A recent study by the Qatar Financial Centre Authority, entitled the GCC (Gulf Cooperative Council) Insurance Barometer has revealed that prospects for the growth of the insurance industry in GCC countries are extremely bright. The GCC includes the nations of Bahrain, Saudi Arabia, Qatar, Oman, the UAE, and Kuwait.
The study conducted by the Qatari organization was conducted through a number of interviews with more than 20 senior executives of leading local and international insurance companies and was intended to gauge their forecasts for the relative health of the peninsula’s insurance market over the coming years.
Over 60 percent of the individuals and companies surveyed stated that they expect the insurance industry to grow over its current levels by 2015 – the GCC’s insurance market is currently valued at US$ 15 billion.
While the market is situated to lead GDP growth in the nations represented in the GCC, this should not be seen as an indication that higher premiums are over the horizon; more than 70 percent of respondents to the study stated that they believed the premiums associated with insurance products in the region, across all business lines, would remain relatively stable for the next 1-2 years.
An example of the dynamic growth currently being demonstrated across the Arabian Gulf can be seen in Bahrain’s insurance market.
In 2011 insurance sales contributed 8 percent of Bahrain’s GDP, up from a mere 3 percent in 2003. This massive upswing in the relative value of the Bahraini insurance market as part of the GDP follows on from increased local penetration for domestic insurance products which grew from 1.95 percent to 2.55 percent from 2002 to 2012.
On top of increased penetration levels the insurance industry of Bahrain, a country of only 1.2 million people according to the 2010 census, actually tripled in size between 2003 and 2012; the Bahraini insurance sector grew by a staggering 335 percent during that period.
The types of insurance products being purchased in Bahrain have also experienced a shift in the last decade, which may account for the increased levels of growth being demonstrated in the market. The sale of medical Insurance products grew by a staggering 1840 percent which may be due to the proposed legislation to mandate employer provided health coverage in the country; however, Marine and Aviation products saw a loss, shrinking by 13 percent during the same period.
The number of providers entering the Bahraini insurance market has grown in tandem with the industry’s overall growth levels.
In 1995 Bahrain had issued 109 insurance licenses, by 2010 this had jumped to 171; a massive 57 percent increase in the number of registered insurance companies legally allowed to do business in the country.
The growth in the number of insurers is indicative of a trend which is being felt across the GCC region – foreign insurance giants, increasingly feeling the burden of struggling markets in western countries are ever more turning to the Middle East and Asia as key development prospects.
In fact, according to the GCC Insurance Barometer Study, approximately 60 percent of those surveyed stated that they expect foreign insurance companies to increase their market share by 2014.
The fact that the GCC has an extremely health expatriate community will not hurt the Foreign insurers in terms of market penetration, as locally based expatriates prefer to obtain their coverage from organizations which they are familiar with in their home nations.
According to the CEO of Arig, a Bahraini based insurance company, Yassir Albaharna, “Foreign insurers continue to show much appetite for the GCC region and increasingly teaming up with local partners rather than establishing a green field presence.”
Other respondents to the Insurance Barometer study cited foreign companies’ higher levels of technical expertise, customer focus, distribution networks, and financial backing as key reasons why these organizations, and not GCC based insurers, would be best placed to capitalize on the recent success of the region’s insurance sector.
A majority of respondents expected to see strong growth in the region’s Takaful Market. However, contrary to this expectation, Takaful insurance, products adhering to Islamic Muamalat laws, have been one of the weakest lines of business in Bahrain. Takaful products have seen a loss each year for the last decade, except during 2010 when Takaful lines posted a 32 percent overall profit.
A number of the organizations and individuals surveyed for the GCC Insurance Barometer study, while not in the majority, indicated that they felt Takaful was falling short of the expectations which local providers had hoped this line of business would achieve, and termed the performance of Takaful products “disappointing.”
While not totally sidelining the possibility of a Takaful resurgence in the coming years, as the products did in Bahrain during 2010, it was indicated that Takaful insurers would need to develop compelling business models in order to realize success in the vibrant GCC insurance sector; a lack of compelling business models has been highlighted as the prime reason for the relative under-performance of these types of products.
In general, the future is bright for the insurance industry throughout the Middle East. With a number of initiatives on the cards, including mandated employer-provided health insurance for a number of countries in the GCC bloc, and improved regulation of domestic insurance markets in these countries, the Middle East can be said to be a shining opportunity for insurers globally.
As the European debt crisis continues to take its toll on affected countries, numerous companies are revamping their businesses strategies to keep their heads above the waves.
Britain’s second-biggest insurer, Aviva, has increasingly felt the impact of Europe’s unstable economy and recently came under fire when its large exposure to the eurozone crisis contributed to a drop of 38 percent in share prices.
Aviva previously announced it would be reconsidering its investments in 45 businesses and cutting ties where they no longer predict sufficient growth.
Insurance companies holding stronger positions in the market, such as AIA and Prudential, are looking towards expanding in Asia to overcome Eurozone difficulties. However, due to recent incidents, Aviva needs to improve its shareholder value as quickly as possible and therefore seeks to exit non-core operations and focus on their home markets.
Aviva first teamed up with Malaysian CIMB in 2007 when it paid USD $119.4 million for a 49 percent stake in two of the company’s units. Sources with knowledge say the group is now in the process of exiting this joint venture and has hired Morgan Stanley to oversee the sales process.
In Sri Lanka, the acquisition of Eagle Insurance in 2010 resulted in the formation of Aviva NDB. Based on recent figures, the company has a market value of 36 percent which would value Aviva’s 51 percent stake at USD $18 million to prospective buyers. Sources predict AIA group, Manulife Financial and Prudential will be among potential bidders.
