vlad.tribnet.com / Issue #148 / Business / Reading article...

Pyramida Insurance Company sealed a deal with FAI Insurance this week, selling 19.9% of its 3.3 billion ruble ($568,965) new stock issuance to the Australian giant.

The sale comes as the result of a new krai law requiring all Primorye insurance companies to have capital of 3.5 billion rubles ($603,448) if they want to sell life insurance. As Pyramida tries to become a dominating force among Primorye competitors by the end of 1997, it will use the issuance to update technology, increase marketing and open branch offices throughout the krai. It will also begin selling liability policies, new to the Russian market.

Though the money changing hands is under $200,000, the move is regarded as an enormous vote of confidence for Pyramida, as it gives the company a strategic partnership with the fifth-largest insurance company in Australia, whose assets are roughly $2.8 billion Australian. Pyramida's assets, after the new issuance, are just under US $1 million.

"The important thing about it is as Pyramid grows, and its requirement for capital increases, FAI won't be embarrassed to invest more," said Andrew Fox, chairman of Tiger Securities Vladivostok office, which facilitated the deal.

The partnership is advantageous for both FAI and Pyramida. FAI sees the move as its chance to break into the relatively unexplored Asian market, and it will train Pyramida agents to sell policies in a market where only 10 percent of the population has insurance beyond what the government requires. Before perestroika, over 70 percent had additional policies.

Pyramida welcomes the recognition that comes with the foreign investment, said company president Anatoly Verevkin. It is the first insurance company in Primorye with foreign shareholders, and hopes to use FAI's name as a powerful strategic tool in establishing itself in the minds of Russians looking to buy policies. The deal may also allow Pyramida to move into reinsurance, protecting its policy-holders and strengthening its image.

As a strictly Primorye-based company, Pyramida also wants to keep capital flowing into the krai, reviving the economy and creating an atmosphere where people will once again want to buy insurance, Verevkin said. The company believes the area is ripe for an insurance boom, what with its extreme climate, natural resources and propensity towards floods and typhoons.

The two companies also have similar philosophies. Both have young executives and are flexible and aggressive, Fox said. FAI also has faith that Pyramida will be around for a long time. In a market where many insurance companies are created to dodge taxes and to insure their owners, Pyramida has been a legitimate company since its foundation, Fox said.

"Pyramida focused on people quite early in the game," he said. "They're not just playing paper games."