Increased Insurer Interest in India and China

Posted on Jun 24, 2011 by Sergio Ulloa (G+)

Insurance Australia Group (IAG), New Zealand's largest general insurer with over one million customers, is focusing on a renewed expansion effort throughout Australia despite the recent losses associated with the devastating Christchurch earthquake and consequential aftershocks.
Last week in a press release, IAG managing director and CEO, Mike Wilkins, announced potential cost contingency plans when he revealed that the company had plans to increase premiums by up to 5 percent in New Zealand. While financially struggling competitor AMI may have to turn to a government bail-out in order to fulfill the policies of its 50,000 Christchurch customers, IAG is indeed gaining financial ground with the recent purchase of HBF's Nonlife Insurance Business by CGU Insurance, a part of IAG. As Western Australia's general insurance sector has grown to include more overseas, Eastern-state based, and online insurance companies, HBF, an Australian, non-profit health fund company, was struggling as a small, local company opposite the larger insurance giants. Instead of manufacturing insurance products, HBF will now focus on distribution. It is believed that the sale will transition smoothly, as most of HBF's general insurance employees have been promised jobs in CGU's Perth offices.
In addition to its renewed expansion efforts in Australia, IAG has also proclaimed its interest in Asia with expected expansions into China and India, following on the heels of companies such as Cigna Incorporated, which was recently granted a license for business in the Singapore health insurance market. Already present in India, with a 26 percent share of the Indian sector of the business that it owns with the State Bank of India, IAG hopes to increase its Indian footprint further by setting their sights on the equivalent of US$1 billion of gross written premiums by 2016. IAG also announced that the company has made "substantial progress" in discussions with a possible joint venture partner in China. In a statement by CEO Wilkins, he said that the company hopes that their efforts in Asia will contribute to "10 percent of the Group's gross written premium by 2016."
Another New Zealand insurance company has revealed plans for a major expansion this week; the country's top rural insurer, FMG, has taken over Quadrant Insurance Group, producers of equine and livestock related insurance. A few hours after the announcement, FMG chairman Greg Gent referenced China and India's growing populations in a press conference, saying that he thought the company had "a lot to look forward to" as "those developing nations are getting wealthier quickly and they need feeding". New Zealand will surely profit from the high commodity prices that are on the rise throughout the agricultural market.
California-based company EZ-Cap also announced international growth this week. EZ-Cap is the top producer of health plan administration software, has "a strategic approach that integrates and automates all healthcare business processes for optimal efficiency" and is used to "streamline data exchange and transaction processing." EZ-Cap will be partnering with GM-Medicare Management Ltd, a medical insurance information management business based in China, which will begin using the EZ-Cap technology in Shanghai. James P. Mason, CEO of Syner-Med, the US-based, joint venture partner of China's GM Medicare Management, said that together, they are "able to offer a combination of services and support that are imperative to establishing a high standard of healthcare management throughout China." The company hopes to continue to expand into more areas in China and to "help the Chinese worker to access the system fairly and appropriately."
Meanwhile, at the International Insurance Society's Annual Seminar in Toronto, Canada yesterday, directors from major companies such as Goldman Sachs, Morgan Stanley, and Deloitte Consulting USA, debated over the importance of mergers and acquisitions in today's economy, and the effects on the companies after the merger or acquisition. Greg Locraft, executive director of Morgan Stanley, believes that money for a merger or acquisition would be better spent elsewhere, such as "retooling for organic growth, retiring debt, or buying back shares." While Locraft (using historical stock data as evidence) pronounced that the stock performance of acquiring companies after the purchase was "abysmal." John O'Connor, President and CEO of Endurance Services USA, which has "US$8.4 billion in assets and US$2.4 billion in shareholders' equity," has grown greatly due to M&A, with the acquisitions XL Surety, LaSalle Re, and Hartford Re.

Insurance Companies Mentioned

Insurance Australia Group

Insurance Australia Group (IAG) provides personal and corporate insurance policies under several different brands, including NRMA Insurance, CGU, SGIC, SGIO and Swann Insurance. In addition to being the largest general insurer for Australia and New Zealand, IAG is expanding out of its home markets and looking to Asia.
FMG is New Zealand's leading rural insurer, providing not only insurance, but also advice for those partaking in a rural lifestyle, whether it be for business or pleasure. FMG offers rural insurance for dairy, beef, and sheep farming, as well as domestic insurance for vehicles, lifestyle insurance, and business insurance, along with helpful risk assessment strategies.

HBF

HBF is Western Australia's largest general insurance company, offering vehicle, home, and travel insurance. A non-profit company, HBF also contributes greatly to its community with events such as the HBF Run for a Reason and the HBF Freeway Bike Hike for Asthma.

Quadrant Insurance

Quadrant Insurance is the top provider of equine and livestock related insurance in New Zealand, offering protective packages for business, income, and leisure.

CIGNA

CIGNA Health Insurance is a global health service company dedicated to helping people improve their health, well being and sense of security. CIGNA Corporation's operating subsidiaries are committed to providing medical, dental, behavioral health, pharmacy and vision care benefits, as well as group life, accident and disability insurance, for 46 million people throughout the United States and in other communities around the world.