asian region – have become a focal point for global insurers recognizing the financial stability now being enjoyed in this part of the world, with AXA consolidating its position in China through a deal struck with ICBC to acquire a majority stake in the French insurer’s joint venture AXA-Minimetals. The strength of the Asian market has become even more apparent over the last few years as China’s economy has evolved to become the second largest in the world, with other Asian countries also experiencing economical prosperity in the wake of the financial crisis. The Asian region has emerged from the 2007 world financial crisis largely unscathed – compared to Western Europe and the USA – leading international insurers to grasp opportunities for corporate growth – particularly as the more established, mature insurance markets have offered multi-national insurers less scope for new premium returns.
As part of AXA’s focus on expansion in Asian markets, it has launched a joint bid with Australian financial services group AMP for AXA Asian Pacific Holdings Ltd; this amounts to approximately US$13.1 billion (€9.7 billion). If the takeover of AXA Asian Pacific Holdings Ltd is successful, AMP will acquire the Australia and New Zealand operations, with AXA SA taking control of all Asian networks.
If the French insurer’s bid is completed, it will result in their increased presence in nascent Asian insurance market such as China, India, Thailand, Indonesia and the Philippines. Also, AXA will gain increased access to the mature Singapore and Hong Kong markets, which have been generating profitable returns for insurers as the markets stabilize. The insurance markets in China and India offer insurers such as AXA fantastic opportunities to expand and increase revenue due to the vast and increasingly wealthy populations in these countries.
Along with the two economic powerhouses of China and India, Vietnam, Thailand, Indonesia and the Philippines have all shown growth and an appetite for insurance products in recent years. This has caused insurers such as AXA to prioritize efforts in the Asian insurance industry as established markets in the USA and Western Europe have suffered from more difficult trading conditions after the 2007-2008 financial crises.
An ambitious but failed bid by the British-based insurer Prudential for AIG’s Asian arm, AIA, earlier in 2010 emphasized the potential seen in the Asian insurance industry. Prudential aimed to takeover AIA in a bid to further expand its reach across the Asian region in order to take advantage of emerging premium returns in China, Indonesia and India. Global insurers Bupa and Zurich have also entered into joint ventures / partnership agreements in 2010 to gain access to the growing Asian markets. Bupa’s joint venture in India – MaxBupa – was established earlier this year, with the Bupa group enjoying significant growth as a result.
As life-styles change and personal wealth increases, demands for indemnity insurance grow – whether life, saving, motor or health insurance. As needs change, there is scope to develop products to suit demands regionally. In Asia, the products provided under the takaful and mircosurance ranges are proving particularly successful.
Speaking on the future of AXA, Henri de Castries said: “We will finalize it in the coming months and will present our deployment plan in the first semester of 2011. The aspirations and priorities we are sharing today are at the core of our ambition, which aims at better preparing AXA for the opportunities created by the growing needs for insurance and protection worldwide.”
As AXA enters a new phase of global operations, it is focusing on becoming a more profitable insurer by cutting costs, improving efficiency and taking a more aggressive approach with capital allocation. In order to become more competitive globally AXA – like other international insurance companies – is concentrating on expansion of its activities in Asia, with the French insurer taking serious action reflected in its US$13.1 billion (€9.7 billion) joint venture bid with AMP to acquire AXA Asian Pacific Holdings.
Insurance Companies Mentioned:
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.
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, and China and across Latin America.
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.
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.
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. Prudential’s Asian operations include Hong Kong, India, Malaysia, Singapore, Indonesia and other Asian countries.
AIG
The American International Group is a leading international insurance organization with operations in more than 130 countries and jurisdictions globally.
Nov
16
Aviva has confirmed that it has exercised its option to buy out the remaining 16.3 percent stake in French based company Société d’Epargne Viagère (SEV). On the 10th November, Aviva announced that it had acquired full ownership of the French life insurance company SEV, in which it already held a majority 83.7 percent stake.
The news of the purchase comes shortly after the Aviva group reported strong sales growth in the first nine months of 2010. Total sales amounted to €43 billion (US$ 57.4 billion, £35.9 billion), with European sales amounting to €14.7 billion (US$20.9 billion, £13.1 billion). However, sales in the French market sector specifically declined by 3 percent, generating revenue of €650 million (US$915 million:£570 million ).
SEV is a French life insurance company and is a joint underwriter of AFER life insurance products in France alongside Aviva Vie, a wholly owned subsidiary of Aviva. AFER of France is the largest savings association in the country, which has half a million members and also provides life-insurance products. There was a year on year increase in sales of 39 percent for Aviva products through AFER, totaling €1.863 billion (US$2.64 billion, £1.55 million) for the first half of 2010 compared to the same period in 2009.
