Global insurers have been pushing into Asia at a time when
growth in Western markets is sluggish, and French insurer AXA Group
(CS.FR, AXAHY) has helped lead the charge.
AXA's Asia Chief Executive, Mike Bishop helped seal two deals in
Asia last year: the purchase of HSBC Holdings PLC's (HSBA.LN,
0005.HK, HBC) property and casualty operations in Hong Kong,
Singapore and Mexico for $494 million, and AXA's joint-venture
partnership with China's largest bank by assets, Industrial &
Commercial Bank of China Co. (601398.SH, 1398.HK, IDCBY) Those
deals expanded AXA's footprint in Asia and helped it vault over
competitors to gain greater market share.
Insurers from Canada's Sun Life Financial Inc. (SLF.T, SLF) to
Hong Kong's AIA Group Ltd. (1299.HK, AAGIY) racked up a combined
$21 billion worth of purchases in fast-growing Asian economies last
year, up from $16 billion in 2011. Still, there are greater risks
for insurers in volatile emerging markets, where data on morbidity
rates and life expectancy are often sparse.
Drawing on 15 years' experience in the region, Mr. Bishop met
with The Wall Street Journal in Hong Kong to discuss the
opportunities for insurers in Asia and also the potential pitfalls
for newcomers. What follows are edited excerpts of those
comments:
WSJ: Why are insurers bulking up in Asia?
Mr. Bishop: This is the world's growth engine--everything favors
Asia at the moment in terms of demographics, given the young
populations of India to Indonesia, to the expanding class of mass
affluent. It is an amazing opportunity.
We are focusing on health and protection where there is an
enormous gap in the market, and it's what customers genuinely need.
AXA completed two large transactions in Asia this year which are
critical to our future.
WSJ: What is your position in China? How has the recent slowdown
affected your business?
Mr. Bishop: The potential is enormous for us, we are partnered
with the world's largest bank, ICBC, which has 280 million
customers. The scope is beyond imagination. Last year, we
restructured our 50-50 joint venture with China Minmetals Corp. to
include ICBC. ICBC now owns 60% of the venture, we have 27.5% and
Minmetals owns 12.5%. Given our new partnership, there is bags of
upside potential, so for us the recent economic slowdown is not
such a major concern.
WSJ: Where lies the danger in this rush by insurers into the
region?
Mr. Bishop: Growth in Asia is a very popular strategy in
boardrooms across developed markets; people see Asia as a
relatively easy option.
However, newcomers should not underestimate the competitiveness
of Asia, particularly from large incumbent players who are very
good at what they do.
One of the biggest challenges for all the industry is retaining
top talent; turnover in Asia is a lot higher than in Europe.
Actuaries, risk managers and compliance officers are becoming
pretty rare commodities in some countries.
In Indonesia, for example, average salaries for these
professions have done up by double digits in the past few years.
Because we're growing quickly, when we need people we bring in
expats from the rest of the world for a few years to fill holes and
help train local talent.
WSJ: Why did you buy HSBC's property and casualty business in
Hong Kong and Singapore?
Mr. Bishop: This is a transformational deal for us.
Specifically, it gives us a dominant position in Hong Kong in terms
of gross written premiums, a measure of revenue in insurance, and
consolidates our existing No. 2 position in Singapore. It also
gives us exclusive 10-year distribution in India, China and
Indonesia over HSBC's bank branches.
On the price tag, clearly it is about what the deal brings to us
over 10 years. It is not just a here-and-now transaction.
WSJ: Insurance tie-ups with banks seem to be getting longer in
duration in Asia. What's driving that?
Mr. Bishop: Banassurance is growing extremely quickly and is now
arguably the largest distribution channel in Asia for insurance.
But sales agents remain vital as in Asia, relationships are
culturally very important in making a sale.
In Thailand, our sales split is a 50-50 mix between agents and
banking, and I think that's optimal. Longer contracts with banks
also reflects the fact that deals are getting more expensive and
banks are getting a lot of the value upfront.
However the right way to approach a partnership with a bank is
on the basis that if you are getting married to someone then the
real value comes over years, not all on the wedding day.
WSJ: Is AXA Asia on track to meet targets?
Mr. Bishop: We are on track to meet our ambitious targets for
the next year. We plan to double 2011 revenue and new business
profit [the present value of future profits] by 2015. We doubled
sales between 2007 and 2011 and we can double again.
After completing the two deals last year, it's about
delivering.
Write to Alison Tudor at Alison.Tudor@wsj.com
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