ECONOMY

Attractive Turk insurers

ISTANBUL – Turkey’s small but fast-growing insurance sector is coming onto foreign investors’ radars and at least four deals are on the table in the fragmented sector. European Union candidate Turkey is attracting foreign investors with strong economic growth, a fast-growing population of over 70 million and increasing wealth. But insurance premiums far outstripped overall growth of around 5 percent last year, and inflation of 10 percent, growing 20 percent to 9.4 billion lira, according to data from industry association TSRSB. There is still room for more growth as Turks are very underinsured: Non-life premiums account for around 1.4 percent of the overall economy compared to 2.6 percent in Europe. «The insurance sector is attracting foreign interest because there’s an opportunity to grow… Insurance premiums are growing faster than the economy and inflation,» said Hasan Sener, analyst at brokerage Oyak Invest. Foreigners have already poured into Turkey’s banking sector, paying as much as three or four times book value to do so, while foreign investment banks are also opening offices here. «What we have seen in banking we will see in insurance… and valuations will be attractive for sellers,» one banker in Istanbul said. Seeking partners Some sellers have already announced their intentions, with Dogan Holding, one of Turkey’s large conglomerates, saying last week it was looking for partnership or sale opportunities for its insurance unit Ray Sigorta (Insurance). That followed a similar decision last year from Garanti Bank, which owns Garanti Sigorta, in which one industry source said Rabobank and Fortis were among those interested. Fortis, which owns a bank here, declined to comment, while Rabobank said it was interested in Turkey but could not comment on this deal. Aksigorta – part of the huge Sabanci Holding conglomerate – has said it is looking for partnership opportunities for its pensions unit Ak Emeklilik, while Ankara Sigorta – owned by the police pension fund – has mandated HSBC to find a foreign strategic partner, a company official said. Bankers say Cukurova Group is looking at selling a stake in its Genel Sigorta. No one at the firm was available to comment. «All groups whose main area of business is not finance are selling their insurance business,» another Istanbul banker said. Foreigners already here include France’s Groupama, AXA and Germany’s HDI International Holding. As more enter, the number of players – 53 at the end of 2004 – is expected to shrink. Reforms to the social security system including healthcare are expected to help the industry, as is a new law allowing mortgages which should lead to associated insurance products. Life insurance accounts for just 15 percent of all premiums, or 1.4 billion lira last year. But insurers moving into Turkey are doing so as a long-term bet as the sector is not yet very profitable. Analysts also warn that fierce competition, and pricing strategies aimed at gaining market share, dent profitability. «It’s a growth business. But foreign players aren’t making a lot of money because they’re investing,» the first banker said.