The 16.3 percent minority shareholder stake in SEV was purchased for a cash consideration of €121.5 million (US$ 170 million, £101.4 million). Having completed the takeover of SEV, Aviva has strengthened its position in the continental European insurance market. Recent research has indicted that over the next 5 years the European life and pension market is set to deliver total returns of as much as €1.22 trillion (US$1.7 trillion, £1.05 trillion) in pensionable assets – a predicted level of activity which exceeds any other region in the world.
When Aviva released its third quarter results for 2010, the group highlighted that it is looking for growth opportunities across Europe. France, being a key member of the European Union, is part of a region where it is forecast that there is going to be annual pension shortfall of €1.9 trillion (US$2.6 trillion, £1.6 trillion); Aviva’s full acquisition of SEV will boost their presence in a country with a population exceeding 64 million people.
In related news, Aviva France’s, Chairman and Director General Jean-Pierre Menanteau announced that he will resign from his post, which he originally took up in the autumn of 2008.
Along with other international insurers such as Prudential, AXA and Zurich, Aviva has also expanded its presence in the nascent Asian insurance industry to take full advantage of growing premium returns. However, Aviva still feels that there are substantial returns to be made from the more mature European pension market as this region works towards curbing a pension shortfall. Aviva’s recent acquisition means that the London-based insurer is broadening its sales potential in France to take full advantage of the prospects for growth in the European insurance industry.
In France Aviva’s product range includes car, home, retirement, health, savings and life insurance. Aviva’s completion of the deal to fully acquire SEV will augment their presence in an insurance market which is also home to such major players as AXA, Groupama, Generali France, AGF Allianz, Credit Agricole and BNP. In 2008, the French life market was valued at €139.8 billion (US$190 billion, £118 billion), with non-life premiums amounting to €64.4 billion (US$91.4 billion, £53.5 billion).
Insurance Company 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.
Oct
28
Microinsurance Will It Satisfy Global Demand
Filed Under Allianz, Aviva, Health Insurance, Income Protection, Insurance Company, Life Insurance, Philippines | 6 Comments
The purpose of microinsurance is to provide basic, low cost insurance cover to individuals on low incomes requiring protection for typical risks including the affects of serious weather conditions, healthcare, life and non-life products. Microinsurance offers security for individuals who need insurance protection but until now have been unable to afford the relatively high cost of cover.
Insurers are seizing the opportunity to cooperate with international agencies in providing microinsurance to populations in less developed countries, with further scope for providing insurance cover to the less affluent citizens in the more wealthy trading nations. The potential for provision of this type of insurance – by exploiting the scope for attracting high numbers of contributors making regular payments into a fund – is considered to be vast.
It is estimated that there are three billion low income individuals globally who would reap benefits and comfort from low cost insurance. The scale of the market clearly represents a tremendous commercial opportunity for local and multi-national insurers, and, at the same time, it will enable the companies to make a significant ethical contribution to social needs.
Global poverty and the recession will be the key drivers in the growth of the microinsurance business, which is already estimated to be used by 135 million people worldwide. The demand for affordable indemnities is on the rise with insurers in regions such as Africa and South East Asia taking steps to initiate microinsurance programmes.
The challenge insurers, aid agencies and governments face are promoting the concept of insurance to communities which have no or little previous knowledge of commercial and personal protection. Insurers also need to consider the commercial aspects of providing insurance for low level premiums and the trade-off on the volume of potential customers taking out indemnities.
In addition to the sale of microinsurance to new markets, the impact of the 2007/8 financial collapse, the global recession and the imposition of austerity measures in major western hemisphere countries is expected to open up additional opportunities for the sale of microinsurance; a notional estimate portrays the prospect of 50-90 million low income people being plunged into poverty in developing countries. The question then posed is whether more micro policy providers will be needed.
Recessionary pressures and economic factors will undoubtedly influence the size of the microinsurance market, but a number of other variables will contribute to this including climate change and its impact on flooding and droughts.
The provision of international microinsurance is already taking shape. In Indonesia, Allianz has secured 230,000 new customers with microinsurance policies where premiums range from IDR 10,000 (US$1.23) to IDR 100,000 (US$11.2); in a country, with a population of 240 million people, the potential for an increase in business is tremendous and Allianz Indonesia intends to expand its sales force to 50,000 agents by 2015 in order to capitalise on this opportunity. These efforts are supported by the Indonesian government.