Aviva entered South Korean markets in 2008 when the company teamed up with Woori Financial and purchased LIG Insurance for USD $115.3 million. It has now been speculated that the two partners have informally discussed exploring the sale of Aviva’s 41 percent stake in LIG; but Woori declined further comment.
Other European financial institutions appear to be taking similar measures to secure their base markets with Royal Bank of Scotland selling a share in its investment banking operations to CIMB and ING Group N.V beginning the process of selling its Asian Life Insurance and asset management business.
While some companies are exiting Asian markets, others are re-considering their investments in Europe.
Insurance Australia Group feels that with the current UK economic conditions, now is a suitable time to reassess their UK business investments and strategies.
IAG CEO, Mr. Mike Wilkins, aims to prioritise returning the groups UK businesses to profitability. Positive progress has taken place so far this year so IAG is now discussing the most efficient way to maximize shareholder value given the UK’s current economic climate.
With equities in Red Star, the UK’s fifth largest motor insurer, one option for IAG is to refine their business strategy so as to solely focus on motor insurance. IAG also discussed continuing to improve the group’s performance within their current operating model or explore what options are available for a sale in part of or all of their UK business investments.
Continued instability within the European business climate will undoubtedly lead to additional companies undergoing strategic reviews such as these and as a result, interesting but unpredictable developments are sure to be in store for international insurance companies.
Established in 1996, Jordan based Arab Orient Insurance Company is currently one of the leading providers of general insurance in the Middle East.
Operating as a subsidiary of Gulf Insurance Company, AOIC prides themselves on reliability, quality and superior customer service and believes these characteristics have helped them to dominate the competitive market whilst showing consistent growth over the years.
With the Middle East rapidly becoming a global business hub, the economy of Jordan continues to grow and entice expanding businesses. AOIC has reacted positively to this change and has grown along with the country in which it is based. However, the company has always envisioned expansion in their future and hopes to be the first local company to establish an international presence for themselves by expanding wherever possible.
British international insurance giants Bupa are helping to fulfill this desire and have signed an agreement enabling AOIC to offer worldwide international health insurance as well as improve the quality of their local insurance services.
The collaboration will undeniably have a positive impact on both parties by combining AOIC’s local expertise in Jordan with Bupa’s knowledge and experience of global health insurance.
Bupa first entered the Middle East insurance market over 10 years ago when it successfully planted its roots in Saudi Arabia and formed Bupa Arabia. Now the kingdom’s largest health insurer, Bupa will undoubtedly continue to make its mark on the Middle Eastern health insurance industry by forming this positive partnership.
AOIC will continue to offer a range of insurance products, but those offered in the health sector will now be serviced by Bupa International and as a result, members of such products will be able to receive treatment in more than 7500 participating hospitals and clinics worldwide as well as the 24 hospitals in Jordan that have now been added to Bupa’s ever expanding network.
Deputy CEO of AOIC’s Medical insurance and customer care Mustafa Melhem is pleased by the prospects the partnership can offer, hoping they will now be able to offer customers an even more personalised experience with unique custom-made plans to fit their personal requirements.
AOIC has high hopes for its development and believes its continuous growth will help place Jordan in amongst the list of top countries providing the best insurance services in the Middle East.
With the backing power of the worlds leading expatriate health insurance provider now behind them, there is a good chance they will be able to do exactly that. Furthermore, the reputation that Bupa carries both in the UK and internationally should not only benefit AOIC but should positively impact the Jordanian insurance market as a whole.
It is partnerships such as these that enable Bupa to stay ahead of the game in international health insurance and it appears that the Middle East may witness many more alliances in the future.
Swiss global insurance giant, Zurich, is on a profitable track this year, with positive results coming in from the First Quarter reports.
The group reported a total business operating profit of US$ 1.4 billion for the First Quarter of 2012 with an operating profit increase in the General Insurance sector of US$ 567 million to US$ 856 million.
It appears that Zurich may be overcoming difficulties in the European markets by focusing on forming new alliances and acquisitions internationally.
The international markets division contributed US$ 1.3 billion of Zurich’s first-quarter gross written premiums resulting in an increase of USD $240 million when compared to the results from this same time last year.
The Asia-Pacific region alone witnessed 16 percent growth partly due to the renaming of the Malaysian MAA to the Zurich brand towards the end of 2011. Also to be taken into consideration is the fact that, as of last month, Zurich is now the provider of wealth insurance products to HSBC clients in the Bahrain, Qatar and the United Arab Emirates after signing a 10 year exclusive distribution agreement; additionally, the company now has license to access their target market segments for life insurance products in Singapore as well.
Zurich’s most notable area of growth however, lies in the markets of Latin America. The group recently acquired Banco Santander’s insurance business and has witnessed a positive impact since then as an overall growth of 50 percent was reported.
The life insurance sector of Zurich contributes one-third of the groups’ total global business, and Banco Santander continues to boost performance in this area as Brazilian sales of individual protection policies enabled a 16 percent year-on-year increase in life gross written premiums. Gross written premiums in non life have also witnessed noticeable improvements and increased from US$ 370 million to US$ 10.5 billion. However, such growth has, of course, been counterbalanced by the continuing decline of European markets.
As the Debt crisis continues in Europe, Zurich is considering how else it can expand and is now looking towards making more progress in Asia. Indonesia in particular is experiencing a flurry of activity, and Chief Executive Kevin Hogan believes the country’s increasing income and resulting capability to pay for individual protection offers a “tremendous opportunity for growth”.
In 2011, Indonesia’s economy experienced the fastest growth it has had since 1996 and grew 6.5 percent. It would seem therefore, that the population is becoming wealthier and has more to protect as a result.
Zurich noted this 3 years ago and made a head start when it took on Mayapada Life; Zurich presently controls 80 percent of the now renamed Zurich Topas Life company. Up until recently, the company could only offer coverage for car and home insurance but now that they have been granted a license to add life insurance to their services, Zurich Topas life will no doubt continue to expand and interest more of the Indonesian market.
