Allianz Insurance committed to Asia despite economic crisis

By Riyadi

SINGAPORE (JP): Allianz AG, one of the world's largest insurance firms, is still committed to investing in Asia despite the deepening crisis.

Allianz Insurance Management Asia-Pacific's chief executive officer Micheal Diekmann says the company's long-lasting commitment to the region serves as one of its strengths in Asia.

"We definitely share both good times and bad times with you in Asia," Diekmann told a regional media gathering here last week.

Allianz Insurance (Singapore) Pte. Ltd. managing director Udo Krueger added that it would be "foolish to leave this market because next century is still Asia's century".

Despite the crisis, Diekmann said, the encouraging parameters for the region had not changed: high savings rates, a growing middle class (excluding Indonesia), increasing educational needs, the need for old age provisions and the funding of necessary infrastructure.

The companies that will succeed in such challenging times are those that are forward looking and have the ability to adapt business strategies in response to market conditions. Allianz, Diekmann said, is such a company.

Long-lasting commitment alone will not help companies succeed in these challenging times. Allianz also has a strong presence in the region, with enough reinsurance capacity and know-how in all lines of insurance businesses.

The relationship between Allianz and the Asia-Pacific dates back to the first decade of this century. In 1917, Allianz started selling fire and marine insurance to customers in major Chinese ports. By 1920s, Allianz life insurance policies were available for Indian customers.

Asia-Pacific

Today, Allianz is present in 15 countries throughout the Asia- Pacific. Allianz has chosen Singapore and Hong Kong as its regional centers to manage its operations in 15 countries in the region. Singapore hosts Allianz Insurance Management Asia Pacific, Allianz Reinsurance and Allianz Risk Management, while Hong Kong houses Allianz Asset Management.

Allianz has subsidiaries and joint ventures in nine Asian countries, comprising Singapore, Indonesia, China, Japan, Philippines, South Korea, Laos, Pakistan and India.

Allianz has shareholdings in Malaysia, Brunei, Thailand, Australia and New Zealand.

In addition, the company has representative offices in Vietnam.

Diekmann said Allianz would continue to venture into Asian countries, especially emerging markets like Vietnam.

Virginie Puertolas from Allianz Representative Office in Hanoi said Allianz had secured a license from the Vietnamese government to set up a 100 percent insurance firm there.

She said Vietnam was the right choice to set up a wholly owned company now as it had managed to relatively avoid the spillover of the economic crisis affecting the region.

Alliance is also expanding its reinsurance business in Asia by establishing an independent reinsurance branch in Singapore, to be completed this year.

All reinsurance businesses in the region have thus far been handled by Allianz Insurance (Singapore) Pte. Ltd. This particular firm has written treaty and facultative reinsurance business with affiliated companies and selected partners in the region.

Allianz Insurance (Singapore) managing director Udo Krueger said establishing a separate reinsurance firm was necessary for Allianz because it could be used as a tool to enter markets which were still relatively closed to foreign insurance participation.

Back door

"If you cannot enter a market through a front door using direct insurance services, you can always enter it through a back door with reinsurance business," Krueger said.

He said most local insurance firms in developing countries in Asia did not have the capacity to cover all insurance exposure in their own countries. That is why they always need to spread their risks to reinsurance firms, he said.

Allianz has also established its own risk management unit for the region, based in Singapore, to provide full risk management support throughout the region. This service is available to both its insurance and non-insurance clients on a consultancy basis.

Allianz' managing risk consultant Hans J. Kubon said the ultimate objective of risk management was basically to reduce or even to prevent losses to a project, be they human or material losses.

To complete its service, Allianz is also establishing its own asset management unit for Asia-Pacific, to better invest the funds generated from the region.

Allianz Asset Management Hong Kong, established in 1996, manages investment activities in the Asia-Pacific region and supports the Allianz Group's local insurance subsidiaries in areas such as corporate finance, treasury management, investment planning and investment management.

While the focus of the investment policy so far has been on equity instruments, future activities would also include the accelerated buildup of expertise in the fixed income segments.

Allianz Asset Management Hong Kong's managing director Bernd Gutting said his company also managed third-party funds, especially from Europe through its parent company in Germany.

Gutting said his fund manager would invest some US$1.5 billion in the next two to three years in Asia, mainly in North Asia and not in Southeast Asia.

"Southeast Asia has structural problems. Thailand, for example, is just too expensive to buy. Indonesia is still too risky, in terms of politics. And Malaysia, you cannot just enter this market," he said.

The crisis in the region hit Allianz Asset Management quite hard. Last year, for instance, it invested some $250 million of third party funds in Asian equity. But it lost some 40 percent of the investment value due to the drastic fall in Asian stock prices.

"I assure you that this loss is like a drop in the ocean for Allianz," he said.

As a group, Allianz Asset Management manages over $350 billion in funds, making it one of the world's 10 largest fund managers.

Established in 1890 in Berlin, Allianz has grown into one of the world's largest insurance companies.

With the takeover of the majority stake of the French insurer Assurances Generales de France, Allianz expects premium volume to reach $60 billion this year, compared to some $54 billion in 1997.

The company also aims to increase the contribution of its affiliates outside Germany to about 58 percent of this year's gross premium written from about 48 percent in 1997, and 20 percent in 1913.

Allianz now operates in 60 countries around the globe and employs over 70,000 people in life, health, industrial, commercial and personal lines insurance as well as asset management.