AMEV has long been one of the three largest groups in the Dutch insurance industry. It became the sole shareholder in the largest savings bank in the Netherlands in 1990, and is also the country’s largest private landowner. In addition to playing a leading role in the Dutch economy, it is a major multinational group in the field of financial services. Its subsidiaries operate in 11 countries on four continents, and in 1989, before its merger with VSB Groep, only 37% of the group’s income came from the Netherlands, compared with 42% from the United States, 17% from the rest of the European Community, and 4% from Australia and Southeast Asia. Yet the company’s headquarters are still in Utrecht, where the burial fund from which it has grown was founded, and from where the group controls its four main divisions, AMEV Nederland, VSB Groep, AMEV International, and Brabant, which, respectively, control its Dutch insurance business, its Dutch banking concerns, its foreign financial subsidiaries, and its non-insurance activities.
The burial fund Let op Uw Einde was set up by W.P. Ingenegeren and D. Stolwerk in 1847 to collect and manage weekly payments from poorer households wishing to avoid the consignment of family members to paupers’ graves. It was one among 1,200 such funds that spread throughout the Netherlands in the 19th century, and by 1871, with branches in Amsterdam, Rotterdam, and Den Bosch—as well as Antwerp—it had become the largest fund, with nearly 150,000 members. In the same year, in order to clarify the question of whether the fund belonged to its directors or to its members, the fund bought the directors’ shares from them, and now appeared to be on a secure legal and financial footing. In 1880, however, the Dutch Supreme Court declared government regulation of life insurance unconstitutional and thus prompted fierce competition among the burial funds, the existing life insurance companies, and a number of newly founded enterprises. The directors of the Let op Uw Einde fund, which by this time had over 260,000 members, had to decide whether to try to go on operating as a mutual fund with no actuarial reserves, or become a life insurance company which, by offering a range of premiums based on mortality tables, could offer premiums lower than any burial fund’s, and which would have a more secure legal status as a company with limited liability. In 1883 Let op Uw Einde’s directors, W.P. Ingenegeren—the founder’s grandson—and P.J. Bol, set up N.V. Levensverzekering Maatschappij Utrecht, or Utrecht Life Insurance Company, which gradually took over the issuing of new policies. The burial fund took care of investments until 1893, when Utrecht took it over. In this way Utrecht acquired trained and experienced office and sales staff, and by paying back the fund’s original investors on the basis of a 3.5% rate of return when the actual rate was about 4%, it started out with a very useful amount of free capital.
W.P. Ingenegeren’s policy toward his staff was an unusually liberal one. For example, he introduced the eight-hour working day for all the company’s employees in 1897, 40 years before Dutch law compelled employers to do so. The company was ahead of its time in other ways. Its multinational presence was established very early. The burial fund had established a Belgian office in Antwerp, and then branches of Utrecht were established in that country in 1883, in France in 1889, and in Denmark in 1899. The foreign branches became autonomous subsidiaries in the early 1980s. The company also had agents in Alsace, Luxembourg, Italy, Switzerland, and Russia. Utrecht’s association with land development started in 1898, with the purchase of some uncultivated heathland in the province of Brabant, an apparently reckless move that surprised most observers in the insurance world at that time, but that eventually proved a wise investment. The company handed the land over to the new Nederlandsche Heide Maatschappij, a company specializing in reclaiming heathland for development, and by the 1930s it supported a flourishing settlement.
Utrecht’s first two decades of success culminated in the 1902 opening of a new head office building, designed by a prominent Rotterdam architect and featuring electric lighting throughout, and in the issuing of its one millionth life policy, in 1906. Three years later it arranged its first group policy, for the personnel of Nederlandsche Heide Maatschappij.
World War I caused such serious losses to the company’s investment portfolio—especially where the shares were denominated in rubles, marks, or Austrian crowns—that the directors had to create extra reserves and suspend the distribution of profits. The company weathered the economic crisis of 1921-1924 by drawing on these reserves, and it did not resume profit distribution until 1926. In these years its rate of expansion actually accelerated, and in 1929 total policies issued reached three million. In 1920 the company had taken on the financial structure it retains today, when N.V. Algemeene Maatschappij tot Exploitatie van Verzekerings-maatschappijen (General Company for the Management of Insurance Companies) was created to hold the majority of shares in the Utrecht Life Insurance Company, its foreign branches, and any further acquisitions. The abbreviation “AMEV” became the company’s official name in 1968.
Another economic crisis, in 1934-1935, found the company better prepared, though many life insurance policies were terminated. The company then had to struggle through the German occupation, during which the economy collapsed, and the company head office was destroyed in 1944 by a British bombing raid.
