Allianz sees soaring emerging markets sales

Allianz expects its insurance premiums from emerging markets to double to one-fifth of its worldwide total in three years.

Europe's second-largest insurer, Germany's Allianz, expects its insurance premiums from emerging markets to double to one-fifth of its worldwide total in three years as it embarks on a cautious expansion in China, its top executive said on Wednesday.

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The company, which ranks only behind France's AXA in premium income in Europe, also confirmed analysts' expectations that it will be profitable this year as it shakes off the impact from its loss-making Dresdner Bank unit.

"There's three strategic markets where we want to invest in whenever it makes sense -- China, India and Russia," said Chief Executive Michael Diekmann in an interview ahead of a news briefing in Shanghai.

Diekmann, who played a pivotal role in increasing Allianz's Asian business from near-zero in 1996 to five per cent of gross written premiums today, conceded the company could be perceived as slow to win China versus rivals. And that suited him fine.

"It's the prime market in Asia. That's why it makes sense to take this slowly," said Diekmann, who took time off during his rapid rise at Allianz to write a guide to canoeing.

"To rush in, you box yourself into positions that may not be of advantage going forward," he said.

To be sure, Munich-based Allianz may first have to tackle wider issues. The global financial industry is emerging from a horrendous two or three years that have seen widespread lay-offs and restructuring.

Allianz itself avoided another year in the red for 2003, with a net profit of 1.6 billion euros as a windfall asset sale offset a second straight annual loss at its Dresdner Bank AG unit. Analysts expect Allianz's net profit to rise 35.5 per cent to 2.2 billion euros in 2004, according to Reuters Research.

Asked if Allianz would turn a profit this year, Diekmann said: "Absolutely."

Diekmann, who took over the top job at the financial giant last year, did not specify if they were net or operating profits.

"My shareholders are bugging me about profitability. They want profits," he said.

SLOW BOAT TO CHINA

Allianz, which vies with ING, AXA and Zurich Financial Services to sell policies around the world, has said it would take a final restructuring charge of 150-180 million euros on Dresdner Bank AG this year.

In 2003, the Asia-Pacific region generated for Allianz premium income of 4.25 billion euros ($5.18 billion), or about five percent of global gross premiums. Lumping in other emerging markets, that figure would swell to 10 per cent, Diekmann said.

"I wouldn't be surprised, because the growth is so accelerated compared to mature markets, that we would double this within the next three years," he said.

China would play a key role in driving that.

Citing figures from the Boston Consulting Group, Allianz expects the mainland life insurance market to jump 20 per cent annually to 830 billion euros in 2008. Non-life premiums should hit 83 billion euros by then.

Its loss-making Chinese life insurance venture with Dazhong Insurance posted a 36 per cent rise in gross premiums last year to 166.6 million yuan ($20.13 million). Executives declined to say if it would pull itself into the black in 2004.

But Allianz remains a bit player in an insurance arena that is taking off as the state dismantles cradle-to-grave welfare, but that is dominated by local rivals such as China Life and foreign competitors such as AIG and Prudential Plc.

It now runs two equity-debt funds, totalling some 10 billion yuan, via an asset management joint venture in Shanghai.

For 2004, Allianz will expand its life business in the world's most populous country to the southern city of Guangzhou, and hopes to offer non-life policies in the capital Beijing and the richest city of Shanghai.

"Yes, they (rivals) may concentrate on building networks a little bit faster on the life side," admitted Diekmann, 49.

But he added: "China will still be here in 100 years."