HONG KONG: Axa Asia Pacific Holdings Ltd, the Australian unit of Europe’s second-biggest insurer, said it plans to open 14 more life insurance branches in India this year, tapping the growth of the world’s second-most populous country.
“The fastest-growing markets will be China and India, simply because of the size and low penetration rates now,” said Mark Pearson, regional chief executive for life insurance at Axa Asia Pacific, in an interview in Hong Kong today. “In India, the licenses are national licenses. We are able to open up at a slightly faster pace than we can in China.”
The insurer is speeding up expansion in India, where economic growth is boosting demand for financial services and products. Bharti Axa Life Insurance Co., Axa’s venture with Bharti Group in the country, plans to sell policies in 20 cities by the end of the year, up from six, Pearson said.
India had an insurance penetration rate of 3.14% in 2005, below the 9.15% in the US and 12.45% in the UK, according to data by Swiss Reinsurance Co. China’s rate was 2.7%. Penetration measures total premiums as a percentage of gross domestic product.
Local life insurers collected premiums of Rs1.05 trillion in the year ended 31 March 2006, 16% higher than a year earlier, C.S. Rao, chairman of the Insurance Regulatory and Development Authority, said in October. Future growth may be as much as 24% yearly, he said.
The government expects the $854 billion economy to expand 9.2% in the year to 31 March. Growth has averaged 8.6% in the past four years, the quickest pace since independence in 1947, making India the world’s second fastest- growing major economy after China.
“The prospects of growth are very strong,” Pearson said. Bharti Axa, started last August, had premium income of Rs28.6 million last year and operates in six cities including Chennai, Mumbai and Hyderabad. Bharti Group offers cellular and traditional telephone services in the country.
In China, overseas insurers need regulatory approval before they can enter a new city, whereas they get a national license at the outset in India, making branch expansion easier. Axa is approved to sell policies in four cities in China, including Shanghai and Guangzhou.
Axa Asia Pacific, 52%-owned by Paris-based Axa SA, reported last week net income rose 23% to A$668 million last year, boosted by increased funds under management and sales through acquisitions. The company aims to devote 10% of its profit every year to developing business in newly entered markets such as China, India, Malaysia and Indonesia, Pearson said.
The insurer, which has A$1.3 billion of surplus capital, may consider acquisitions to enter countries such as South Korea and Taiwan.
“We have a strong balance sheet,” Pearson said. “Markets that we are looking at would be in North Asia, in particular Taiwan and Korea, where over the last three, four years, market developments have become very attractive.” He declined to be more specific.
The company bought National Australia Bank Ltd.’s MLC insurance units in Hong Kong and Indonesia for A$575 million in May and agreed to buy Winterthur’s Hong Kong life unit for about A$311 million in December.