By 1958 the Dutch economy, and the insurance industry in particular, had returned to prewar levels of activity and Utrecht, while celebrating its 75th anniversary, entered the age of computers with the acquisition of an IBM machine, which began operating in 1960. 1963-1964 saw a wave of mergers throughout the Dutch financial-services industry, and the creation of the Nationale-Nederlanden, Amro Bank, and Algemene Bank Nederland (ABN), which are still dominant today. From 1963 onward AMEV also became an insurance group, extending its holdings beyond the Utrecht company to take in the non-life insurance company Holland van 1859 of Dordrecht—with which it had had cross-shareholdings and cross-directorships since 1958—together with the Nieuwe HAV-Bank of Schiedam, taken over in 1963; the life insurers VVM and the non-life company AVS, taken over in 1966; and De Groote Bossche van 1838, taken over in 1968.
Around 1972 there was an influx of British capital into the real estate business, followed by a dramatic drop in share prices in 1973, large-scale bankruptcies from the end of 1975, and finally, a significant drop in house prices in the early 1980s. It is not surprising that the late 1970s and early 1980s saw all the leading Dutch insurance groups investing abroad, in order to break out of a relatively small home market in which 61 life and 828 non-life insurance companies were offering services to 14 million people in a mature market.
One way into the wider market for insurance was through restricted joint activities with other companies. The most successful example of this has been the AREA Benefits Network, which was formed in 1978 in response to the needs of multinational corporations by AMEV, La Royale Beige, Eagle Star of the United Kingdom, and Allianz Leben of Germany. The network is based in Brussels and covers 41 countries. By 1987 half of all new group policies in the Netherlands were coming to AMEV through the AREA system rather than through its own agents. AREA’S joint activities with American International Group have extended coverage to more than 90 countries.
The other way into the wider market, and the method preferred by the major insurance groups, has been through mergers and acquisitions. AMEV has concentrated its efforts on four areas, the European Economic Community, the United States, Australasia, and Southeast Asia.
Having had a presence in France, Belgium, and Denmark for many years, AMEV was now looking to expand into other European markets. In 1979 it acquired the U.K. company Gresham Life Assurance, which had been founded in 1848, and merged it with its own U.K. subsidiary, AMEV Life Assurance. It has since set up Gresham companies offering unit trusts and mortgages. Its holding in the Bilbao Insurance Group of Spain rose from an initial 25% in 1982 to 53% by the end of 1984. An Irish subsidiary, AMEV General Insurance, was created in 1982. In 1985 AMEV acquired Bishops-gate Insurance, based in Southampton, United Kingdom, from its French owners, and also bought two Belgian insurance companies, De Ster and Eurobel, from their U.K. owners. At the same time it entered by way of its French subsidiaries into a joint venture with its AREA partner La Royale Beige. In 1988 AMEV’s two Belgian non-life companies, “Utrecht” Allerlei Risico’s and De Ster 1905 NV, were merged under the name of the latter company, but since the beginning of 1990 the life and non-life businesses in Belgium have operated as AMEV Levensverzekeringen and AMEV Verzekeringen, respectively, in line with the policy of using the AMEV name and logo wherever possible.
AMEV had begun a program of acquisitions in the United States, which constitutes about half of the world market for insurance, by setting up a subsidiary, AMEV Inc., in 1970 as a holding company for various investments. The overwhelming importance of its U.S. holdings dates from 1978, however, when it acquired the Time Insurance Company of Milwaukee, Wisconsin. Time’s main product is health insurance, and its fortunes have risen and fallen in line with this sector of the U.S. market. While several companies left the field in the 1980s, others, including Time, benefited from the rise in expenditure both on medical operations and on doctors’ protection against liability suits. Time Insurance is the tenth-largest player in the personal health insurance market. By 1988, spending on health care had reached 11.3% of the U.S. gross national product, and this sector alone provided nearly half of AMEV’s income from the United States in 1989.
AMEV’s acquisition of Interfinancial of Atlanta, Georgia, in 1980 was its largest U.S. venture thus far, costing US$134 million, a figure representing over one-third of its stock market capitalization at that time, which is an indication of how important the acquisitions program seemed to AMEV’s directors. The next major U.S. acquisition was a set of four companies—two life insurance firms and two mutual fund companies—from The St. Paul Companies of Minnesota, for which AMEV paid US$137.5 million in 1984. AMEV’s U.S. operations also include several non-insurance firms, including AMEV Venture Management, founded in 1979; the AMEV Financial Group, dealing in mutual funds, and founded in 1988; and the General Furniture Leasing Company.