Although there are already well established insurers in Indonesia, Zurich hopes its personal strategies will give it the edge it needs to stand out and continue to make improvements. Zurich Topas Life has previously collaborated with Bank Mayapada International but is looking to explore more opportunities to join forces with other Indonesian banks so as to further distribute their products.
As the European climate continues to remain unstable, it would seem Zurich has the right idea by looking towards international possibilities for growth and expansion. The impact of the global developments that the group has made so far are clearly bringing in positive results for the company and it will be interesting to see what directions they choose to take in the future.
London based insurance company Aviva is now the sixth largest insurance group worldwide and the largest provider of life and general insurance in the United Kingdom.
Despite having a strong start to the year so far, Aviva will be undertaking a much needed strategic review of its businesses to aid the company in its recovery after the departure of Chief Executive Officer Andrew Moss.
Moss, having held his position since 2007 stepped down on the 8th of May after the shareholder’s unhappiness at his pay and performance was making it too difficult for him to continue in a successful manner.
Now in charge, executive deputy chairman John McFarlane has been set with a number of tasks with priority residing in acquiring a new CEO. McFarlane reports this could take the rest of the year as it is paramount that an excellent candidate is selected so as previous events are not repeated. However, with Aviva share prices already down 10% since the departure of Andrew Moss, it would seem McFarlane needs to act with greater urgency.
In addition, McFarlane has been developing strategies to improve Aviva’s current condition which he hopes will be put in motion by July. The acting CEO plans to have Aviva reconsider its investments in 45 business units so as to ensure the company can improve performance in businesses that offer sufficient promise for the future and rid themselves of those that do not. He hopes this will enable Aviva to strengthen its capital base and boost share prices, especially as recent reports are reflecting the increasingly tough conditions the euro crisis is bringing about for the company.
Continuing with the trend of the last 5 years, Aviva has underperformed rivals Prudential and L&G with stocks decreasing by 8% since the beginning of the year. The Euro zone crisis has of course taken its toll on their rival companies as well but as Aviva generated 40% of its operating profit last year in Europe alone, it appears to be feeling more of an impact and has already seen a 5% drop in its life insurance sales so far this year.
Spain and Italy in particular, have been hit hard by the recession where reports in Life and Pension sales reflected an overall 23% decrease.
Worldwide, Aviva’s total sales, which include general insurance premiums, were down 3% at a total of 15.3 billion US Dollars but on a positive note, the company’s asset management funds have seen a healthy inflow of 1.6 billion US dollars in the first quarter alone.
The recession is making life difficult for all European citizens, including Aviva’s own employees. Aviva Ireland mentioned last week that between 500 to 540 redundancies will unfortunately be enforced due to the current economic climate in the Euro Zone.
Like other companies involved with Europe, It appears that the Aviva group will continue to struggle in certain areas until the business landscape becomes more stable. In the mean time, it is clear the company requires a positive management situation to assist them in moving forward and overcoming whichever obstacles the recession will undoubtedly create.
ING Groep may see a flurry of activity in the near future as it has received multiple bids for their asset management operations in Asia, as well as seeing multiple parties squaring up to bid on their Asian life insurance assets.
ING must sell off their global insurance business in order to fulfill their agreement with the European Commission and repay the US$7 billion bailout it received in 2008. A growing number of companies are throwing their hats in the ring for ING’s Asian asset management and life insurance businesses.
The asset management business has so far attracted the attention of Nikko Asset Management, Macquarie Group, Principal Financial Group and Singapore’s United Overseas Bank to list but a few of the participants. The auction could see ING’s Asian asset management business valued at around US$500 million.
Also on the sale block is ING’s Asian life insurance business, and given the number of suitors cueing up to take over the operations it may turn into a bidding war that could net ING upwards of US$6 billion.
The U.S.’s two largest life insurance companies are preparing to put forwards bids for the life insurance business, with MetLife hiring Credit Suisse and Prudential Financial hiring Bank of America Merrill Lynch to advise their respective clients on potential bids. Manulife Financial is also considering a bid, having hired Citigroup to advise them, while Sun Life Financial from Canada is also contemplating a bid. Samsung Life Insurance has declined to participate in the initial bidding process although it has said that it may reconsider and place a bid if changes to the sales method were made.
ING’s life insurance business currently has operations that are either wholly owned or operated as joint-ventures in Japan, South Korea, China, Hong Kong, Singapore, India, Thailand and Malaysia. However, some operations may be more or less desirable for different companies, based on what markets the potential suitor wishes to expand in.
While the bidding process is just getting off to a start, it has the potential to turn into a serious windfall for ING, as the US$6 billion estimate is almost 20 percent higher than previous estimates.
The Allianz Group has a rich history dating back to 1890 and prides itself on being able to offer solutions in insurance, banking and asset management areas. Insurance wise, Allianz thrives in Europe and has especially excelled itself in the German market. 2012 has started off in a positive direction for the company and CEO Michael Diekmann sees this trend continuing for the rest of the year.
On May 15th, Allianz was able to confirm their total profit target of 11.1 billion US dollars (8.7 billion euros) for the end of the year, after results from their first quarter net income showed a profit increase of at least 53%.
Almost all regions have assisted Allianz in this growth but the Australian and Asian-pacific sectors in particular have performed significantly well so far. All three components that make up the Allianz group have contributed to this increase but it is in the insurance sector where such increases are most noticeable and are enabling the company to stay on track towards reaching their set target.
In terms of shares, since December 31st 2011, Shareholders’ equity reported a growth of 7.4% meaning an increase from 58.2 billion US (44.915 billion Euros) to 61.4 billion US dollars (48.245 billion Euros). Furthermore, as of last week, Allianz will now be welcomed to list their stock on the Chinese markets and thus continue their growth across Asia.
