TUCSON, Ariz. - Financial modernization will force U.S. banks and insurance companies to expand abroad to meet the competitive threat from foreign institutions it attracts to this country, according to a top insurance company executive.
"No matter who you are, globalization is going to affect you," Joseph Gasper, president and chief operating officer of Nationwide Financial, said Tuesday at the Bank Securities Association's annual convention.
But Mr. Gasper, whose company is a division of Columbus, Ohio-based Nationwide Insurance Cos., said U.S. companies must choose their targets carefully. "I would look to Asia first," he said in an interview. Whether U.S. firms should form joint ventures or make acquisitions depends on the country, he said. "What works in Japan isn't going to work in Hong Kong."
Europe, where banking and insurance are already closely intertwined, will be a tougher nut to crack, Mr. Gasper said.
Though he stopped short of predicting a wave of acquisitions of American banks and insurance companies by their European counterparts, he pointed out that financial modernization has made the United States a more appealing market for European bancassurance companies. And he said European financial companies' high stock multiples give them more leverage for acquisitions.
U.S. firms should seek to capitalize on Europe's burgeoning 401(k) market, he said. "It's high risk, but they have to."
In his speech, Mr. Gasper also predicted increased consolidation among U.S. financial services firms and convergence in their business lines.
"All industries are coming together," he said. "As banks and broker-dealers come together, insurance companies are paralleling that."
Cross-industry mergers will be dogged by cultural differences, Mr. Gasper said. But regulatory actions - such as the proposed move to create national standards for the insurance industry, which is currently regulated state by state - will bring the industries closer together, he said.
"Financial services reform has given it to us," he said. "Now we're all going to say, be careful what you wish for."