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Europe’s biggest insurer now wants more of the Asian market. Allianz has made a $1.6bn bet to take a bigger share in the region, making an offer to acquire at least 51 per cent of leading Singapore insurer Income Insurance. In doing so, it has chosen a good way to get into a rather unappealing market.
Asia-Pacific is a small fraction of Allianz’s total business. But it is an important growth market, accounting for nearly €7.7bn in total business volume across its property-casualty and life and health businesses last year. The region was one of the main contributors to the group’s strong operating profit figures last year. Gains from its protection and health business in Asia Pacific were especially strong.
And Singapore is a safe bet for foreign insurance companies looking for expansion. Making inroads into markets such as China and Japan, where local companies dominate, is a tall task. But in Singapore, foreign companies including Prudential, Manulife and AIA have grown to become some of the top insurers by market share.
It is also a well-developed market. Singapore’s general insurance sector received $7.6bn in gross written premiums last year. Regulators recommend that Singaporeans allocate up to 15 per cent of their salary after tax on insurance protection which are typically combined with savings products. Meanwhile, citizens aged 65 and above account for nearly a fifth of the population, meaning growing demand for health insurance.
But those features also mean that competition in the local market is fierce. There are over 120 licensed insurers and reinsurers in Singapore. Around 70 per cent of local residents are already covered with optional health plans provided by private insurance companies. Life insurance sales growth has been slowing, with a 4 per cent decline in total weighted new business premiums las year. The market is also highly regulated, with tough capital requirements to meet.
Shares of Allianz are up a quarter in the past year, outperforming Asian peers such as Hong Kong-based AIA. The best part of the latest deal with Income Insurance, which has about 1.7mn customers in Singapore, is that it allows Allianz to skip the queue and take a leading position in segments including property-casualty, health, and life. It is a low risk — if unexciting — way to diversify its business beyond Europe and the US.