It appears Allianz are benefiting from the impact of the many natural disasters that occurred last year and have been able to push higher prices for coverage in property and casualty insurance – an area of high importance when profit is concerned. The company’s CFO Oliver Baete reported that as the impacts of natural catastrophes appear to be increasing in frequency and damage, Allianz has increased their budget for 2012 as a response.
Aon Benfield, the world’s biggest reinsurance broker has estimated that so far, natural disasters have cost insurers and reinsurers less than US$ 3 billion in losses, an almost insignificant figure when compared to the staggering US$ 53 billion the previous year.
2011 definitely deserves the title of most costly year on record with earthquakes, tsunamis, floods and tornadoes all making for a very difficult time for the entire insurance industry. This time last year, both the New Zealand and Japan earthquake with its tsunami aftermath had already struck massive blows to the insurance industry and contributed to a massive total of 60 billion US-dollars in losses.
By contrast, 2012 has experienced a lesser impact from natural catastrophes and as a result, Allianz has shown significant improvement in Property and Casualty as well as Life and Health insurance with a 50% increase in net income. This has enabled the company to reach their second-highest revenue level in history and brought in an impressive figure of 38.3 US dollars (30.1 billion euros) compared to 38 billion US dollars (29.9 billion) the same time last year.
Of course natural disasters are not the company’s only concern. Volatile Markets continue to decrease interest rates and the sovereign debt crisis remains an ongoing issue but Allianz prioritises the monitoring and analyzing of such challenges and believes they can continue to expect an operating profit of 8.2 billion euros to ensure a profitable growth.
Allianz has clearly managed to keep their head above water even when faced with disasters of huge proportions and their confident solutions in times of crisis are amongst the number of factors enabling them to stay ahead of their European competition.
India-based HDFC ERGO, the joint-venture between Indian finance group HDFC and Germany’s insurance company ERGO International, have recently established their own in-house claims servicing department for health care and insurance claims and questions.
The HDFC ERGO General Insurance Company, which is the 4th largest general insurance company in India, provides a number of lines of private insurance including motor, home and local health insurance plans. ERGO recently established their own department to service health claims in-house. The new department, called Health Claims Services (HCS), will focus on expediting HDFC ERGO’s claims settlements, while also ensuring a level of transparency throughout the process.
Customer satisfaction surveys focused on Indian general insurance companies have indicated that customers often stake their opinion of health insurance providers on their experiences during claims settlement. Meanwhile, regulatory adaptations in India allowing portability between insurers for health insurance products and a new system for filing and tracking complaints have also improved consumer choices further raised customer expectations.
By creating the Health Claims Services department, HDFC should be able to control their customers’ claims experience from end to end, rather than relying on an outside entity, like a Third Party Administrator. By increasing their engagement in the process and also with the customers, HDFC ERGO may be able to build trust with its clients provided that the Health Claims Services department continues to provide quality services.
In order to further this goal, the Health Claims Services will not only manage the claims settlement of health policies, but will also assist customers with other relevant health queries. HDFC ERGO is facilitating this through partnership with numerous network service providers such as diagnostic and wellness facilities, ambulances and pharmacies in addition to their 3,000 strong network of hospitals.
HDFC ERGO’s Head of the Strategic Planning Group, Mr. Mukesh Kumar said about the announced creation of HCS, “In today’s era, customer expects to interact with company directly. There is more trust generated with higher accountability involved in servicing the customers. With this internal mechanism we are planning to establish better control on the overall claim settlement process & improve the turnaround time (TAT) with seamless, hassle free & transparent services in health claim settlement.”
HDFC ERGO General Insurance Company is a Indian general insurance joint-venture between ERGO International AG, the main insurance arm of Munich Re Group, and HDFC Limited which is one of India’s leading finance institutions for housing. The joint-venture which is split 26:74 between ERGO and HDFC, is the 4th largest general insurance provider in India, and operates a number of lines of insurance including motor, health and home.
Both Qatar and Dubai are well placed to become regional insurance hubs, reports have revealed, following the creation of a Governmental partnership with Samsung Life Insurance in Dubai and the implementation of a national health insurance law in Qatar.
According to a Financial Times report, the Investment Corporation of Dubai is set to agree to a memorandum of understanding with Korea’s largest Life Insurance underwriter, Samsung Life, to deliver high quality life protection products to the Middle Eastern and North African Regions. Historically both underserved markets for life products, the ICD and Samsung intend to grow the distribution of life insurance plans across the region with a view to entering the less developed markets located in Sub-Saharan Africa.
Read the rest of the Qatar and Dubai Set to Become Major GCC Insurance Hubs article
This Article appeared as a Press Release on Yahoo Finance.
Globalsurance.com, an internet based international health insurance advisor, has revealed some unusual trends in the Hong Kong Medical Insurance market today.
In a departure from form, expatriates in Hong Kong, Asia’s leading financial services center, are eschewing international health insurance options in favor of locally provided Hong Kong Medical insurance products. This is the direct result of more than 10 years of increases in international health insurance premiums at a rate of roughly 10% per year; which themselves are the product of heightened levels of medical inflation in the city.
Hong Kong, along with Israel, is the second most expensive place in the world to receive healthcare after the United States of America.
In terms of the charges associated with various treatments at Hong Kong’s private hospitals examples can be seen in a scenario involving Maternity. Realistically, delivery of a child at a Hospital like the Matlida, Hong Kong’s leading maternity services provider, can easily reach HK$ 156,000 – 234,000 (US$ 20,000 – 30,000) even if there are no complications. A private room at this same hospital will run the patient HK$ 5,935 (US$ 761) for a single night.
In the last 10 years, the levels of disposable income within Hong Kong’s expatriate community have not risen at the same rate as medical inflation, and consequently the premiums charged by international health insurance providers. This is putting pressure on insurance premiums as the loss ratios of not adjusting for the heightened cost of medical care in HKSAR are not economically feasible.
