Wed 16 Oct 2013
Filed under: Business / Trade,News
U.S. insurance giant MetLife MET has won a license to set up a representative office in Myanmar, as it and other global insurers look to expand their reach across Southeast Asia.
The move will give MetLife the opportunity to work with regulators to help shape the industry in Myanmar before foreign insurers are allowed to start operations there in 2015, said Nirmala Menon, senior vice president at MetLife in Asia.
“With the opening up of the market we believe there’s going to be a good opportunity there,” she said.
MetLife, the largest life insurer in the U.S., has been moving into other markets in Southeast Asia. Late last month, the company signed a joint-venture agreement with the Bank for Investment & Development of Vietnam. It’s also one of three bidders recently short-listed for a majority stake in the life-insurance division of Malaysian banking group AMMB Holdings Bhd., The Wall Street Journal reported previously.
“It’s clearly a key component of our strategy to build our presence in emerging markets,” Dr. Menon said. “We will be looking at all of the Southeast Asian markets and when the right opportunity comes up, we will look certainly at going into those markets.”
In Myanmar, a number of insurance companies have been granted conditional approval to enter the market, industry participants say, but MetLife would be one of the biggest yet.
MetLife’s entry into Myanmar comes a little more than two and a half years after the military ceded formal control of the country. The new leaders granted independence to the central bank this summer and have ushered in other changes meant to pave the way for increased foreign investment.
Norway’s Telenor AS and Qatar Telecom QSC, for example, are set to become Myanmar’s first foreign telecommunications operators after winning hotly contested licenses to develop the nation’s telecom industry.
Myanmar promises a lot of growth for insurers. Its market for life-insurance premiums was around $1 million in 2012, but MetLife expects that to grow to nearly $1 billion by 2028. Meanwhile, its economy could more than quadruple in size to more than $200 billion by 2030, according to consultancy McKinsey & Company.
Insurance isn’t the only financial sector opening up there, either. The government could open the door for foreign banks, at least through joint ventures with local banks, in the hopes that it will help Myanmar’s domestic private banks grow and gain expertise from foreign players while protecting their market share.
Southeast Asia has become a hot market for global insurers looking for growth rates unavailable at home. Swiss Re estimates that life-insurance premiums in Asia’s emerging markets will grow 9.8% this year—nearly double its 5.2% estimate for developed Asia and four times its 2.2% forecast for all industrialized countries.
Such promise has led to an uptick in merger-and-acquisition activity. Malaysia’s CIMB Group Holdings is considering selling its stake in an Indonesian life-insurance joint venture in a deal that could raise as much as $200 million, people with knowledge of the matter told The Wall Street Journal last month. Japan’s Meiji Yasuda Life Insurance Co. agreed to pay $700 million for a 15% stake in Thai Life Insurance Co. in July, and in June Dai-ichi Life Insurance agreed to pay more than $300 million for a 40% stake in Panin Life of Indonesia.
Myanmar’s population is changing, which should boost demand for insurance products. The consumer class will balloon to 19 million people by 2030, McKinsey estimates, from 2.5 million today. Spending could potentially triple to $100 billion from $35 billion today. But McKinsey warns that foreign companies face a “major risk of disappointment” given that much uncertainty remains, particularly with ongoing ethnic violence and constraints on business.