Posted on Feb 21, 2011 by Sergio Ulloa
Ageas has announced plans to enter the growing Turkish non-life insurance market through a partnership with local conglomerate Hac? Ömer Sabanc? Holding A.?. (Sabanci). This will see the Belgian insurer acquiring a 31 percent share in Sabanci subsidiary Aksigorta for US$220 million (€160 million).
Ageas agreed the deal with current owner's Sabanci, a leading industrial and financial business in Turkey, with the price tag reflecting the potential returns from Turkey's fourth largest non-life insurer Aksigorta.
Turkey's insurance sector remains generally untapped, with the non-life insurance markets generating roughly 1 percent of gross domestic products (GDP) against the European Union (EU) average for the non-life insurance sector of approximately 3 percent of GDP.
On completion of the deal, Ageas and Sabanci will each hold 31 percent in the Turkish non-life insurer; the remaining 38 percent of shares will continued to be traded on the Istanbul Stock Exchange.
In 2010 Aksigorta generated US$ 562 million (€415 million) in gross written premiums and held an 8 percent market share in Turkey's non-life insurance market. Almost 50 percent of Aksigorta business comes from motor insurance, followed by fire and health insurance at 18 percent and 14 percent respectively.
Aksigorta operates through two distribution channels in Turkey - a network of agencies and a bancassurance link with Akbank - one of Turkey's largest banks, which is controlled by current owners Sabanci. Part of Ageas' new agreement with Sabanci, will see Akbank extend its bancassurance deal with Aksigorta for 15 years, through an established network of 913 branches and 8 million customers in Turkey.
The potential in Turkey's growing non-life insurance sector comes as the economy expands, alongside the requirement for motorists to take-out a minimum third party insurance cover and, since 2009, a mandatory requirement to have a policy to cover protection against the high risk of earthquakes in the country.
The transaction is Ageas' second major venture outside its core home market in Belgium since re-banding from Fortis, with the Aksigorta deal following the US$351 million (€257 million) acquisition of the UK's Kwik-Fit insurance business in 2010.
Both the Kwik-Fit insurance deal and the current Aksigorta proposal have been carried out by Ageas to expand its position in markets which offer the insurer new avenues for premium growth following the rebranding which took place in 2010.
Ageas is the insurance arm left after the Fortis group was taken over by France's BNP Paribas - after a short period of nationalization - following the global financial crisis in 2008. Prior to the break-up, Ageas was present in the Turkish life insurance market through Fortis, but subsequently exited operations in Turkey when the group was dissolved.
Ageas CEO, Bart De Smet said: "I welcome this partnership as an important step in the execution of our strategy as announced at the end of 2009. Turkey is an exciting and fast-developing country with attractive growth potential in non-life insurance and currently low insurance penetration levels. I am very pleased that we can access this growth market together with Sabanci, a well-reputed and leading group with extensive experience in partnerships."
The deal between Ageas and Sabanci comes as both partners drive to augment their position in a developing insurance market, with huge potential for new premium growth through Turkey's population of 75 million people and an expanding economy. However, although the insurance sector in Turkey remains generally untapped, some analysts believe the potential for growth of profitable business is limited as competition increases in Turkey's non-life insurance sector.
"After a rigorous selection process spanning the last several months, we have concluded that Ageas, one of Europe's leading insurance groups, is the best partner to help us realise our aim of making Aksigorta the leading non-life insurance company in Turkey. We have set new, demanding performance targets for Aksigorta and we are better positioned to achieve them with Ageas as our partner." said Sabanci Holding CEO Zafer Kurtul on the Ageas agreement.
As global financial markets return to stability, insurers have been looking for opportunities to reposition in international markets and secure future premium growth. Turkey has emerged as a country with particularly good potential for growth in the Euro region, with foreign insurers being attracted to the Turkish insurance market where market penetration has been historically low.
The deal is still subject to regulatory approval and is expected to be completed in the second quarter of 2011.
Ageas will enter an insurance market which includes some of Europe's largest insurers including AXA, Aegon, Allianz, Aviva, and Ergo. Some of the world's leading insurers have been attracted to Turkey because of its young and expanding population, its dynamic economy and its strategic role in global terms reflecting its location at the crossroads of Europe and Asia.
The Belgium-based insurer generated a US$211 million (€153 million) third-quarter net profit in 2010
, driven by its operations in Asia which offset results in Ageas' domestic market in Belgium where activity remains relatively static in line with the rest of Western Europe.
Insurance Companies Mentioned:
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 geographic 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.
Aksigorta was founded in 1960 operating in the Turkish insurance industry. The company provides fire, transportation, accident, machine assembly, hail, life, animal life, and health insurance in Turkey.