With a large proportion of the Hong Kong expatriate community choosing to obtain local health insurance options, rather than their international variants, Globalsurance.com believes that further evolution of the design of international protection plans available in the city is not far off. Potential restructurings may include the provision of selected service providers given that private medical facilities in the City are amongst the most expensive in the world; leading to less comprehensive healthcare options for individuals but also reduced premium charges.
Globalsruance.com is of the opinion that any innovations within Hong Kong’s iPMI market would be an attempt to stem the tide of expatriates choosing to purchase local health insurance options, but would also need to compete with the major players in the local market whilst providing coverage enabling the policyholder to receive treatment options at superior medical facilities in order for developments to be considered a success.
French global insurance group AXA SA has made a move to strengthen its position in South Korea’s important direct insurance market through the acquisition of general insurer Ergo Daum Direct in a deal announced this past week.
Officials representing both AXA and the Dusseldorf-headquartered ERGO Insurance Group completed and signed a share purchase and sales agreement on May 3rd which will see AXA General Insurance Korea, the French global insurer’s local unit, take over 100 percent of ERGO’s subsidiary in South Korea, ERGO Daum Direct this year. Although the official purchase price has yet to be disclosed by either party, local media put AXA’s expected outlay for their local market rival at around KRW50 billion (US$44.2 million). Closing of the sale remains subject to final regulatory approval.
Ergo Daum Direct is a Seoul-based non-life insurer that focuses its operations around direct motor insurance policy sales. Founded as Daum Direct Auto Insurance in 2003, the company has been quick to build a considerable business portfolio, with a client base now surpassing 500,000 members and annual insurance premiums worth KRW260 billion (US$229 million). The Korean insurer became a subsidiary of Ergo Insurance Group, when the firm, which is itself a subsidiary of global reinsurance giant Munich Re, acquired a 65 percent stake of the company in 2008. According to their 2011 year-end financial statement, Ergo Daum Direct is now the fourth largest direct motor insurance provider in South Korea, with a share of just under 8 percent of the domestic direct motor insurance market.
While Ergo has certainly benefited from their time in South Korea, the firm put up their local unit for sale last year on fears that their current market share and sales momentum would not be able to offset rising claims costs going forward. Ergo Daum Direct has been dragged down by losses due to high loss ratios in motor insurance and have been unable to raise insurance premiums appropriately and compete due to ongoing governmental pressure to freeze rates. AXA was among several suitors vying for Ergo’s South Korean motor insurance book, and was finally able to successfully outbid its principal rival, the Korean Federation of Community Credit Cooperative, after local laws barred the cooperative from owning more than 30 percent share of the domestic financial entity.
AXA already have a leading presence in the South Korean motor insurance sector through its wholly-owned subsidiary AXA Direct Korea. AXA’s local branch currently controls around 15 percent of the market with over 950,000 policyholders and KRW534 billion (US$467 million) in written annual premiums. Now, with the acquisition of Ergo Daum Direct, AXA becomes the biggest player in the Korean auto insurance industry as its market share will jump from 15 percent to 22 percent after the merger. In addition, if you combine the KRW700 billion (US$ 612.6 million) in net premiums both direct insurers have written as of January, AXA’s Korean operations would rank ninth amongst all general insurers active in the Asia Pacific nation.
Speaking on the transaction in a press statement, Stephane Guinet, CEO of AXA Global Direct, noted that the decision to purchase Ergo’s South Korean business will give AXA the opportunity to further reinforce it’s its presence in one of Asia’s fastest growing and most developed motor insurance markets for years to come. “We are extremely pleased to have agreed on the terms with ERGO for the purchase of ERGO Daum Direct, which further strengthens AXA’s number one position in the Korean direct motor market,” Guinet remarked, adding that with the addition of ERGO’s business, AXA now serves almost 5 million clients through it’s general insurance operations worldwide. Guinet Continued to say, “This acquisition demonstrates AXA’s commitment to the Korean market and is fully consistent with our global strategy to accelerate our development in the Direct Property & Casualty business.”
President and CEO of AXA Direct Korea, Xavier Veyry, assured clients of ERGO Daum Direct and AXA Direct Korea that the transaction will have no immediate impact on their account status and that going forward both organizations will benefit from improved access, service levels and product offerings. As it stands, insurance coverage will remain unchanged and fully in force. “Both companies have very similar business models and organisations,” says Mr Xavier Veyry, adding that “through this acquisition we are efficiently reinforcing our platform for growth in the most dynamic and strategic distribution segment in Korea”.
In a separate statement ERGO’s representatives heralded AXA as a strong brand that is more than capable of developing the company’s position further in the current South Korean direct motor insurance market which has its own specific challenges. Indeed, Ergo’s decision to sell comes at a time when Korean insurers are facing tough market conditions at home, with intense competition and low profitability forecasts prompting many to consider new business opportunities by expanding into new insurance markets through mergers and acquisitions abroad. Evidence of this trend was seen in November last year when Korea Life Insurance penned a 50-50 joint venture insurance operation in China with Zheijiang International Business Group. The insurer, South Korea’s second largest life insurance company, has also expressed an interest in ING Groep’s Asia Pacific insurance operations. This has been followed by plans made by their chief rival, Samsung Life, to develop operations in Thailand, India and Indonesian insurance markets in 2012.
