The increased 2011 emissions figure for our Thai business reflects the new inclusion of fuel consumed by a number of motorcycles used for business purposes, and a move to best practice emission factors for air travel.
The importance of Asia to the long term growth aspirations of the Group was confirmed during the year. We set a new goal to increase the revenue generated in Asia from around 4% of IAG’s gross written premium to 10% by 2016 on a proportional basis. We are well-placed to deliver on this challenge, given our success in our established businesses in Thailand and Malaysia, the momentum achieved in our Indian joint venture, and our progress in pursuing growth opportunities in other select markets.
Our established businesses in Thailand and Malaysia continued to perform well and during the year we expanded the launch of our new Indian joint venture with the State Bank of India.
In Thailand, our businesses grew gross written premium by 5.5% in local currency, and recorded an underlying insurance margin of 6.1%. This result was particularly pleasing given the negative impact of three major floods which affected the country during the year. Our joint venture business in Malaysia recorded an improved insurance margin of 13.2% on the back of substantial product and process improvements. As the Asia division accelerates its growth strategy, our regional development costs are reflected in the divisional result of a $7 million loss for financial year 2011, along with the start up costs of our India joint venture. If regional development costs are excluded, the division recorded an underlying profit of $13 million.
An important source of long term growth
To boost our Asian footprint, we are pursuing a strategy of:
- entering new markets – namely China, Indonesia and Vietnam;
- expanding in our existing markets of Malaysia, Thailand and India through a combination of organic growth, increased shareholding, and bolt-on acquisitions; and
- creating value by continuing our capability transfer programmes in existing businesses.
We implemented a number of measures to further improve the efficiency of our Thai and Malaysian businesses and these markets continue to offer us good long term growth prospects.
The official launch of our general insurance joint venture in India was the most visible progress made during the year. We now have 17 branches fully operational, and over 420 local employees. We are focused on using the extensive network of our partner, the State Bank of India, which has over 18,000 branches (including associates) and a captive base of more than 160 million customers. Working with such a strong partner positions our joint venture extremely well to be a key participant in India’s general insurance market which is forecast to grow by 15 – 20% per annum over the next decade.
We identified additional markets we aspire to enter, in China, Indonesia and Vietnam. In August 2011, we were delighted to enter a strategic partnership with a Chinese general insurer, Bohai Property Insurance Pty Ltd, giving us a foothold in a region that contributes almost 30% to China’s annual insurance premium pool of around US$60 billion. This is expected to be completed in early calendar 2012. In Indonesia and Vietnam we are making solid progress with our detailed strategic reviews.
- 1IAG holds 98% voting rights in Safety Insurance, based in Thailand.
- 2IAG owns 49% of the general insurance arm of Malaysian-based AmBank Group, AmG Insurance Berhad, which trades under the AmAssurance brand.
- 3IAG has 26% ownership of SBI General Insurance Company, a joint venture with State Bank of India.
- 4More information about IAG’s activities to build sustainable businesses and communities including the greenhouse gas emissions profile is available at www.iag.com.au/sustainable.
- 5Risks in force or policies in force.
- 6This represents IAG’s Asia division.