Baloise and Gothaer to merge German
Streamlining broker account
Insurers urged to market
Medical costs set to
Ping An facing mixed
MERGERS AND ACQUISITIONS
In a brief release, composite insurers Switzerland-based Baloise
Group and Germany-based Gothaer Versicherungsbank have announced
that they are in negotiations regarding a strategic partnership and
a merger of their German insurance activities. A letter of intent
has been signed and both companies are conducting due diligence
A merger of the insurers’ German operations would create an insurer
with a total annual premium income of about €5.38 billion ($7.9
billion). This would comprise Gothaer’s 2007 premium income
reported at €3.95 billion and the premium income of Baloise’s two
German units, Basler Versicherungen and Deutscher Ring and
Gothaer’s, reported at CHF1.1 billion ($997 million) and CHF1.2
billion, respectively, in 2006.
ARC, an electronic account reconciliation system launched by
business process specialist CGI Group, has been hailed as the death
knell of paper-based account settlement between insurers and
brokers. ARC was developed in association with two UK insurers,
Norwich Union (NU) and Allianz Insurance.
“ARC is an accounts settlement system developed in consultation
with the industry, for the industry – one that brings efficiency to
the back office and tangible benefits to both sides involved in the
business process, insurers and brokers,” said CGI’s insurance
sector vice-president, Tim Gregory.
According to CGI, up to 50 percent of brokers’ time is spent
reconciling items where the broker and insurer already agree on
what needs to be paid. ARC virtually eliminates this problem,
Feedback on ARC, which has been used by NU and AI in a six-month
pilot project, is positive.
AI’s credit management manager, Tim Bruce, commented: “We have
already seen huge benefits that come from the earlier notification
of queries, resulting in earlier resolution and payment. We are
also benefiting from improved communication with our brokers [and]
spending less time on the phone with brokers discussing
According to market research company Experian Research Services, 55
percent of well-insured US adults go online six or more times a
week and represent a marketing opportunity that the insurance
industry, which has the highest customer acquisition costs of any
US business, cannot ignore.
Ken Treske, president of Vente, an Experian unit specialising in
online lead generation, explained that demand for insurance can be
triggered by a number of specific individual circumstances such as
a new home, baby or dissatisfaction with existing providers.
“Unlike other industries, insurance marketers can rapidly steal
market share by focusing on changes at the individual level. The
best tactic for accomplishing this is via the internet because of
reporting technology which allows you to reach qualified consumers
in real-time,” said Treske.
More bad news on the soaring cost of healthcare has been revealed
by a survey from consultancy Watson Wyatt of 85 insurers in the
Americas, Asia, Europe and Africa that provide medical insurance to
According to Watson Wyatt, 71 percent of respondents expect
higher or significantly higher medical cost trends over the next
five years. Additionally, more than 81 percent reported that
medical costs are eclipsing the general rate of inflation in their
The rising trend in healthcare costs is particularly acute in Asia
where, with the exception of Hong Kong and Singapore, double-digit
increases are predicted by insurers in 2008. The highest predicted
are 19.6 percent in China and 11.5 percent in the Philippines
Double-digit increases are also predicted in South Africa,
where costs are set to rise by 12.6 percent in 2008, and, with the
exception of Brazil and Chile, in Latin America.
European insurers, with the exception of those in Italy where
an 11.3 percent is predicted in 2008, expect single-digit increases
although all European countries expect higher trends over the next
US and Canadian insurers predict increases of 11 percent and
12 percent, respectively, in 2008.
Things could hardly be going better for Ping An, China’s
second-largest life insurer and third-largest general insurer. In
an announcement, Ping An said it estimated its net attributable
earnings in the year to December 2007 would reflect an increase of
more than 100 percent compared with the CNY7.342 billion ($1.02
billion) achieved in 2006. This would follow an 88 percent increase
in attributable earnings reported in 2005.
Ping An noted that 2007’s results reflect improved investment
returns, steady growth in insurance business and the significant
increase in profits contribution from its banking, securities and
other asset management businesses.
Meanwhile, the insurer’s plan to raise $22 billion in additional
capital via a combined share and bond issue has run up against
stiff opposition. In a story in The People’s Daily, a newspaper
regarded as the mouthpiece of the ruling Communist Party, Ping An’s
plan has been denounced as a contributing factor to current equity
The scale of the planned capital-raising exercise sparked rumours
in the UK financial press in January that Ping An could be planning
to acquire a sizeable stake in a UK life insurer. Among those
mentioned was Prudential.
Ping An bought a 4.18 percent stake in Belgian-Netherlands
bancassurer Fortis in late 2007.
Aviva enters Korean life insurance market
Aviva, the UK’s largest insurer, has made its first move into
Korea’s life insurance market via a tie-up with Woori Finance
Holdings, Korea’s third-largest financial services group.
Spearheading the consortium’s drive into Korea’s $72 billion annual
premium income life market is LIG Life Insurance, in which a 91.65
percent stake is to be acquired from Korean general insurer LIG
Insurance and seven individual shareholders for KRW137.17 billion
($145 million). Aviva will have a 40.65 percent stake in LIG
Commenting, Aviva Asia-Pacific CEO Simon Machell said: “South Korea
is the second-largest life insurance market in Asia in terms of
premium income and, with Aviva aiming to significantly increase its
presence in Asia, a foothold in this market is a logical
At present, LIG Life indeed represents a foothold. According to
Aviva, LIG Life’s premium income in the year to 31 March 2007 was
KRW328 billion, a level representing a market share of about 0.5
percent. LIG Life’s total assets on the same date were KRW1.3
Aviva and Woori intend to develop LIG Life’s business distribution
predominantly via Woori’s banking network, which boasts about 15
million customers, and through independent financial advisers.