AMEV’s ventures in Australia, New Zealand, and Southeast Asia have been on a much smaller scale, and somewhat less successful. AMEV’s first major foreign venture of the postwar era had been the establishment of AMEV Australia, in Melbourne, in 1967, as a holding company for shares in motor and life insurance firms. In 1980 it added to its portfolio 80% of the shares in the Australian subsidiary of the U.K. firm United Dominion Corporation, which it renamed AMEV Finance. Legal changes in 1985 and 1986 allowed AMEV Australia to achieve outright ownership of its three Australian companies. Four years later the group sold off AMEV Finance, as well as the relatively unprofitable agency portfolio of AMEV Life. The group also pulled out of New Zealand in response to changes in the taxation of life insurance which it regarded as unfavorable. Finally, AMEV South East Asia was set up in 1984 after the acquisition of Ka Wah AMEV Insurance in Hong Kong. In 1986 AMEV South East Asia bought 40% of Malayan Motor and General Underwriters, a non-life insurance firm based in Singapore.
These and other acquisitions transformed AMEV from an insurer deriving only 14% of its premium income from abroad in 1976 to an international group deriving more than 40% of premiums from abroad only four years later; this rose to 56% in 1984 and 63% in 1989. Nationale-Nederlanden and AEGON, AMEV’s rivals at the top of the Dutch industry, also depend on foreign operations for most of their premium income. AMEV International had been set up in 1983 to coordinate all of the group’s insurance and financial-services subsidiaries outside the Netherlands. In practice this meant concentrating on activities in the rest of the European community, since the U.S. subsidiaries are organized under AMEV Holdings in New York, the group’s largest single source of income.
Meanwhile, there were changes in the Dutch companies of the AMEV group. In 1984-1985 all of its financial-services subsidiaries were integrated into a single organization under the name AMEV, in order to simplify the non-life business and make it more accessible to agents and customers. The change in image was accompanied by a change in marketing strategy. While the life and non-life sectors continue to be separate inside the company, and are known respectively as AMEV Levensverzekering and AMEV Schadeverzekering, they share marketing services for the five sectors identified by AMEV Nederland—average-income families, higher-income families, small- and medium-sized businesses, large businesses, and professionals. The investment activities of AMEV Levensverzekering are handled mainly by a subsidiary formed in 1988, AMBA (AMEV Maatschappij voor belegging in aandelen NV). AMEV Levensverzekering has investments of DF1 10.8 billion, of which about a quarter is in mortgages, nearly half in debenture loans, about a tenth in shares, and nearly a sixth in real estate. An indication of the sheer size of AMEV’s investments is the fact that its position as the largest private landowner in the Netherlands has been achieved on the basis of just 3% of the capital invested, not by N.V. AMEV as a whole, but by this life insurance arm of AMEV Nederland. As for the non-life side of the business, the main source of revenues for AMEV Schadeverzekering, as for other Dutch non-life insurers, is accident and sickness insurance, since the state system covers only 70% to 80% of most workers’ lost earnings, and excludes people who are higher-paid.
The smallest of AMEV’s four divisions, Brabant, was established in 1969. Having disposed of all its interests in textiles and most of its interests in jewelry, it was then chiefly involved in property development in the Netherlands, France, and Belgium, and in providing venture capital for industry. Its holdings, most of which are below the 50% level, include shares in the Dutch currency exchange company De Grenswisselkantoren NV and in the children’s clothing manufacturers, the Harvest International group. Brabant also serves to test out markets which AMEV International has not yet entered.
In preparation for the European Single Market targeted for 1992, several corporations in the financial-services field have been seeking to set up allfinanz arrangements, allowing them to cover both banking and insurance and thus be ready for the competition which seems likely to develop in the 1990s. The cooperation agreements between the Allianz insurance group and the Dresdner Bank in Germany, or between the Banque Nationale de Paris and the Union des Assurances de Paris in France, were early examples of this trend, but both took place in countries whose laws already had been revised to allow for them. In the Netherlands, however, where the two sectors were kept strictly separate, AMEV began a new chapter in its history in March 1989, when it announced that it was to swap shareholdings of 15% with the Verenigde Spaarbank Groep (VSB Groep), with a view to a full merger once Dutch law was revised to permit it. VSB’s holdings included the largest savings bank in the Netherlands, the finance house FMN, and the Dutch segment of the Visa credit card network, but at about one-third of AMEV’s size, it seemed unlikely that the eventual merger could be anything but a takeover, as it has proved to be. In 1990, after the necessary legal changes had been made, AMEV became the sole shareholder in the VSB Groep and VSB in turn disposed of its holding in AMEV. The two groups were well matched, both being well-established market leaders for services to individuals and families and both, more recently, developing their provision for commercial and upper-income customers.
Since by 1990 the European Community’s central agencies had not finished work on all the directives required for unifying the market, and since the member states varied in their ability and political willingness to implement those that were ready, there were likely to be variations between member countries in tax treatment of insurance and in systems for distributing policies for some years to come. Differences in social customs and economic development also persisted, and led, for instance, to a 1986 situation in which, the average West German citizen was spending over 20 times as much on insurance annually as his Greek counterpart. Those states such as France, which have public welfare provision sufficient to make private non-life insurance more important than life insurance clearly will require a different kind of strategy from those in which every kind of insurance is underdeveloped.
