IAG: Asia Pacific expansion coming thick and fast

Reported by Mike King, The Motley Fool.
Wednesday, April 18, 2012
Topics in this article:
Asx,Australia And New Zealand Banking,Insurance Australia,Qbe Insurance

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Insurance Australia Group Limited (ASX: IAG) has announced that it has entered the Vietnamese insurance market, with the acquisition of 30 per cent of Vietnam based AAA Assurance Corporation (AAA).  The investment is less than $20m, but marks another step in IAG’s strategy to expand into Asia.

The deal is subject to regulatory approval and is expected to be completed by June 2012.

IAG’s Managing Director and CEO, Mr Mike Wilkins, said

“Our goal is for our business in Asia to represent 10 per cent of IAG’s Gross Written Premium on a proportional basis by 2016. We have previously indicated that we were targeting six markets in the region: India, China, Thailand and Malaysia, where we already have a presence, as well as Vietnam and Indonesia.

This investment will allow us to enter Vietnam’s general insurance market, which has been growing at a compound rate of 25% per annum since 2009. With a low level of insurance penetration, the market is expected to continue growing at similar levels for another three to five years”.

IAG have an option to increase its shareholding to 49 per cent, subject to regulatory approval.

Malaysian expansion

IAG’s Vietnamese deal comes on top of its announcement on 5th April 2012 that its 49 per cent owned Malaysian associate AmG Insurance Berhad (AmG), has received regulatory approval for a possible acquisition of Kurnia Insurans (Malaysia) Berhad (Kurnia), a general insurance business.

The purchase price is Rm1.55billion (approximately A$480m), of which IAG will contribute 49 per cent (A$235m). The acquisition will make AmG the largest general insurer in Malaysia, with a 13 per cent market share of the general insurance market, and number one in motor insurance.

New Zealand growth

The same day, IAG announced that it had completed the acquisition of New Zealand’s AMI insurance business, following Reserve Bank of New Zealand approvals. You can read more about this transaction in this article.

Into China

On the 12th April, IAG announced that it had taken its first step into China, when it completed its acquisition of 20 per cent of Bohai Property Insurance Company Limited (Bohai). The deal was originally announced in August 2011, for a price of RMB687.5m (approximately A$100m). Bohai is predominantly a motor insurer, with around 265 provincial and city based branches.

The Foolish bottom line

Like Australia and New Zealand Banking Group’s (ASX: ANZ) Asian expedition and QBE Insurance Group’s (ASX: QBE) recent transaction, only time will tell whether IAG’s Asian expansion is successful, but Asia appears to be one of the few places on earth not currently in economic turmoil. The expansion into Asia seems logical – if not risk-free.

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More reading

Motley Fool contributor Mike King doesn’t own shares in IAG. The Motley Fool’s purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Click here to be enlightened by The Motley Fool’s disclosure policy.

21/04/2014 11:10Sydney, Australia. 21 April,2014
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