Asia-based insurance companies are reviewing their asset management ambitions amid a hunt for yield that's found them outsourcing an ever-growing chunk of their assets to external money managers.
With that hunt pushing insurers beyond their traditional comfort zones in fixed income into higher fee alternative strategies, a number are asking, “Should we get into the asset management game ourselves ... and make this a profit center?” said Daniel Celeghin, Hong Kong-based partner with money manager consultant Casey Quirk & Associates LLC.
Turning a cost center into a profit center is a perennial issue as insurance industries in different parts of the world have developed, but it's “most pronounced in Asia” today, said Robert Goodman, managing director and global head of insurance relationships with Goldman Sachs Asset Management in New York.
Conversations about whether it makes sense to pursue a broader commitment to asset management remain at a “very early stage” in markets experiencing dramatic regulatory reforms, such as China, but are more advanced in countries such as South Korea, Taiwan and Japan, said Mr. Celeghin.
A recent reshuffling of Korea's Samsung Group — which made Samsung Asset Management a wholly owned subsidiary of Samsung Life Insurance Co. — could ultimately provide one model for insurers in the region looking for a way forward — even as the Korean giant continues to work on the details.
In May, Samsung Life executives announced their company would lift its stake in Samsung Asset Management to 100% from 5.5% by purchasing stakes held by other group companies — a move, they said, would help “create synergies,” boost the competitiveness of “our global asset management business” and make that business “an important driving source for future growth.”
A task force of executives from Samsung Life and Samsung Asset Management is formulating a long-term strategic plan now for the money management business, a Samsung Life spokeswoman said.
One investment consultant, who declined to be named, said Samsung Life will benchmark the success of that effort against the money management undertakings by offshore insurers such as Allianz SE and Aviva PLC.
At the end of 2013, Samsung Asset Management had US$122 billion in assets under management, with 63.1% coming from other Samsung group companies, 19.9% from institutional investors and 17% from retail investors, according to the company's ADV filing with the U.S. Securities and Exchange Commission.
Asked if Samsung Asset Management executives would focus strategically on organic growth or acquisitions, the spokeswoman said the initial focus will be on nurturing Samsung Life's existing strategic alliances with global investment firms, such as New York Life Investments. She didn't rule out acquisitions over the longer term.
Mr. Celeghin said Samsung's moves will be followed closely by other insurers in the region.