Zurich Insurance Group AG (ZURN), the biggest Swiss insurer, is seeking more licenses to expand in Chinese cities as part of a strategy to grow in emerging markets, chief executive officer Martin Senn said.
Mergers and acquisitions provide an additional channel for growth, yet the Zurich-based company will not participate in bidding wars for Asian insurance assets, Senn said today in an interview with Bloomberg Television in Hong Kong. In addition to China, Zurich Insurance seeks to become “a leading insurer” in Malaysia and is looking to expand in Indonesia, he said.
When there is “an opportunity on the M&A front, we have to look at it,” Senn said. “We have to be very disciplined.”
Zurich Insurance is targeting emerging markets such as Latin America, Middle East, Africa and the Asia-Pacific region to help attain a business operating profit after-tax return on equity of 16 percent over the long term. The company last year bought 51 percent of Banco Santander SA (SAN)’s Latin America insurance business and Malaysian Assurance Alliance Bhd.
“We are seeing a decline in premium income in Europe and it is fair to say that growth prospects in Europe are limited,” the insurer’s Chief Financial Officer Pierre Wauthier said in an interview in June. “There is less of a need in Latin America than in certain countries in Asia Pacific, because we already have a pretty strong position after the Santander transaction.”
There is a “big shift” in life insurance with emerging markets expected to contribute more than 40 percent of new business value by the end of this year, Wauthier said at the time. Increasing demand from companies in Asia will help drive growth in general insurance, he added.
Zurich Insurance earlier this month reported a 19 percent decline in second-quarter profit, after a gain in the year- earlier period from the sale of a stake in New China Life Insurance Co. (1336) and lower investment income this year.
The environment in the Euro zone will remain challenging for quite some time and interest rates may stay low, Senn said today. Zurich Insurance has adjusted its business model and strategy according to the greater “tail risk”, he added.
It’s too early to put a number on the damages from the typhoons in Asia this year and Hurricane Isaac in the U.S., Senn said, adding that he doesn’t expect them to have a material impact on the insurer.
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