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05.15.2015

Insurance Industry Merger & Acquisition Appetite in the Asian Region

Hui Yun Boo - Managing Director, Asia/Pacific - Chief Executive Officer, Singapore

Asian countries, such as Malaysia, Indonesia and Thailand, have experienced rapid growth in just the past few years.  Burgeoning economies, healthy GDP and an unprecedented surge in the middle class population segment are amongst a confluence of factors that will further fuel insurance coverage demand and broaden market penetration. Slow growth in domestic markets and the soft pricing environment are driving the larger insurance companies into emerging economies in their search to uncover opportunities in high growth markets across the region.  Asia offers an attractive value proposition for insurers with an appetite for greater diversification in new business line sectors and distribution channels.

Recent Regulatory Reforms Create New Opportunities

Recent insurance regulatory reforms in countries, such as China, Indonesia and India, have also created newfound M&A opportunities. Since June 1, 2014, Chinese-based foreign insurers, as well as domestic insurers, have had the ability to acquire shares in more than one company operating in competing lines of business.  The new rules also permit the investor to deploy external debt to fund up to 50 percent of the overall purchase price, subject to approval from the China Insurance Regulatory Commission (CIRC).  The recent landmark insurance law enacted in India allows foreign insurers to invest up to 49 percent in a local Indian insurance company.  The outlook is for a much anticipated active M&A market, driven by insurance companies hungry to get a slice of the growing Indian insurance pie.

Local Challenges Do Not Inhibit Insurance Industry Appetite

Execution of successful M&A transactions presents challenges. In emerging markets, insurance data tends to be limited and local insurance companies have less developed systems and technological infrastructures. Reliable information, therefore, may not be readily accessible to ensure proper due diligence. Local cultures can be deeply ingrained, thereby blocking effective organizational integration and raising compliance issues. In some countries, regulatory hurdles can present obstacles that prohibit transactional closure.

Despite the challenges, insurance industry appetite in Asia has not dissipated. Insurance M&A pursuits will proliferate as large insurance companies and third-party capital chase regional expansion opportunities. It is increasingly challenging to find value proposition targets and with demands not abating anytime soon, upward price pressures will continue.

SideBar Chart: Recent transaction in the Asia Pacific Region.

Acquirer

Target Companies

Country of Target Companies

% acquired

Mitsui Sumitomo Insurance

PT Asuransi Jiwa Sinarmas

Indonesia

50%

The Dai-Ichi Life

Tower Australia

Australia

71%

MSIG Insurance

Hong Leong , Non Life Business

Malaysia

100%

Nippon Life

Reliance Life

India

26%

ChinaTrust Financial Holdings

Metlife Taiwan Insurance

Taiwan

100%

Sanlam

Pacific & Orient Insurance Company

Malaysia

49%

ACE

Siam Commercial Samaggi Insurance PCL

Thailand

60.9%

Sanlam

Pacific & Orient Insurance Company

Malaysia

49%


About Ironshore

Ironshore provides broker-sourced specialty property and casualty insurance coverages for varying risks on a global basis through its multiple international platforms. The Ironshore group of companies is rated A (Excellent) by A.M.Best with a Financial Size Category of Class XIV. Ironshore’s Pembroke Syndicate 4000 operates within Lloyd’s where the market rating is A (Excellent) by A.M. Best and A+ (Strong) from both Standard & Poor’s and Fitch. For more information, please visit: www.ironshore.com