Swiss Re, the world’s second – largest reinsurer, agreed to buy a Chinese unit of RSA Insurance Group Plc as it shifts capital to regions with higher premium growth prospects.
The Zurich-based company is buying Sun Alliance Insurance (China) Ltd. for £71 million ($122 million), according to a statement today. The acquisition, which is subject to regulatory approval, will enable Swiss Re to offer corporate insurance directly from mainland China.
Swiss Re is expanding in faster-growing markets such as China, Indonesia and Brazil, to increase the portion of premiums from those regions to between 20 percent to 25 percent by 2015, from 18 percent last year, according to a presentation today. The company last year bought a stake in New China Life Insurance Co. for about $493 million, and a holding in Brazilian insurer Sul America SA for $334 million. In October, it invested as much as $425 million in Hong Kong billionaire Richard Li’s FWD Group.
“Growing wealth and increasing urbanization are key drivers for a continuing demand” for insurance and reinsurance products in “high growth markets,” the company said in the statement. “With the overall outlook for these markets remaining intact, the growth rate for premiums is expected to stay at around 8 percent per year.”
That’s more than double the 3 percent premium growth rate seen in mature markets from 2013 to 2020, according to the presentation on the company’s website.
Swiss Re shares rose 0.3 percent to 80.05 Swiss francs [$90.00] by 9:48 a.m. in Zurich trading, trimming the decline this year to 2.4 percent.
The reinsurer said it’s “confident” it will reach a return-on-equity goal of 10 percent to 12 percent by 2015.