Growth policy behind insurer sell-off

Newsroom 05/03/2012 | 09:11

Mihai Popescu, CEO of Aviva Asigurari de Viata, tells Business Review why Aviva’s operations in Romania, the Czech Republic and Hungary were sold off to the American group MetLife and the effects this will have locally on both customers and staff.

Anda Sebesi

What prompted the sale of Aviva’s operations in Romania, the Czech Republic and Hungary to the American group MetLife?

It started as a result of a strategic review from November 2010, when Aviva announced that it would concentrate its efforts on those markets where it had a strong presence. The goal was to consolidate the company’s position by focusing its capital and efforts on the markets where it believed it could obtain USD 100 million IFRS profit and a 12 percent return on capital employed or which have the potential to deliver USD 1 billion of franchise value.

Seven markets with such potential were identified inside  Aviva Europe, and it was decided that the Czech, Romanian and Hungarian markets do not yet fulfill these criteria. Hence, other possibilities for the operations on these markets were analyzed from the perspective of both customers and investors, choosing the best of them.

As MetLife is already present in Romania through Alico, will it lead to consolidation?

It is obvious that the main goal of this transaction is growth. It opens the path to creating, by consolidation, a better performing financial institution that can change the make-up of the life insurance industry and administration of pension funds.

What impact will this transaction have on Aviva’s products and services on the local market?

Aviva Asigurari de Viata and Aviva Pensii customers will have the same terms and conditions as they initially signed up for, as well as the same products and representatives. So nothing will change from this perspective for the company’s existing customers. We will continue to operate under the name of Aviva until the completion of the transaction.

And what impact do you think the deal will have on Aviva’s employees?

The transaction will go through a process of authorization by the authorities in each country and is expected to be completed by the end of 2012. Aviva

Asigurari de Viata has 110 employees and Aviva Pensii, 30. After the authorization is secured, MetLife will work with the local management on an integration plan in order to manage the transition.

To what extent will this deal influence Aviva’s strategy in Romania this year?

Until the completion of the transaction, Aviva Asigurari de Viata and Aviva Pensii will operate in the same manner, with no changes. We will continue to focus this year on the efficiency of our business, a process that started in 2010 and which has significant implications for the operational and sales areas. We have made and continue to make important investments in professionalizing the sales force and operational infrastructure and the results are already visible at the level of our performances. Our company’s activity hasn’t changed and our priorities will continue to be offering high-quality services and products to our customers that meet their needs.

How do you see the local life insurance market going this year?

In Romania, life insurance has a market share of 19.9 percent of the total insurance market,  significantly lower than in nearby countries such as the Czech Republic (46 percent), Hungary (53.5 percent) and Poland (58 percent). These differences are also evident in the life insurance penetration rate, calculated as the volume of gross written premiums against the gross domestic product (GDP). In Romania 0.3 percent of the monthly average gross salary is allocated to life insurance, while in other countries in the region the figure is 2 percent. So, while a typical Pole devotes up to EUR 17.2, a Romanian spends EUR 1.5.

At present, Romania is in the process of convergence regarding the consumption of all products, including life insurance. Although there is a significant gap between the share life insurance accounts for out of the total insurance market locally and the equivalent percentages in other countries in the region, we will help close it in the years to come.The life insurance market grew by about 5 percent in 2011, according to the latest public data. Such an increase posted in a year of crisis shows that the industry is moving in the right direction. Personally I think that in 2012 too we will see an increase in the life insurance segment.

andasebesi@business-review.ro

CV Mihai Popescu

May 2010 CEO of Aviva Asigurari de Viata

2008-2010 Chief marketing officer with AIG Life Romania

2003-2008 Manager, financial institutions & group management division at AIG Life Romania

2000-2003 Relationship manager at Citibank Romania

1997-2000 Brand manager at P&G Balkans

1995-1997 Off-shore business integration project leader at P&G Balkans

1995 Graduates from the Bucharest Technical University with a MSc. degree in Engineering.

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