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IAG on track to realise significant growth in Asia

IAG underwrites around A$8 billion of insurance premiums each year

July 10, 2012 4:13 IST | India Infoline News Service
Insurance Australia Group (IAG) is increasing its operations in Asia including India to generate 10% of its business from the region within four years.

Speaking at a market briefing on 10th July in Sydney, IAG managing director and CEO Mike Wilkins, said “There was a significant growth opportunity in Asia with middle class consumption (ex Japan) expected to increase by nearly 200%, to around US$12 trillion by 2020.” He further added, “IAG is well positioned to benefit from the accompanying trend of increased asset ownership in markets where insurance penetration is currently low, resulting in long-term profitable growth close to home.”

“The Asian opportunity is here and now. Over the past couple of years, we’ve quietly gone about our Asian strategy and are now getting real traction. We are entering an exciting phase of our Asian ambitions as we shift from a market entry focus to one of driving operational performance from our enlarged regional presence,” Mr Wilkins said.

Around $500 million will be invested in established businesses in Thailand (safety insurance) and Malaysia (AmG and Kurnia) that are already delivering strong double digit returns, rising to an ROE of more than 15% by FY17.
 
IAG has further invested $220 million in the emerging markets of India (SBI General), China (Bohai Insurance) and Vietnam (AAA Assurance). While these businesses are currently in the development phase, they are expected to generate an ROE of more than 15% by FY17. The ROE expectations are before allocation of regional development costs which are expected to peak at approximately $25 million (pre-tax) in FY13.

IAG’s CEO of Asia, Justin Breheny, said IAG’s local business model was fundamental to its success in Asia. He identified three key elements to this model: Effective market entry, local partnering and capability transfer.

Headquartered in Sydney, the company underwrites around A$8 billion of insurance premiums each year and employs around 13,000 people. Through acquisitions and investments, IAG now has established businesses in Thailand and Malaysia, and is building its presence in India, China and Vietnam.

In India, IAG has a joint venture with State Bank of India, SBI General Insurance Company Ltd. SBI owns 74% of the total capital and IAG the remaining 26%.

SBI General is in the process of setting up a unique multi-distribution model encompassing bancassurance, agency, broking & retail direct channels. Bancassurance will be the major channel during the initial years, according to the information on the joint venture’s website.

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