Insurers On Merger Path In Global Run For Cover

The Age

Monday May 8, 2006

REBECCA URBAN

GLOBAL insurance companies are preparing to pay big dollars for acquisitions, with new research revealing that the sector is on the verge of a significant era of consolidation.

About 40 per cent of insurers expect to spend up to $US500 million ($A647 million) on acquisitions - and some more than $US3 billion - over the next three years, according to a survey by KPMG.

The survey, titled Run For Cover and involving more than 200 companies, also highlighted the predicament facing businesses wanting to capitalise on the expected growth in the Asia-Pacific region, particularly China and India.

KPMG partner Kevin Chamberlain said there was a clear difference between identifying a high-potential market and being in a position to acquire and establish a presence in that market, with just 19 per cent of insurance companies making acquisitions in that region over the past three years.

"The Asia-Pacific region serves up an unusual predicament for global insurers. On one side they can see the immense potential growth in the area, and on the other there are strict foreign ownership regulations to navigate," he said.

"At the present, the only permissible means of entering markets such as India or China is via joint ventures or alliances with local firms."

Mr Chamberlain said that would change as the financial services industries in those nations were liberated.

While 81 per cent of the companies surveyed said they were actively looking for acquisitions, that hunger was not shared by insurers already operating in the Asia-Pacific region. Seventy nine per cent said organic growth was more important. -- REBECCA URBAN

© 2006 The Age

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