South Korea is one of the worlds most saturated and competitive insurance markets. According to a Swiss Re sigma study, the country’s insurance penetration, as measured by the ratio of premiums to gross domestic product, is one of the highest in the world at 11.2 percent in 2010, behind only Hong Kong (11.4 percent) and Taiwan (18.4 percent). The South Korean market offers limited organic growth opportunities going forward compared with other markets in the region, in particular China and India where insurance market penetration holds rates of 3.8 percent and 5.1 percent respectively. In those countries, insurers remain focused on home market development, which features large populations and favourable demographic factors that should continue to support and drive premium growth. Given the fact that overseas expansion also helps to spread risk and balance business cycles as well as broaden client bases, it only makes sense for Korean most prominent insurers to pursue these new insurance markets abroad.
Insurance Companies Mentioned
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.
ERGO is a subsidiary of global reinsurance giant Munich Re and offers a wide spectrum of insurance provision and services across 30 countries; it currently has more than 40 million customers. ERGO has a strategic focus in Central and Eastern Europe and certain Asian markets. The German insurer has become one of the leading health and legal expenses insurance companies within Europe. In addition ERGO provides property and personal accident insurance in India. In 2011, ERGO recorded a premium income of 20 billion euros and paid out benefits to customers amounting to E17.5 billion.
New research out this week from prominent international medical insurance provider William Russell warns that an alarming number of expatriates are currently risking their livelihoods overseas without an adequate life or income protection policy in force.
William Russell carried out a customer survey with over 650 of its expatriate insurance policyholders from all over the world, with questions ranging from coverage tendencies to evolving consumer product and technology attitudes. The main finding the insurer took away from the study was that while a lot of expatriate clients consider international private medical insurance an important investment to make before working abroad, purchasing life and income protection policies have not been given similar deference thus far and this could lead to significant hardships for underinsured expatriates if adverse events transpire while overseas.
When William Russell’s health insurance clients were asked whether they had a life or income protection policy in place, through themselves or any another insurer, well over half the respondents (61.4 percent) said that they didn’t. A further 5.7 percent of those polled indicated that they were unsure whether they had more coverage, while the remaining 33 percent claimed that they had at least one of the life and/or income protection products in force.
William Russell’s survey then found that, conversely, when these expatriate clients with life and income protection plans were asked about their health coverage situation, almost 70 percent said they had already had a medical insurance policy in place, while a further 7 percent were unsure as to their arrangements. These results show that the majority of expatriates are only making provisions to take care of their immediate health and are ignoring insurance policies that could help in the event of an untimely death or protracted workplace absence and income loss due to an illness or injury.
Speaking on the customer survey findings, William Russell’s Sales Director, James Cooper commented that more work clearly needs to be done in convincing expatriate clients to broaden their insurance portfolio. “Although we are pleased to see that a high number of expatriates are making provision against the risk of needing expensive medical treatment whilst they’re abroad, it is worrying to see how many expatriates are not making financial provision in the event of their untimely death, or an illness or accident that would prevent them from working.”
While the discrepancy between health and life insurance cover for expatriates in the survey was considerable, William Russell concluded that ultimately the results were unsurprising given that domestic figures have been falling in a similar fashion over the past few years. Regardless of this fact however, expatriate consumers need to be better advised and informed about the risks of being uninsured outside their home country. Having sufficient protection in place has always been important, but is particularly so if you are living abroad, as you may not be able to rely on the financial support of family, friends or government benefits if you suffer an unforeseen injury or illness and lose your workplace income for an extended period of time. Because of this, William Russell and other multinational insurers offer global life insurance protection plans for expatriates, which provide valuable security to families in the event of a sudden death or incapacitation. Also, with advances in modern medicine meaning that more people can now live for longer with a serious illness or injury, the need for income protection insurance has now become just as significant as the need for traditional life insurance cover.
In addition to policy purchasing behaviour, William Russell’s survey also revealed some interesting developments in expatriate consumer attitudes. While online technology has fast become the industry standard, over a quarter of William Russell policyholders claimed, when asked, that they would still prefer to access and view their insurance documents in a hard copy format. In addition to this, the rise in importance and popularity of smartphones was made evident by the fact that almost 2 in 3 respondents said they would encourage the development of a William Russell specific mobile application.
The customer survey also provided some interesting insights into the social networking habits of expatriates, certainly valuable information for marketers. According to the survey, Facebook is the most popular social networking service, with just under 60 percent of expatriate respondents indicating that they have an account there. LinkedIn finished second with 47.3 percent of respondents online. Perhaps surprisingly Google+ was more popular than Twitter amongst the expatriates polled, with 19 percent using Google+, while 14.5 percent are on Twitter. The remaining respondents, around 25 percent of the total, have not held an account on any of these social networking platforms.
Inez Cooper, Managing Director at William Russell concluded the report, saying that is now incumbent on insurers and financial advisors to use whatever channels are available to them to better convey the importance of comprehensive insurance coverage for expatriates. “We would certainly encourage insurance brokers and Financial Advisers to advise and inform their expatriate clients about the risks of being uninsured,” Inez Cooper said, adding that “an insurance solution can be found that will protect families today and into the future.”
William Russell is an international health insurance company, focused on providing health, life and income protection products to expatriates across the globe. Based in the United Kingdom, William Russell opened its doors in 1992 as a family-run company and since then has grown into an international company that does business with people of every nationality in over 180 countries around the world. They have central offices in the UK, Indonesia and Dubai and offer their customers a 24/7 emergency medical assistance hotline.
While stagnant growth forecasts, sovereign debt contagion issues, and political infighting continue to drag down many Western economies and industries, the first quarter of 2012 was relatively stable to many in the international insurance industry. Several notable insurance companies posted positive business developments in the face of adverse market developments over the past month. The following is a summary of some of the most recent earning statements put forward by some prominent insurers.
