Oct. 15--SET-listed Ayudhya Insurance Plc, a Bank of Ayudhya affiliate, is considering an aggressive acquisitions strategy to become a top-10 firm by the end of 2010.

The Office of the Insurance Commission has set a 2011 deadline for local insurers to meet the regulator's new risk-based capital requirements. These require insurers to maintain capital funds proportionate to their assets, debts, liabilities and risks, to protect customers and the general public.

This is likely to make many weaker insurers with low capital reserves consider the mergers and acquisitions market. Snapping up such firms would help Ayudhya increase its market share, said president Rowan D'Arcy.

"To become number 10 by 2010 would be great. We are currently at about number 23 and expect to move up the ladder a little this year as we are growing faster than the market at present," he said

"Being in a strong position, we would naturally be interested in exploring these (M&A) avenues."

Ayudhya has a 3-billion-baht war chest comprising retained earnings and locked capital funds -- share premium reserves that cannot be distributed to shareholders, said Mr D'Arcy. "As the company has a strong capital base and a proven record in management, it is natural to consider investing further in its own core business," he said.

If the company cannot find firms to acquire by the end of 2011 it will continue to drive growth organically, he said. Potential acquisitions must be correctly priced and offer further distribution possibilities, particularly for bancassurance and telemarketing, he said.

Despite keeping its relatively low profile Ayudhaya Insurance has grown steadily in the last five or six years, both in written premiums and its bottom line.

Last year it reported total written premiums of 1.68 billion baht, a rise of about 7.3 percent from a year earlier. However, net profit slumped by 14 percent to 357 million baht in the same period, due to weaker investment incomes.

For the first six months of the year, the company eported written premiums of 885.73 million baht, a rise of 9.07 percent from the same period last year, while net profit dropped to 128.97 million baht from 175.28 million.

The company projects its written premiums this year will grow by about 10 percent to 1.84 billion baht despite poor economic conditions.

It expects to maintain the same growth trajectory throughout 2010 thanks partly to its balanced distribution channels and income structure.

High-risk motor insurance constitutes only 29 percent of the company's written premiums, while the profitable segments of fire, miscellaneous and marine make up 25 percent, 34 percent and 12 percent respectively.

Ayudhya's network of external insurance agents contributed 37 percent of sales, and bancassurance 30 percent, while the rest came from its brokerage and direct sales.

The insurer has implemented several measure to mitigate the impact of the global and domestic recession.

"We've instituted myriad actions ... from reducing employment costs, changing our production technology, rebranding our products and services to broaden distribution and [improving] corporate communications," he said.

"More importantly, we've made it easy for potential buyers to buy our products by focusing on simplifying the buying process and making the products the most simple and convenient."

Ayudhya Insurance is a German-Thai joint venture in which the Allianz Group holds a 16.84 percent stake.

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