European News

08, Mar 2010.

Insurers including Europe’s Allianz SE and Axa SA may seek acquisitions to boost sales and spread risk after Prudential Plc agreed to buy American International Group Inc. Asian unit, consulting firm Accenture Ltd. said.

“We expect an ongoing consolidation of the global insurance sector over the next 12 months as companies seek to diversify risks, grow premium income and cut costs by exploiting synergies,” Thomas Meyer, Zurich-based managing director for Accenture’s insurance practice in Europe, Africa and Latin America, said in a telephone interview.

Prudential, the U.K.’s biggest insurer, agreed this week to pay $35.5 billion in cash and stock for Hong Kong-based AIA Group Ltd. MetLife Inc., the largest U.S. life insurer, may reach an agreement as early as this weekend to buy AIG’s American Life Insurance Co. unit, a person with knowledge of the matter said. Allianz and Axa, Europe’s biggest insurers, have both said they aim to expand in emerging markets.

“Prudential may have to sell some assets in Asia during the AIA integration, which might lead to some interesting opportunities,” Meyer said. “While Asia is clearly in the focus following Prudential’s agreement to buy AIA, countries such as Brazil, Russia or Nigeria and Kenya might be offering interesting opportunities as well, even more so as they typically carry cheaper valuations.”

Local Russian insurers can be bought for the equivalent of their annual revenue from premiums, or less, compared with four times before the global financial crisis hit Russia in September 2008, Andrei Dubinin, head of Aviva Plc’s Russian unit said in an interview today.

China, India

“Lowering costs through the realization of synergies is a major challenge in the Asia insurance market,” Meyer said. “Insurance operations in countries such as China or India are highly heterogeneous by nature as most of them rely on joint ventures, bancassurance or other forms of partnerships.”

Prudential Chief Executive Officer Tidjane Thiam said on March 1 that the insurer intends to keep its stake in a joint venture with China’s Citic Group. In India, where Prudential and AIG have separate joint ventures, regulators have told the company it can’t have two licenses, Thiam said.

Allianz, Europe’s largest insurer, has a joint venture to sell life insurance in India with Pune-based motorcycle maker Bajaj Auto Ltd. In China, Allianz sells insurance through various channels, including a cooperation with Industrial & Commercial Bank of China Ltd.

“Another major challenge in emerging markets, especially in Asia, will be managing and training local sales forces, which can involve a mass of 600,000 agents,” Accenture’s Meyer said. “While many customers are still inexperienced in buying insurance, they will catch up relatively fast thanks to the rapid emergence of modern communication services and offerings such as insurance comparison services on the Internet.”