Munich Re, the world’s biggest reinsurer, is interested in buying some of the units that American International Group Inc (AIG) could sell, an official at the German company said.
Munich Re is particularly interested in AIG’s life insurance business in Asia, Ludger Arnoldussen, a member of the Munich-based insurance group’s board of management in charge of the Asia-Pacific, African and German operations, told reporters in Hong Kong yesterday.
AIG plans to sell assets including its life insurance operations in the US, Europe, Latin America and Japan to repay a government loan as four straight quarters of losses tied to the US housing slump burned through its cash at a record rate. The US on Nov. 11 almost doubled the rescue package for the New York-based insurer to US$150 billion.
“We’re only interested in parts that fit exactly into our long-term expansion strategy and at the right price,” Arnoldussen said.
Munich Re’s Dusseldorf-based primary insurance unit Ergo Versicherungsgruppe AG generates about 80 percent of its business within its home country, he said.
Ergo, the fourth-largest German insurer, is seeking to expand into emerging insurance markets such as China to catch up with rivals including AIG that have bigger overseas operations, he said. It has set up joint ventures in India and also operates non-life businesses in South Korea.
Munich Re expects to see on average double-digit increase in reinsurance prices worldwide from Jan. 1, the fastest pace since the aftermath of the Sept. 11, 2001, terrorist attacks, Arnoldussen said.
Slumping markets have eroded insurers’ investment returns, weakened their share capital and made it difficult to raise funds, forcing the companies to increasingly turn to reinsurers as a substitute for new capital.
“They simply don’t have the capital strength to support high risk exposure,” Arnoldussen said in an e-mailed statement yesterday. “The demand for highly rated reinsurance will increase as the greater risk environment produces a flight to quality.”
Insurers globally have booked more than US$140 billion of credit losses and writedowns since the collapse of the US subprime-mortgage market, Bloomberg said.
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