Allianz Maps Out Asia/Pacific Strategic Growth

Allianz SE is looking at China and India as strategic markets to deliver new business growth for both life and nonlife insurance in the Asia/Pacific region.

"We are convinced that Asia will remain a growth region and our own economists have forecast a 7.5% growth in the Asia/Pacific region with insurance penetration still being low in most countries," said Bruce Bowers, chief executive of Allianz Asia Pacific.

The German insurance group achieved a 31% rise in gross written premiums to 5.6 billion euros (US$7.1 billion) in the region for the first half of 2010. Despite widely diverse markets conditions, Bowers said Allianz was able to achieve "organic growth in almost all [Asia/Pacific] markets."

India and China's infrastructure investments are "huge," contributing to new business development in industrial and commercial insurance lines, according to Bowers. Also, Indonesia shows positive developments in both life and nonlife business.

"In all these markets we see a big potential to extend our sales and distribution, but also to develop new products," said Bowers. In this first half, Allianz reported a 17% rise in operating profit to 313 million euros in the Asia/Pacific, where it has 22 million customers. Globally, the group posted a 21.7% increase in operating profit to 3.9 billion euros.

Leading With Life

Life insurance is a major driver for the group's business growth in the region. Life premiums in the region rose 40% to 4.1 billion euros in the first half, according to Allianz's financial statement.

Taiwan contributed the largest life business in the region, with a 42% rise to 1.1 billion euros in premiums. Japan and Indonesia also achieved strong growth, said Allianz. The growth has been driven by strengthening distribution across the region.

In Taiwan, Bowers said there are always "essential" customer requirements for protection and savings. The insurer's strategy is to grow market share by selling products that are sustainable. After the financial crisis, Bowers said Allianz managed to boost its ranking from 10th to fourth in Taiwan.

In the past two years, several foreign insurers including ING Groep NV, Aegon NV and Prudential plc. withdrew their life businesses from Taiwan. The divestitures of American International Group Inc.'s Nan Shan Life Insurance Co. Ltd. and MetLife Inc.'s life unit are awaiting regulatory approval.

In product development, Taiwan's customers are attracted to unit-linked insurance offered with a mix of life protection and a range of investment options for long-term savings. Allianz launched some new products to provide stable returns and risk management in Taiwan, according to Bowers.

Pension and life protection products offer good growth potential in the Asia/Pacific region, given the demographic changes of an aging population. Health insurance is also seeing growth opportunities. However, Bowers noted the basic conditions of national law and regulation have to be considered carefully.

In Japan, Bowers said "we've seen markets for variable annuities recovering compared to last year." Restoring customers' confidence in variable annuities has supported business growth. Gross written premiums for Japan's life insurance increased to 532 million euros in the first half this year, up from 57 million euros a year earlier.

Several local and foreign insurers stopped selling variable annuity products in the wake of financial crisis. However, Bowers said Allianz "has never stopped selling variable annuities in Japan." One product was replaced with a new generation as a normal procedure for adaptation.

Nonlife Openings

In the nonlife sector, India and Malaysia posted the strongest premium growth of 28% and 14%, respectively, in the region for Allianz. The region's nonlife premiums increased 11% to 1.6 billion euros in this first half. The insurer's combined ratio was steady at 97.

India has experienced a boost in motor and property insurance, supported by overall economic growth and domestic consumption, said Bowers. Increasing motor vehicle sale and infrastructure investments are boosting further growth in nonlife business. Also, India's fast-developing services sector is expected to drive demand for liability insurance.

In Asia, a lot of nonlife customers start with a simple entry-level policy and stay with the insurer for other income and insurance needs. "India and Malaysia are good examples" driven by growing motor business, noted Bowers.

With operations in both mature and emerging markets, the insurer has to strike a balance for sustainability. Bowers said "any growth that is not profitable will not be lasting." Currently, Allianz is reshaping its business model to improve customer focus and company efficiency.

The strategic difference for mature and emerging markets is always the customers, said Bowers. "To open up a dialogue with the customer is sometimes easier in emerging market, but rightly, so customers are challenging us in both mature and emerging markets," he said.

"Any new business will only be considered where we can boost growth and profits," said Bowers. Products innovation and multichannel distribution are the strategic driver for the Asia/Pacific region.

Listen to the full interview with Bruce Bowers at http://www.ambest.com/media/media.asp?RC=177150

(By Iris Lai, Hong Kong bureau manager: [email protected])