It is estimated that the micro insurance market in Africa could be worth US$25 billion driven by a potential customer base of 700 million people. Figures indicate that around 147 million African lives are currently covered by microinsurance polices, which generates approximately US$ 257 million in premiums for insurers. Countries such as Kenya has seen a small take-up of microinsurance, but it was reported by the Association of Kenya Insurers (AKI) that there is still scope for significant improvement – but it is predicted that it may take up to three years for the insurers to develop products to meet the needs of the low-earning population. Unlike emerging and developing Asian nations, countries in Africa generally show little sign of underlying prosperity and the insurers have been slow in seeking market penetration.
Microinsurance is already popular in the Philippines where there is significant exposure to natural disasters – Munich Reinsurance has been particularly active in providing indemnities for this category of risk in this nation. Also, the healthcare system in the Philippines is currently in the early stages of planning the reform of the public healthcare service, where out-of-pocket payments are currently a main contributor to overall funding. This causes a problem for many of the local inhabitants and the government is in the process of establishing the Philippine Health Insurance Corporation (PHIC) to give poorer Filipinos access to better quality healthcare. This is being run alongside the National Strategy and Regulatory Framework for Microinsurance, which is promoting growth of the insurance sector by providing scope for equal and fair access to affordable Philippine mircoinsurance products, thereby raise the general standard of health of the population this country.
Asian countries are keen to take advantage of the microinsurance sector and the issue was raised specially at the East Asian Insurance Congress held in Bali in October 2010; governments and insurers were in unison in recognising the benefits for residents with low levels of earnings requiring the complete range of insurance cover which could be made available.
The BRIC countries – Brazil, Russia, India and China – are recognised as economic powerhouses; however, there are sizeable elements of the very large populations not reaping the benefits of national prosperity. With a wide range of insurers present in these countries, it should be possible to develop insurance products to satisfy emerging demand. India has been at the forefront of developing the microinsurance sector, with large pockets of low income people spread across the country – about 70 percent of India’s 1.2 billion population live in rural areas – and companies such as Bajaj Allianz and Aviva are able to offer life protection policies starting at as little as US$0.50 per week.
Zurich Insurance has increased its focus on providing microinsurance products in Asia, Africa and Latin America and has established good relations with international aid organizations to ensure appropriate products are designed to cater for the needs of the disadvantaged populations in the regions. Latin America has a population of approximately 569 million people, with around a quarter of those people being on low incomes; it is therefore vitally important for all parties involved with the provision of microinsurance do so to meet the needs of this element of society.
Insurers and governments will play pivotal roles in the further development of the microinsurance sector on a worldwide basis. This will fulfill many benefits, firstly, by providing the less advantaged populations in many countries with valuable insurance cover and thus providing invaluable peace of mind to this element of society and, secondly, by providing a mechanism for expanding and improving the robustness of the insurance industry. Microinsurance is not about corporate benefits, it is a means of achieving social equality particularly in the healthcare sector where many countries are looking to reform the structure of health service provision and micro insurance will be an important step in enabling this to happen.
Insurance Companies Mentioned:
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.
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.
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.
Munich Re
Munich Re stands for exceptional solution-based expertise, consistent risk management, financial stability and client proximity. This is how Munich Re creates value for clients, shareholders and staff. 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. ERGO is one of the largest insurance groups in Europe and Germany and 40 million clients in over 30 countries place their trust in the services and security it provides. In international healthcare business, Munich Re pools its insurance and reinsurance operations, as well as related services, under the Munich Health brand.
Oct
4
Aviva Makes Improvements to International Health Insurance Offerings
Filed Under Aviva, Expat Insurance, Health Insurance, International Healthcare, Medical Insurance | 8 Comments
Aviva has instituted a handful of changes to their international private medical insurance products, ranging from adjustments in applications and claims handling processes to minor changes to group policies.
Aviva said it has introduced the adjustments, which are part of a larger package of improvements, to their offerings in order to make it easier for intermediaries to do business with them.
One of the changes Aviva has made is that they will now allow intermediaries or individuals to fax or email copies of claims forms and applications in order to speed up the process for both applications and claims. Aviva will now be able to place clients on risk the day they receive the faxed or emailed copy, while the original documents may be sent in at a later date.
Aviva have also amended their international private medical insurance group policies to reflect a change in the minimum size a group must be in order to have a medical history disregarded benefit applied to the policy; the group size for this requirement, commonly known as MHD, has been lowered, from 15 to 10 people in the group. Aviva also hopes to start a new international private medical insurance sales team, which will offer advice and support to individual clients and Small & Medium Enterprises from the time the clients look at quotations, all the way to renewal.
