Australian Insurers' Asian Expansion Gains Traction
SYDNEY -- Insurance Australia Group (ASX: IAG.AX) informed analysts today that the company has now invested AU$720 million in five Asian countries, including AU$500 million in established businesses in Thailand and Malaysia and AU$220 million building its presence in India, China, and Vietnam. Return on equity in all five countries is expected to be more than 15% by 2017. IAG is also investigating opportunities in Indonesia.
This is all part of IAG's plan to generate 10% or more of its gross written premium from Asia by 2016.
Middle-class consumption in Asia (excluding Japan) is expected to increase by nearly 200% to around $12 trillion by 2020, according to CEO Mike Wilkins. He also said plans were gaining traction as the company "shifts from a market entry focus to one of driving operational performance from our enlarged regional presence."
IAG has also said that it wants to accelerate growth in Australia and New Zealand and restore profitability to its U.K. operations.
QBE Insurance Group (ASX: QBE.AX) yesterday advised that it completed in Hong Kong the acquisition of Hang Seng General insurance and 10-year bancassurance agreements. Under the agreements, QBE will become the exclusive provider and underwriter of bancassurance general insurance products to Hang Seng Bank's customers in Hong Kong and mainland China.
As for other major Australian insurers, Suncorp Group (ASX: SUN.AX) announced in May that it was concentrating on simplifying its business and saving on future costs by replacing legacy infrastructure with modern platforms and systems. The company is also adopting an organic growth strategy, focusing purely on Australia and New Zealand.
AMP Limited (ASX: AMP.AX), on the other hand, is focusing on its wealth management following its takeover of the Australian and New Zealand businesses of AXA Asia Pacific Holdings. Wealth management generated 31% of earnings in 2011, with just 25% coming from insurance.
Suncorp is the only major insurer predominantly concentrating on its banking and insurance business in Australia and New Zealand, while IAG and QBE expand globally and AMP focuses on its primary business of wealth management. IAG shareholders will be hoping the Asian strategy doesn't turn out like the company's U.K. expansion under the former CEO.
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