Allianz SE, Europe’s biggest insurer, bought Turkey’s Yapi Kredi Sigorta AS for 684 million euros ($879 million), seeking to expand in faster-growing emerging markets as the debt crisis abated.
Allianz agreed to buy the company from Turkish bank Yapi & Kredi Bankasi AS, it said in an e-mailed statement today. Munich-based Allianz said the deal will make it the country’s largest insurer and will provide access to Yapi & Kredi’s 928 banking branches for its products over the next 15 years.
The world’s insurance firms are competing for premiums in developing economies as the expansion in traditional markets slows. Turkey is forecast by the Organization for Economic Cooperation and Development to grow 4.1 percent this year as the euro area contracts 0.1 percent. Paris-based Axa SA agreed last year to purchase HSBC Holdings Plc’s general insurance businesses in Mexico, Hong Kong and Singapore.
“We’ve now seen Allianz and Axa dip their toes into small bolt-on deals in emerging markets in recent months, suggesting that the larger conglomerates are becoming more comfortable that the worst of the crisis is over,” Shailesh Raikundlia, an analyst at Espirito Santo Investment Bank in London, said in an e-mailed report to clients. “Allianz’s model is very underweight emerging markets.”
The agreement means Allianz will displace Axa as Turkey’s biggest insurance company in an industry where premiums grew 16 percent to 17.1 billion liras ($9.4 billion) in 2012, according to figures published by the Insurance Association of Turkey.
European insurers including Allianz are benefiting from a recovery in financial markets and higher prices for some of their products. Net income at Allianz was 5.49 billion euros in 2012, almost double the 2.8 billion euros it reported for 2011.
“Turkey is one of the fastest growing insurance markets worldwide,” Allianz board member Oliver Baete said. The transaction “is a unique opportunity to move into a market-leading position in one of Europe’s key growth markets,” he said.
Allianz fell 3.1 percent to 105 euros at 1:21 p.m. in Frankfurt. The main Stoxx 600 Insurance index dropped 1.9 percent.
Yapi Kredi Sigorta slumped 18 percent to 17.60 liras in Istanbul, the biggest decline in more than a decade. The deal had valued the 93.9 percent stake that Allianz is buying at 23 percent below yesterday’s share price-based valuation of $1.14 billion. Allianz said it will conduct a mandatory offer for remaining stock after the transaction is complete.
Allianz, which ranked third among insurers in Turkey last year with a 7.3 percent market share, will increase its coverage to about 15 percent through the acquisition, according to data from the Insurance Association of Turkey. Axa controlled 12 percent of the market and local firm Anadolu Anonim Turk Sigorta Sirketi 11 percent, the data showed.
The agreement also means Allianz acquires 80 percent of life insurance and pensions provider Yapi Kredi Emeklilik AS, with Yapi & Kredi Bankasi keeping 20 percent, Allianz said.
Turkey’s population is expected to become larger than Germany’s by the end of 2014, according to the U.S. Census Bureau. The 99 percent-Muslim nation may have almost 82 million people, overtaking Germany’s 81 million, the bureau said.
The government is also increasing cash incentives for citizens to take out private pensions, introducing legislation this year that raised its contribution.
Yapi Kredi Sigorta increased its premiums 26 percent to 1.23 billion liras last year. Health insurance accounted for 507 million liras, making it the market leader with a 23 percent share.
Allianz offers health, property insurance, life insurance and pensions in Turkey with primary business lines being auto and health, according to its annual report.
The German firm’s share of health insurance premiums will expand to more than 38 percent after the acquisition, according to the insurance association’s figures. Acibadem Saglik & Hayat ranked second last year with 10 percent, the data showed.
The agreement to buy Yapi Kredi Sigorta requires the approval of Turkey’s antitrust regulator.