MetLife, the United States’ largest life insurance group, posted net loss of US$174 million during the first quarter of 2012. This result was driven by a derivative net loss of US$1.3 billion for the quarter, which the company said was due in principal to rising interest rates and lower credit spreads experienced during the reporting period. Outside of these derivate losses, which impact the valuation of certain insurance liabilities but not the company’s overall economic performance, MetLife’s operations have remained on track in 2012. According to the financial statement, MetLife’s operating earnings hit US$1.5 billion for the first three months of the year; an 11 percent rise on the US$1.3 billion in earnings recorded during the corresponding quarter in 2011. Operating revenues climbed by a further 7 percent to US$16.7 billion on gains made in the Asia Pacific and the Americas. The insurer also reported US$5.1 billion in net investment income, a 6 percent increase over the same quarter last year.
MetLife has attributed much of their quarterly insurance growth to their Alico acquisition and the positive impact it has had on the company’s investment portfolio thus far. Chief Executive Steven Kandarian remarked in the company statement that “these results reflect top-line growth in all of MetLife’s global regions, sound fundamentals and the core earnings power of our diversified businesses.” Metlife had been looking to grow its international footprint and expand it’s distribution platform for a long time. In 2010 the New York-based insurer decided to purchase American Life Insurance Co. (Alico) from AIG for US$15.5 billion to achieve these goals. The purchase of Alico, which operates out of over 50 countries, has given MetLife access to new insurance markets in Asia, Europe, Latin America and the Middle East, and they been rewarded for this business decisions already as their international segment generates an increasing amount of earnings relative to their home US market.
Aflac is another American insurer finding success in more international insurance markets. The insurer posted a substantial 21.9 percent surge in revenues for the first quarter, which was driven primarily by the Japanese insurance market and a stronger yen to dollar exchange rate. Aflac’s sales in Japan officially doubled to a record ¥52.4 billion (US$659 million) for the quarter, led by deals through banks and the introduction of a popular new supplemental medical coverage policy. As this occurred, the company also managed to post a 5.2 percent revenue growth in its home US market and further reduced it’s exposure to European financial companies, reflected in the drop in investment loss to US$29 million from US$376 a year earlier.
Companies active in the US health insurance sector have also put forth their first quarter financial results. Aetna Inc reported earnings of US$477.4 million for the first three months of the year, which was a 15 percent drop on the US$560.2 million posted during the same period in 2011. While net income fell from US$586 million to US$511 million, revenues rose by 6 percent from US$8.3 billion to US$8.8 billion over last year. The company’s statement revealed that healthcare revenues grew substantially over the yearly reporting period from US$7.71 at the start of 2011 to US$8.2 billion by the first quarter of 2012, owing to higher premiums earned from Medicare and Medicaid membership enrolment, improved underwriting margins, and the addition of Genworth’s Medicare-supplement business, which was purchased by the health insurer last year. As this occurred however, the amount Aetna paid out in medical claims, its largest expense, rose by more than 9 percent to US$5.86 billion for the first quarter. The company’s Chairman and CEO, Mark Bertolini, believes they can adjust to new market realities in lieu of any further Affordable Care Act developments, and continue to grow the customer base. “We’re balancing growth and profitability, and are confident of our ability to increase membership over the course of this year to 18.2 million medical members.”
Aetna’s two largest competitors in the US health insurance market, WellPoint and UnitedHealth Group, have also announced their first-quarter results. In Wellpoint’s, the insurer noted that net income fell by about 8 percent annually from US$926.6 million in 2011 to US$856.5 million the first three months of 2012, with sliding enrolment and a 5 percent rise in healthcare claims costs (to US$11.77 billion) cited for the drop in earnings. The health insurer has lost a reported 525,000 members, or 1.5 percent of its 33.7 million client base since March last year, and this was one of the reasons the firm decided to purchase California Medicare Advantage plan provider, CareMore, for US$800 million in June. While the first quarter of 2012 has not started quite as brightly as WellPoint would’ve otherwise liked, their decision to purchase CareMore may have been vindicated by the fact that of the company’s US$495.4 million surge in new revenue, US$266 was accounted for by the inclusion of their new California business. The demand for Medicare-supplement insurance, sometimes referred to as ‘Medigap’ plans, is only set to grow further as the burgeoning ranks of incoming US retirees expect similar healthcare benefits to those they have enjoyed throughout their career and many still have the clout to pay for them.
UnitedHealth was the lone US health insurance giant who finished the first quarter of 2012 in the black. America’s largest health insurer finished the quarter ending March 31 2012 with revenues of US$27.3 billion, up US$1.7 billion, or 7 percent, on the US$25.4 billion reported for the same quarter in 2011. According to the company filing, UnitedHealth was able to buck the trend and grow their operations by increasing their enrolment by an additional 1.6 million customers over the past year, of which 1 million joined during the first quarter of 2012. The statement adds that this membership growth has been well balanced and diversified, with numbers split amongst the traditional commercial insurance markets and subsidized public and senior markets. As a result of this development, the company has already increased its earnings outlook for 2012 by about 3 percent, with membership expected to swell by additional 750,000 people, to settle between 1.7 million to 1.9 million new policyholders by 2013.
US-based health insurance companies were able to post greater-than-expected profits in 2011 because fewer Americans filed claims and used healthcare services as a result of the weak economy. As the fortunes of the average American citizen begin to improve they will begin to demand more of their respective insurer and this could make the market even more competitive and expensive. Expect more companies to cast their net further adrift and expand into international markets to further develop their business portfolio.
Insurance Companies Mentioned
MetLife is the largest life insurance company in the United States, with total assets of US$785 billion and over US$4.2 trillion of life insurance in force. 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.
AFLAC is the world’s leading provider of supplemental medical insurance. Founded in 1955, the insurer has gone on to provide services to more than 50 million people through more than 70,000 agents worldwide. Aflac’s total assets at year-end 2011 totaled more than $117 billion with annual revenues of more than $22.2 billion.
