Albania puts its past behind it
Albanian-American Enterprise Fund: More than just a charity case
BANKING IS NOT the only element of the financial services industry in Albania to see rising foreign direct investment. The insurance sector is also increasingly attracting interest from abroad.
As far back as 2003, for example, the European Bank for Reconstruction and Development and the International Finance Corporation each bought a 19.5% stake in Insig.
The one-time monopoly insurer had suffered a collapse in its market share to less than 20% as new entrants undercut its government-controlled tariffs. However, the introduction of a more liberal tariff regime has given it greater pricing flexibility and it is now firmly established as the third-biggest player in the country. Insig should be privatized via an open tender process later this year, with both the EBRD and the IFC stakes becoming available for sale alongside the government’s 61% holding. Alasdair Macdougall, senior banker in the financial institutions group at the EBRD in London, says: “Over the past four years we have provided Insig with extensive donor-assisted technical assistance and we would be willing to remain an investor should a strategic investor request us to.”
The EBRD and IFC’s pioneer involvement has now been augmented by the activities of more traditional insurance players. In February, for example, Greece’s Aspis Pronia bought 51% of Interalbanian for €2.2 million as part of a strategy that will also involve it expanding its coverage to include Kosovo, Macedonia and Montenegro. Founded in September 2004, Interalbanian had a market share of about 8% at the end of 2006. Interalbanian’s chief executive officer, Bardhyl Minxhozi, says Aspis will enable Interalbanian to becoming a leading player in Albania and the surrounding countries in the next two to three years. He adds that the tie-up makes especially good sense, as more than 800,000 Albanians live and work in Greece. As a result Aspis will be able to target Albanian expatriates in Greece as well as the populace in Albania itself. “It’s a good match as Aspis knows the Balkan business mentality well and has a good business model which has worked successfully in Greece,” he says. “Aspis will give us more technical capacity, marketing know-how and product expertise, while we will enable Aspis to tap new markets here in Albania and the region.”
The pace really heated up in March, however, when Austrian arch-rivals Uniqa and Wiener Städtische Versicherung announced link-ups with local players. Both are vying for second place in emerging Europe behind Germany’s Allianz.
Uniqa signed a cooperation agreement with Sigal, Albania’s largest insurance company, with about a 30% domestic market share as well as subsidiaries in Kosovo and Macedonia. Under the terms of the transaction Uniqa has a fixed option to buy a majority stake in Sigal in 2010. Founded in 1999 and one of the first private insurance companies to be established in Albania, Sigal wrote €19.2 million of business in 2006, up 20% on the previous year. Andreas Brandstetter, director for Albania at Uniqa in Vienna, says that the combination of an improving economic, legal and political environment in Albania and the surrounding countries was a key driver for the agreement as well as the chance to link up with the clear market leader. “We are not just talking about the 3 million or so people in Albania as a potential market, but the 8 million to 9 million in the so-called Albania region,” says Brandstetter. He adds that another strong positive is the fact that one of Uniqa’s major shareholders, Raiffeisenbank International, is the number one bank in both Albania and Kosovo. “We have very close cooperation with Raiffeisen International across central and eastern Europe and there are lots of synergies between banking and insurance that we can exploit in terms of product distribution and marketing,” he says. “The one-stop shop approach is one that works well in the region.”
Almost simultaneously with the Uniqa-Sigal deal, Wiener Städtische Versicherung (WSV) announced that it had signed an agreement under which it will buy 60% of the shares of Sigma, the number two player in Albania. Commenting on the Sigma acquisition, Günter Geyer, WSV’s chief executive officer, told Euromoney that it was a logical extension of the firm’s regional expansion strategy. “For the moment, Albania is one of the poorest countries in the region, but we are looking to the future and expect that in 10 to 15 years’ time we will see very positive development in the insurance market in the country. It is good to start as early as possible in these type of markets as there is always a first mover advantage.” He added that Sigma, with a market share of about 18%, was a good entry point for WSV, which will look to increase its stake in Sigma to 70% to 80% over the next two or three years. Although Albania’s 10 insurance companies generated just €37 million of premium income in 2006, foreign insurers clearly believe in the country’s strong development potential. The penetration rate – insurance premiums as a percentage of GDP – is only 0.5% in Albania, compared with 9% in the EU-15 countries. Although there are undoubted rewards to be reaped in Albania, there are also pitfalls. Albanian insurers have run up about €10 million of debts – equivalent to the entire sector’s last three years’ profits – as a result of Albanian vehicles being involved in accidents outside the country. That will come as no surprise to anybody who has ever witnessed the demolition derby approach of the typical Albanian driver.
