Allianz Eyes Multi-Distribution Network Development in Asia

Although government regulations in Asia have slowed down foreign insurers' business expansion activities, Allianz S.E. [85014] remains open to acquisitions with the aim of strengthening its agency and bancassurance networks across the region.

This year the German insurer marks 10 years of presence in China, Taiwan and South Korea. The group said its continuing expansion of distribution channels in these countries together with the regional emerging markets in Indonesia, Malaysia and Thailand show its "long-term commitment in Asia."

"One of our priorities in Asia is to deliver the best service possible. We need to make our processes, products and services even more customer focused, while keeping expenses tightly under control. To achieve this, we consistently optimize our operations in Asia," said Bruce Bowers, chief executive officer of Allianz Asia Pacific.

Selective Growth

Bowers told BestWeek Asia/Pacific that Allianz's growth market strategy in general "focuses on organic profitable growth." The company also monitors the various markets closely and evaluates possibilities.

"We do not rule out selective acquisitions in Asia," emphasized Bowers.

Currently, the Asia-Pacific region comprises Allianz entities in Australia, China, Hong Kong, Indonesia, Japan, Laos, Malaysia, Singapore (including Brunei), South Korea, Taiwan and Thailand, with total life agency manpower reaching around 60,000 people by the end of June 2009, up 32% within a year.

However, among these 11 countries, Vietnam and the Philippines are excluded. Allianz sold its general insurance unit in Vietnam to Australia's QBE Insurance Group [85434] in 2006 because the insurer wanted to restructure operations and focus on more effective markets.

According to Swiss Re's annual worldwide market report, gross written premiums for Philippines and Vietnam were US$2.3 billion and US$1.3 billion, respectively, in 2008. Bowers said that although both countries are growth markets, Allianz concluded that "both are still in their infancy."

On top of its organic growth, the insurer is open to purchase assets across the region. However, favorable government policies for domestic companies have become hurdles to foreign buyers.

"We see that asking prices for takeovers are still very high for the moment. One reason might be that government-provided financial support to some would-be sellers was dampening the need to spin-off assets," explained Bowers.

"Overall we feel very comfortable with the position we have attained in Asia nowadays," he said. "We are not under pressure to make any acquisitions."

Allianz will focus on recruiting more agents and providing professional training in the region.

According to Bowers, "distribution is key, and we believe in multi-distribution." Management will look to strengthen its agency and bancassurance distribution networks across Asia.

Market Opportunities

The global financial crisis has hurt European insurers' Asian efforts, especially in the greater China region. Dutch financial services provider ING Group [85144] and the U.K.-based Prudential plc [85925] have fazed out their Taiwan markets in the first half of 2009, for example.

As a European insurance group, Allianz has not followed its continental counterparts in cutting back on the Asia market in order to unload cost burdens. By contrast, the company will continue to expand in Taiwan, looking to "shoot for a top-five position among life insurers in Taiwan and number one for the unit-linked sector."

"Taiwan is one of the most important life insurance markets for Allianz globally," said Bowers. "The life insurance market in Taiwan was not immune to the economic downturn and we saw a major impact especially in the unit-linked market. But experience tells us, for every crisis there comes an opportunity."

According to Allianz, during the first half of 2009, the company has increased its agency force in Taiwan by about 10% to about 1,600 agents. In August, it also opened a new customer service center in Taiwan to expanding its services in Taipei and recruit new insurance agents.

In addition, the company is now aiming to double the number of its agents to more than 3,000 and will extend the range of its products by offering more traditional protection products, as well as unit-linked products with a principle guarantee.

"All these demonstrate our determination to remain and retain our position as the leading unit-linked company in the market," said Bowers.

Financial Strengthen

In the first half of 2009, Allianz recorded premiums of 4 billion euros (US$5.9 billion) and operating profit of 203 million euros in its growth markets in the Asia-Pacific and Middle East-North Africa (MENA) regions, far below its original medium-term target of 10 billion euros in premium income in these two regions (BestWire, April 7, 2009).

Werner Zedelius, a member of Allianz S.E. mamagement board responsible for growth markets, said that the company is "on course" in the Asia-Pacific region for the first half of 2009, emphasizing that growth markets are "essential" for Allianz's global strategy.

"I am pleased that we are weathering the economic crisis quite well due to our strong financial position and risk management, as well as our focus on clients and distributors," said Zedelius. "With these features, growth markets will further increase its role as a key source of profitable growth for Allianz as a group."

By the end of June, Allianz recorded premiums generated from its property and casualty business totaling 1 billion euros, up 4.2% from last year. Its life insurance segment in the region was affected by the economic crisis, with its premiums at 1.8 billion euros.

For property and casualty sector, the insurer's largest market in Australia contributed 700 million euros to first-half premiums. The combined ratio for Australia improved to 96.8 from 97 the previous year.

The Asia-Pacific region, excluding Australia, contributed premiums of 189 million euros, up 18.4%. Operating profit for the property and casualty business was 12 million euros in the region.

Operations in Malaysia, Indonesia and China noted double-digit growth in their first-half premiums.

The main growth driver for Malaysia is a successful relationship with its younger distribution channels, in particular bancassurance and franchise dealers. For Indonesia, the engineering business grew over 80% as the main contributor, said Allianz.

The first-half combined ratio for the Asia-Pacific region, excluding Australia, improved to 98.6 from 99.7 in 2008.

For the life sector, Allianz noted Taiwan, Malaysia and Thailand performed well. During the period, Taiwan contributed 40% to the region's gross written premiums, up 5% to 719 million euros; while Malaysia's premiums increased by over 25%, mainly due to "the agency force expansion and higher productivity."

Rising product profitably across all operations has pushed up the insurer's operating profit for the Asia-Pacific region to 54 million euros in 2009.

"I am happy to see the P&C business continuing to grow profitably, while in life insurance, I am satisfied with our performance given that the first quarter of 2009 has seen the worst of the economic crisis," commented Bowers.

During the first half, Allianz's MENA region, including Bahrain, Egypt, India, Jordan, Lebanon, Pakistan, Saudi Arabia and Sri Lanka, registered premium income of 1.2 billion euros, down 14% from 2008, due to a decline in the Indian life insurance market.

Premiums generated from life and P&C in the region were 947 million euros and 230 million euros, respectively.

Allianz said its focus on the MENA region will remain on "managing growth with profitability by prudent expense management and underwriting discipline."

(By Rebecca Ng, Hong Kong news editor: [email protected])