Insurance Australia Group to Acquire Stake in China’s Bohai Insurance

Insurance Australia Group Limited (IAG) announced it has agreed to acquire a 20 percent strategic interest in China’s Bohai Property Insurance Pty Ltd., a general insurer

IAG said it would pay RMB687.5 million (approximately A$100 million [US$104.3 million]) for the acquisition. Under the terms of the agreement, IAG will have board representation as well as senior management roles in key technical areas. Completion is expected in early calendar 2012 and remains subject to regulatory approval.

IAG’s Managing Director and CEO, Mike Wilkins, described the acquisition as an important step in the Group’s strategy to boost its Asian footprint. He stated: “Bohai Insurance is an attractive partner and provides an exciting opportunity for us to meet our long held ambition of entering China’s general insurance market.

“Once the partnership is complete, IAG will have a foothold in the two fastest growing economies in Asia and most populous countries in the world – China and India,” he continued. “Together with our established businesses in Malaysia and Thailand, this puts the Group’s Asia division well on track to meet its target of contributing 10 percent of IAG’s gross written premium by 2016, on a proportional basis.”

CEO of IAG’s Asia division, Justin Breheny, explained that “Bohai Insurance is predominantly a motor insurer, selling directly to customers through around 265 provincial and city-based branches and a network of agents.” It was established in 2005 and has built a “strong culture of underwriting control and risk management.” Bohai’s revenue “has grown steadily, with annualized gross written premium currently in excess of A$200 million [US$208.6 million].”

Bohai’s headquarters are in Tianjin, “at the center of the pan-Bohai region in China’s North East, an area prioritized for new development initiatives,” Breheny continued. “This region generates around 30 percent of China’s national gross domestic product, and a similar proportion of China’s annual insurance premium pool of approximately US$60 billion. Bohai Insurance’s disciplined approach, strategic focus, brand and distribution network will provide us with a solid platform for growth and longer term profitability in China.”

In addition Breheny pointed out that one of IAG’s priorities has been to enter the Chinese general insurance market. He noted that “China’s GDP grew in excess of 10 percent in 2010 and is forecast to grow 9 percent per annum for at least the next two years, and we expect the general insurance market to grow 10–15 percent per annum over the next decade. This strong growth outlook is supported by low penetration rates, a large population, growing per capita income and asset accumulation. Already it is the largest individual market for new vehicle sales, exceeding the US.”
Source: Insurance Australia Group

Topics Mergers & Acquisitions USA China Market Australia