Posted on Oct 28, 2010 by Sergio Ulloa
Zurich Financial Services (Zurich) sees emerging markets and Islamic insurance - known as 'takaful' - as key long-term opportunities. Zurich intends to continue looking for potential acquisitions in globally emerging markets, and envisages good prospects in the Middle Eastern region to grow its market presence.
As Zurich looks for future acquisitions to strengthen its position in the international insurance market, it highlights the Middle East as having capacity to generate significant returns; the 'takaful' industry is expected to grow 15 percent annually over the next 5 years, and generate premium income exceeding more than US$7 billion.
Zurich is looking for bolt-on acquisitions to gain access to emerging markets in a region which has increasingly caught the eye of global insurers. In October 2010, Zurich bought privately-owned Lebanese insurer, Compagnie Libanaise D'Assurance
, and has set up a management unit dedicated to the African and Middle East region to take full advantage of the emerging insurance sector.
International insurers are poised to take advantage of the developing Middle Eastern market recognising the opportunities offered by large populations in a financially prosperous region. Zurich will be competing with heavy weight insurers AXA and Allianz
who are set to lead the charge in an insurance market which has not completely matured. However, local insurers are well positioned in the market having an established presence and are set compete with global insurers.
The United Arab Emirates achieved a 10 percent increase in life and saving premiums in 2009 but, in general, the life and savings insurance segment in the Gulf and Middle Eastern region remains under-developed. This is mainly because governments have not installed incentives for these segments - unlike the property and casualty insurance sectors - which have seen significant growth over the years.
The sharia-compliant insurance sector - also known as 'takaful' - is an Islamic insurance concept, which has caught the eye of foreign insurers who see great potential in the region. The sector's regulatory system is being rapidly transformed, which enables domestic insurers such as Dhabi National Insurance Company, and Saudi's Tawuniya, to be well placed to build on their current dominant position in the market. This will present international insurers with the challenge of gaining access and producing products which are attractive and competitive to the region's communities. Nevertheless, 'takaful' poses a tremendous opportunity for insurers who can break into the region.
The current reach of Zurich International Life in the Middle East region includes residents in Bahrain, Qatar and the United Arab Emirates offering saving, investment and protection products.
Following the acquisition of Lebanese insurer Compagnie Libanaise D'Assurances, Zurich will soon have access to markets in Lebanon, Kuwait and Oman giving them a strong foothold in these emerging markets, while continuing to look for potential bolt-on acquisitions to strengthening its foothold in the region and take advantage of increasing premium revenue.
Zurich has also announced plans to buy up to US$420 million worth of shares in New China Life Insurance (NCI) in a move which will mean they maintain a 20% stake in the company. It follows NCI's decision to participate in a share issue in order to expand its capital base. The decision by Zurich to continue its significant stake in NCI follows the company's premium income expansion by more than 50% year-on-year in 2010.
Zurich initial investment in the Chinese based insurer began in 2000, with the purchase of 280 new shares in NCI fixed at RMB 10 (US$1.50) per share. In June 2010, Zurich's total investment in NCI was valued at US$131 million.
Zurich's CEO Martin Senn said: "Our decision to participate in NCI's share issue reflects our belief that China's fast-growing insurance sector represents an attractive investment opportunity. The Chinese government has expressed a clear intent to further develop the country's insurance market and NCI is well-positioned in the life market. In addition to our investment in NCI, we continue to focus on building our own insurance business in this important growth market."
The initiative by Zurich to continue its significant stake in NCI follows a year when other global insurers have expanded or developed a presence in the world's second largest economy. With the growth in China's economy set to continue, NCI's is well positioned - with its base in Beijing - to maximise its share in the Chinese life insurance market.
Zurich acquisitions and positive developments in recent times enables the company to be well placed to meet the needs of a changing insurance market and to enable it to focus on further growth in an insurance market set to expand.
The current reach of Zurich International Life in the Middle East region includes residents in Bahrain, Qatar and the United Arab Emirates, providing saving, investment and protection products. And with the acquisition of Lebanese insurer Compagnie Libanaise D'Assurances they will soon have access in Lebanon, Kuwait and Oman giving them a strong foothold in an emerging market, while looking for potential bolt-on acquisition to continue strengthening its foothold in the region taking advantage of the increasing premium revenue.
Insurance Companies Mentioned:
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.
New China Life Insurance
New China Life Insurance Co.,Ltd (NCI?has headquarters in Beijing and was established in 1996 It is a large national insurance company, with products
including traditional protection products, bonus products as well as the products that have a strong financial management function. With sustained, healthy and harmonious development of the company, the brand value of NCI is a valuable asset.