Aetna is a leading global diversified health care benefits company head-quartered in the U.S., serving approximately 35.8 million people with information and resources to help them make better informed decisions about their health care. Aetna offers a broad range of traditional and consumer-directed health insurance products and related services, including medical, pharmacy, dental, behavioral health, group life and disability plans, and medical management capabilities and health care management services for Medicaid plans.
WellPoint is the largest health benefits company in USA, with more than 33 million members in its affiliated health plans. As an independent licensee of the Blue Cross and Blue Shield Association, WellPoint serves members as the Blue Cross licensee for California; the Blue Cross and Blue Shield licensee for Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New Hampshire, New York, Ohio, Virginia, and Wisconsin.
UnitedHealth Group is a leading health care company, serving more than 75 million people worldwide. UnitedHealth Group is a leader in the health benefits and services industry, the insurers six businesses offer exceptional service, broad capabilities and enduring value in creating a modern health care system.
May 1st was International Labour Day, a date that celebrates the contributions and progress made by workers in industrialized nations over the past two hundred years. The occasion was perhaps a fitting time for India to formally announce a new life insurance and pension fund that specifically targets the country’s sizeable overseas workforce in a bid to better address their social security and resettlement needs going forward.
The Indian government’s Pension and Life Insurance Fund (PLIF) was officially launched by the country’s Minister for Overseas Indian Affairs, Vayalar Ravi, at a function held over the holiday period. The scheme looks to fulfill a promise made by Prime Minister Manmohan Singh last January to improve upon India’s expatriate benefit framework, and could help the country’s millions of overseas workers, especially those now working in Gulf Cooperation Council (GCC) states, invest back in their home country and prepare for their future resettlement and retirement. The low-cost life insurance plan that covers against natural death for the period of time they are abroad is furthermore expected to become a key savings tool for many families while their breadwinner works abroad.
The PLIF scheme has been designed to provide three distinct benefits for India’s expatriate community: pension planning, life insurance cover, and resettlement compensation. Any Non-Resident Indian (NRI) or overseas contract worker aged 18 to 50 who want to save for resettlement and retirement through the PLIF program will be eligible with a valid work permit and proper immigration clearance. This stipulation would entail holding an ECR (Emigration Check Required) passport or an active employment contract in an ECR country. While the government wants as many overseas Indians covered as possible, the PLIF scheme will be based on voluntary contributions by expatriate workers. Under the provisions of the PLIF, the Indian government will contribute INR 2,000 (US$40) for every member paying between INR1,000 (US$19) and INR12,000 (US$230) into the fund annually, and female overseas workers will be eligible for a special co-contribution worth an additional INR1,000 (US$19) a year.
When it comes time to collect, the three arms of the PLIF scheme will be managed by three different operators. Pensions will be regulated by India’s Pension Fund Regulation and Development Authority (PFRDA), the savings for resettlement will be held in a mutual fund controlled by the Securities and Exchange Board of India (SEBI), and the life insurance requirement will be managed by a dedicated insurance company. PLIF subscribers can begin to withdraw their savings after five years, capped at 50 percent of their account value. If this occurs, 40 percent of the remaining funds will be paid back as lump sum once the policyholder turns 55, with the rest reserved for a monthly pension. PLIF subscribers who return to India before retirement can maintain their savings account for old age through their bank and the electronic claims system.
In addition to this expatriate pension scheme, The Ministry of Overseas Indian Affairs (MOIA) has also set up an Overseas Workers Resource Centre, which is a 24/7 telephone helpline for Indian emigrants and their relatives if they need information about legal procedures, country-specific risks, and what they should do if things go wrong while abroad. The announcement of this new hotline followed the establishment of the Indian Community Welfare Fund (ICWF) to assist distressed expatriate workers in 2009 and other moves made recently by the MOIA to update their electronic documentation network and generally improve upon the country’s strained emigration system.
India’s expatriate workforce is growing not only in number but also in political clout, as successive governments try and entice the country’s large overseas workforce with initiatives to encourage greater reinvestment back home. It is estimated there are around 25 million Indian citizens currently living and working abroad, an entire nation in and of itself. While other prominent Asian countries like China and the Philippines have been able to reap substantial economic reward from their expatriate workforce through sizable remittances and trade activity, India’s emigrant contributions remain muted, and thus the national government is now trying to more actively engage their overseas diasporas in a bid to boost domestic fortunes.
Of particular interest are India’s expatriates in the Gulf. Indian immigrants make up a considerable proportion of the region’s working class, with many moving to the rich Gulf States during the oil boom to work as construction laborers, domestic helpers and in other more specialized fields. The region has been an attractive destination for South Asian migrant labor due to the higher salaries available and the relatively short travel distance to the subcontinent. However as more of Indian workers move east, problems begin to emerge. Citizenship, permanent residency and other legal rights are seldom granted to immigrants working in these Gulf countries and as a result maintaining affordable access to necessary services like healthcare and retirement planning has become a serious problem for most Indian expats. Added to this now are increased regional security concerns surrounding the aftermath of the Arab Spring revolutions last year.
The moves made to address the expatriate social safety net follow renewed efforts made by India’s chief insurance regulator (IRDA) to improve the country’s insurance market and encourage the rising number of Indian middle-class consumers to make more proactive insurance and investment decisions. The county’s insurance sector has grown rapidly over the past decade, driven in particular by the popularity of unit-linked life insurance products, which have dominated the market. Since the Indian insurance market was first opened up to the private sector by the Insurance Regulatory and Development Authority Act in 1999, total insurance penetration across the country has nearly doubled, with the local market overtaking several developed economies in terms of premium output in the process. Critical to this growth has been the input from the international insurance industry. Overall, India represents one of the world’s fastest growing insurance markets, with rising income levels and growing awareness of risk management amongst the populace expected to drive a substantial demand for cover and investment solutions nationwide. Foreign multinational insurance companies have played a big part in this development but contributions from the country’s tremendous expatriate populace should look to play a large part in this development as well.