These national variations suggest that cross-border mergers with partners well versed in local practice might be more successful than trying to push into unknown markets from a single country base, however strong. Thus AMEV has not stopped at merging with VSB, but announced in April 1990 that an agreement had been reached on a merger with the largest insurance company in Belgium, Groupe AG of Brussels, the origins of which go back to 1824, when Belgium and the Netherlands were a single kingdom. The merger was to be effected through holding companies owned equally by both groups, rather than through mutual shareholdings, to avoid integration expenses, some tax liabilities, problems of different accounting systems in the two countries, and the possibility of intervention by the European Commission which, in 1990, forbade the creation of a single company out of corporations from different member-states. Groupe AG was to pay AMEV DF1 575 million plus interest over ten years to compensate for AG’s smaller size. The aim was to establish the European community’s 12th-largest insurance group by 1991.
AMEV’s directors also have ensured that there can be no takeover of the group without their consent, by bringing the holdings of preference shares by the Münchener Rückversicherungs-Gesellschaft of Munich and the Stichting Continuiteit AMEV (AMEV Continuity Foundation) up to the equivalent of 50% each of the value of ordinary shares. The Continuity Foundation is controlled by N.V. AMEV’s management.
Assessing the potential of a group like AMEV involves considering the internal conditions of the insurance industry, the economic framework of the Netherlands, and the international situation. First, above a certain level of economic development it becomes very nearly impossible for insurance companies not to do well, since, in the European Economic Community countries, the growth in total premium value is consistently greater than the growth of gross national product. This is to be expected in countries with aging populations and fitful, uneven rises in general prosperity. AMEV’s declared intention of developing services to higher income groups is telling in this regard. On the other hand, any insurance company that deals in both the life and non-life fields, and offers personal loans, pensions, and other investment services as well, is likely to find that the price of diversification is exposure to a wider range of influences on its activities. The ups and downs of house building and sales will affect its mortgage business and fluctuations in interest rates can help or hinder the growth of lending in particular and investments in general, while fluctuations in exchange rates can put on, or take off, several percentage points in profits or losses, as, for instance, in 1984, when 3.8% of AMEV’s net profits were due entirely to successful foreign-exchange transactions.
Secondly, state regulation of insurance in the Netherlands has been relatively light. There are no rules for contract or premium rates and there is a high degree of self-regulation. Theoretically this should mean greater competition in the insurance field, as the barriers to market entry are lower in the Netherlands than in, for instance, Germany or France. In practice, as in most developed markets, the ideal of free competition long ago gave way to oligopoly, and the insurance industry, with its dependence on long-term contracts, is characterized by very stable market shares in most countries. In the Netherlands, the ten largest insurers in 1989 accounted for over 80% of the market. As in other oligopolies, this dominance gives the market leaders the ability to dictate terms to rivals, intermediaries, and customers alike; to bar entry to the market, especially to firms that do not already have links with insurance; and to keep premiums higher than they would otherwise be. This also explains wny AMEV and its rivals have always preferred to acquire existing foreign firms rather than try to start up wholly new companies: insurance is an oligopoly in AMEV’s other markets. A study of the Dutch insurance industry undertaken for the European Commission and published in 1985 suggested that for several years there had been a tacit agreement among the companies to avoid price competition.
Thirdly, AMEV’s merger activity in the 1990s, unlike that of the 1980s, is intended to cut across both national borders and boundaries between sectors of the financial-services industry—though the latter is still not possible in the United States. This in itself is evidence enough that AMEV expects competition to be fiercer, and profitability less easily achieved in the European Single Market, the success of which depends on the full implementation of the European community’s plans for 1992 and beyond. The record of implementation so far suggests that the unifying process will take much longer than was originally expected. However long it takes, AMEV—working together with Groupe AG—will probably be a major player in Europe, and will be able to use the profits from its large U.S. holdings to try to compensate for any setbacks.
AMEV Australia Ltd.; AMEV General Insurance Co. Ltd. (Ireland); AMEV Holdings Inc. (U.S.A.); AMEV International N.V.; AMEV Nederland N.V.; AMEV South East Asia Ltd. (Hong Kong); AMEV (UK) Ltd.; Brabant N.V.; VSB Groep N.V.
De Utrecht 75 Jaar, Utrecht, N.V. AMEV, 1958; Bollerman, J.B.J., and J.N.J. Broenink, The Burial Fund: Mind Your End 1847-1893, Utrecht, N.V. AMEV, 1983; Aaronovitch, Sam, and Peter Samson, The Insurance Industry in the Countries of the EEC, Brussels, Office for Official Publications of the European Communities, 1985.