The new underwriting terms are now available on all new business, with the International Sales and Marketing Manager for Aviva UK Health, Teresa Rogers, saying “We want to make it easy for intermediaries to do business with us and we’ve been gathering feedback to help us do just this. We’re committed to continue growing our IPMI market share and intermediated business plays a key part in this. These improvements are just the first of many we’re introducing.”
Insurance Company 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.
Sep
17
NAB Bid for AXA Rejected by Australian Watchdog
Filed Under AXA PPP, Aviva, Insurance Company | 1 Comment
The takeover bid by the National Australian Bank (NAB) for AXA Asia Pacific Holdings (AXA APH) has been rejected by the Australian Competition and Consumer Commission (ACCC) on the grounds of insufficient certainty that the proposed undertakings offered by the parties satisfy its competition concerns.
At the heart of the concerns for the commission were the distribution of financial services products through electronic investment platforms, and more specifically, the impact that the merger of NAB and AXA APH would effect on such distribution channels.
The precedent of NAB having bought the Australian operations of Aviva last year, with the purpose of gaining access to its successful Navigator platform, were also taken into consideration by the ACCC. Were the AXA APH acquisition to have gone ahead NAB would have gained control of the new North platform, which is regarded to belong to the next generation of electronic distribution platforms, and would have been able to capture a majority of the market in this area.
To address this concern NAB had proposed to sell the new North Platform, wealth.net, to IOOF, a 160-year+ Australian financial services organisation managing funds. However, the ACCC was not persuaded that this move would have helped to free up market competition in the distribution of retail investment products. In a statement released by the ACCC, Deputy Chairman Peter Kell said, “The undertakings as proposed place a heavy reliance upon IOOF having sufficient distribution capability to provide an effective competitive constraint upon existing key players in the foreseeable future.”
Analysts believe that the merger between NAB and AXA APH would not have given the bank a dominant position in the Australian retail life insurance market, noting that the decision by the ACCC appears to have rather been focused on the distribution of investment products.
AXA and NAB have indicated that they both will review in detail the rejection by the ACCC before making a decision on their next step.
Companies mentioned:
AXA Group is a worldwide leader in Financial Protection. AXA’s operations are diverse geographically, with major operations in Europe, North America and the Asia/Pacific area.
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.
National Australian Bank (NAB) is a financial services organisation of nearly 40,000 people, more than 1800 branches and service centres, and more than 450,000 shareholders. NAB provides products, advice and services through its major Australian franchise and businesses in the United Kingdom, New Zealand, the United States and Asia. NAB is motivated to make a positive and sustainable impact in the lives of their customers and communities, and so build a business that can deliver on their goal of superior returns to shareholders.
For over 160 years, IOOF has accompanied Australians’ journey towards a secure and rewarding financial future. IOOF’s strength and reputation as a financial services organisation was cemented with the merger between Australian Wealth Management in April 2009 and the acquisition of Skandia in March 2009. The Group’s products and services are designed to accompany the lives of around 700,000 Australians from wealth accumulation into retirement and across to the next generation.
Aug
18
Investors Challenge Aviva CEO on Refusal of RSA Bid
Filed Under Aviva, Insurance Company, United Kingdom | 1 Comment
Aviva investors have started to question whether the refusal of the GBP 5 billion (EUR 4.13 billion) bid from RSA Insurance Group Plc was the correct way forward, and this question is being addressed to Mr Andrew Moss, who three months after becoming the Chief Operating Officer of Aviva Plc back in July 2007, unveiled his “One Aviva Twice the Value” strategy. Fast forward to the present, and Aviva shares have lost almost half their value since then, prompting investors to ponder about the merits of a breakup of the company.
The market value of Aviva currently stands at GBP 11 billion (EUR 9.1 billion). The refused GBP 5 billion (EUR 4.13 billion) bid from RSA was for the general insurance division of Aviva, which sells auto and home-owners’ coverage.
The challenge posed to Mr. Moss is to convince Aviva investors that more value can be created by him and his leadership, rather than from someone else coming from outside the company. The perception by analysts is that breaking up the company would give current shareholders more value than what they are getting now.
Online price-comparison websites, an ageing population and the slowdown in growth of the UK economy have been given as reasons for the lacklustre profits reported by British insurers during the past three years. In spite of this, the UK is the third most-insured country in the world even though the size of its economy occupies the sixth place globally.
Should RSA successfully acquire Aviva’s general insurance businesses in the UK, Ireland and Canada they would become Britain’s biggest non-life insurer, putting an end to Aviva’s strategic goal of selling all types of insurance products. Aviva is the only major British insurer currently selling life and pension products alongside motor and home insurance.
Insurance Companies mentioned:
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.
