International Acquisitions Can Spur Growth for Life Insurers, According to Watson Wyatt
February 03 2009 - 12:14PM
PR Newswire (US)
WASHINGTON, Feb. 3 /PRNewswire-FirstCall/ -- While life insurers in
developed markets cope with the current recession, they still have
opportunities for growth with carefully planned expansions into
international markets, according to Watson Wyatt, a leading global
consulting firm. "No one knows how damaging the current recession
will be or how long it will last," said Mike Williams, senior
strategy consultant for Watson Wyatt's Insurance & Financial
Services group. "But some companies can continue to grow by keeping
an eye out for international acquisition opportunities, and
navigating these opportunities in a thoughtful way." For companies
contemplating international expansion, there are three basic steps
to consider: Determine what drives growth. Companies choose to
expand internationally for many reasons, such as pure growth, to
spread their risk or to earn foreign currency. "Trying to grow
internationally can lead to a bewildering maze of questions and
options," said Williams. "Having a clear understanding of your
reasons to grow, and matching these with your capabilities, helps
to forge a path ahead by narrowing these options considerably."
Assess options and opportunities. Once the "why" has been answered,
the "how" must be assessed, said Williams. Conducting a market
analysis in the context of the products, services or skills that
can be applied will be productive and will show which countries
could make appropriate targets. An alternative approach is to
preselect a country that exhibits high growth potential, such as
India or China, and then consider where the opportunities lie
within that region. Because these markets evolve rapidly, an "on
the ground" presence is vital. "Russia is an excellent example --
industry data has indicated a significant life insurance market
here for many years," said Williams. "Our research, however, has
shown the reality to be very different, as reported life policies
were historically set up almost exclusively for tax purposes. A
genuine life insurance market has started to develop much more
recently." Determine a market entry strategy. Once a market has
been identified, entering it typically takes one or a combination
of three forms: greenfield (that is, growing organically in a new
market and starting operations from the ground up),
partnership/joint venture or acquisition. In making these
decisions, it is crucial to keep in mind the context of each
country and its policies and regulations on foreign ownership. Of
course, if a government has limits on foreign shareholding, joint
ventures will be the only option. If companies establish a joint
venture but later become unhappy with the partner or the pace of
growth, a situational analysis can identify gaps in that
organization's capability and pinpoint blockages to growth. In
these cases, clarifying the long-term business goal can help both
partners agree on new strategic initiatives. "Although current
conditions might constrain some companies, others will seek to
seize opportunities. If and when they do, clarity of purpose,
diligent assessment and carefully considered reasoning are all
fundamental requirements," said Williams. "Entering new geographies
carries significant risk -- but for the well-prepared, the
potential returns can be worth the effort." For more information,
visit
http://www.watsonwyatt.com/strategyatwork/render.asp?pageid=perspectives&artic
leid=20299&page=1. About Watson Wyatt Watson Wyatt
(NYSE:WWNASDAQ:WW) is the trusted business partner to the world's
leading organizations on people and financial issues. The firm's
global services include: managing the cost and effectiveness of
employee benefit programs; developing attraction, retention and
reward strategies; advising pension plan sponsors and other
institutions on optimal investment strategies; providing strategic
and financial advice to insurance and financial services companies;
and delivering related technology, outsourcing and data services.
Watson Wyatt has 7,700 associates in 32 countries and is located on
the Web at http://www.watsonwyatt.com/. DATASOURCE: Watson Wyatt
CONTACT: Ed Emerman, +1-609-275-5162, , for Watson Wyatt; or Steve
Arnoff of Watson Wyatt, +1-703-258-7634, Web Site:
http://www.watsonwyatt.com/
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