RSA has a proud heritage dating back almost 300 years. The current company structure was created in 1996 following the merger of two of the largest insurance companies in the UK, Royal Insurance and Sun Alliance. In 2008 the company shortened their name to RSA and simplified and refreshed their corporate brand. RSA has over 20 million customers worldwide. The Group currently manages GBP 14.3 billion of investments. RSA is a member of the FTSE4Good Index. RSA employs around 21,000 people worldwide.
Aug
16
RSA Bid for Aviva’s UK General Insurance Unit Rejected
Filed Under Aviva, Health Insurance, Insurance Company, Life Insurance, United Kingdom | 1 Comment
RSA has been reported as having made a GBP 5 billion (USD 7.8 billion) bid for Aviva’s general insurance business in the UK, which has been turned down by Aviva’s board. Aviva shares jumped over 5 percent on the news.
RSA has previously targeted much smaller companies for acquisition, such as their purchase earlier in August of Irish insurance company 123 Money Limited. Considering that RSA’s market capitlalization stands only at GBP 4.4 billion (USD 6.9 billion), the purchase of Aviva’s general insurance unit at GBP 5 billion (USD 7.8 billion) would more than double the size of the company, making the financing of such an acquisition both challenging and risky.
Aviva is Britain’s only major composite insurance company, offering general insurance and health insurance as well as life insurance and pension funds. While some analysts see Aviva’s constituent businesses as possibly ripe for the picking, given that pre-tax profit in Aviva’s general and health insurance business fell 3.7 percent year-on-year for the first half of 2010 to GBP 525 million (USD 820 million).
However, with the general and health insurance unit accounting for more than 24 percent of Aviva’s pre-tax operating profit, some see the unit as being strategically important, as it is a vital source of money to finance growth in Aviva’s life insurance business. Considering the fact that Aviva’s total pretax profit grew 21 percent year-on-year in the first half of 2010, and has already signed two major bancassurance deals with RBS and Santander, the latter of which includes a general insurance relationship, it seems unlikely that Aviva would be willing to make the deal.
Insurance 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.
RSA
RSA has a proud heritage dating back almost 300 years. The current company structure was created in 1996 following the merger of two of the largest insurance companies in the UK, Royal Insurance and Sun Alliance. In 2008 the company shortened their name to RSA and simplified and refreshed their corporate brand. RSA has over 20 million customers worldwide. The Group currently manages GBP 14.3 billion of investments. RSA is a member of the FTSE4Good Index. RSA employs around 21,000 people worldwide.
Aug
11
Aviva Profits Up as Aviva and RBS Sign New Life Insurance Distribution Deal
Filed Under Aviva, Income Protection, Insurance Company, Life Insurance, United Kingdom | 4 Comments
International insurance company, Aviva, has recorded a 21 percent increase in operating profits in the first half of 2010. Aviva is also in the midst of discussing significant structural changes to their profit sharing joint-venture with Royal Bank of Scotland (RBS), which comes shortly after their deal to be the exclusive provider of life protection insurance products with Santander in the UK.
Aviva recorded IFRS operating profits of GBP 1.27 billion (USD 2 billion) for the first half of the fiscal year, showing a 21 percent increase over the same time last year. Aviva also generated net operating capital of GBP 900 million (USD 1.42 billion), which brings the company a long ways towards its revised target of GBP 1.5 billion (USD 2.37 billion) for the year.
Aviva is also in discussions over the future of their joint-venture with RBS, which comes close on the heels of Aviva’s signed deal to be the sole provider of protection and life insurance products to Santander in the UK.
Aviva’s joint-venture with RBS in the UK has been running for about 10 years and was previously set up so that profits from the sale and distribution of the life insurance products was shared equally between the two entities. The preliminary terms would see Aviva engineer life protection insurance products, which RBS would then distribute, keeping the profit. However, negotiations between the two are expected to continue through the second half of the year, with the joint-venture being wound down by the end of 2010.
Earlier in August, Aviva signed a five year distribution deal with Santander over life insurance products in the UK, expanding upon the preexisting relationship between Aviva and Santander in the general insurance sector. It will see Santander offering Aviva’s life insurance products exclusively through its bancassurance channels which include 1,300 branches in the UK, as well as telephone and internet banking. The deal will come into effect from June 2011.
The Chief Executive of Aviva’s UK business, Mark Hodges said “As Britain’s leading insurer, our strength lies in the breadth and quality of our product portfolio across both general and life insurance and I’m delighted that Santander’s customers will benefit from this. Our new distribution agreement will build on our solid existing general insurance relationship with Santander, creating a platform for significant growth across our UK business.”
Insurance 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.
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