Extract from. Études et Dossiers No th CEO Insurance Summit in Asia

Transcription

1 International Association for the Study of Insurance Economics Études et Dossiers Extract from Études et Dossiers No th CEO Insurance Summit in Asia Achieving Regional Synergies & Partnerships to Boost Competitiveness 30 January 1 February 2008 Jakarta, Indonesia April 2008 Working Paper Series of The Geneva Association Association Internationale pour l'etude de l'economie de l'assurance The Geneva Association - General Secretariat - 53, route de Malagnou - CH-1208 Geneva Tel.: Fax: secretariat@genevaassociation.org -

2 The Geneva Association Working Paper Series Études et Dossiers appear at irregular intervals about times per year. Distribution is limited. The Études et Dossiers are the working paper series of The Geneva Association. These documents present intermediary or final results of conference proceedings, special reports and research done by The Geneva Association. Where they contain work in progress or summaries of conference presentations, the material must not be cited without the express consent of the author in question. Layout & Distribution: Valéria Kozakova The Geneva Association - Association Internationale pour l'etude de l'economie de l'assurance

3 CEO Panel on Regional Strategies for Domestic Insurers Comments on Threats and Options Gordon Perchthold Selected multinationals are evolving their regional operating model The Multinational Competitive Advantage (if they are able to organize to exploit it) Exposed to a greater range of experiences (based on number of competitive markets they operate in) that can be transferred across Asia Can leverage Asia-centric expertise (as opposed to home office centric) across multiple countries in Asia accelerating the transfer of knowledge This is particularly relevant for competitors who have operations in Malaysia, Singapore and Taiwan (and to a lesser extent Hong Kong) who can transfer experienced local Mandarin-speaking resources to help build capabilities within their strategically important China operation Have access to greater capital (given greater revenue base) to fund developments Can spread the costs and risks of capital investments in people, systems and processes (in areas like new sales platforms, CRM platforms, product administration platforms, finance accounting platforms, investment platforms, etc) across multiple country operations Can establish centers of expertise for strategic analysis and development, customer analytics, financial analysis, investments, etc. (highly relevant in an era of skill shortages) Can build and spread costs for shared processing centers serving multiple countries for selected functions to improve controls and reduce transaction costs

4 Organizational alignment is the greatest challenge for MNCs The Multinational Weakness International stakeholder expectations create constraints: Profitability/ROE Compliance and control Organizational complexity and inertia arising from: Diversity of cultures and individual interests Varying stages in career timeline of expat postings Incremental design of organization structures Internal politics Regional Offices of MNCs have generally evolved rather than designed Often, insufficient clarity as to its role results in ill-defined accountability Domestic insurers also have advantages Domestic Insurer Advantages (to the extent that they retain them) Better understanding of local market Better connections with government officials, regulators, key business associates Local brand awareness Scale of distribution points (not necessarily productivity) Lower cost base (e.g. no corporate allocations)

5 Domestic insurers increasing need to become more strategic MNC Advantages Domestic Insurer Options Regional can apply within country Import talent onto management team Access to greater range of expertise/experience Ability to spread costs of investments Ability to lower per unit costs by sharing infrastructures Greater access to capital Contract expertise/experience from external vendors Make investments in those areas with greatest sustainable impact Focus where MNCs are weak Focus on local links in the value chain, e.g. strategic distribution relationships Avoid custom developments for undifferentiated infrastructure and products/services Increase use of outsourcing/off-shoring Align with similar domestic insurers in other countries for knowledge sharing/joint investments Ping An represents a good case study for domestic insurers 2 nd largest insurance company in China 1988: Ping An established 2002: HSBC, Morgan Stanley, Goldman Sachs acquires ~24% stake 2004: Ping An IPOs 2005: HSBC increases stake (from MS/GS) in Ping An to 19.9% 2007: Ping An purchases 4.18% stake in Fortis (largest single shareholder) 2007: Awarded Directors of the Year by Hong Kong Institute of Directors Adoption of international standards and excellent corporate governance First Chinese financial services firm to recruit a large number of top management from overseas with expertise and knowledge in various sectors and fields 19 Directors of which 7 are independent including 3 from overseas (as well as 5 non-executive directors from overseas) Regularly hires international consulting firms, foreign actuaries and accountants

6 Ping An has been more strategic in its approach than many competitors* Consumers Focused on affluent consumers in coastal region plus Beijing (higher margins) Increased emphasis on cross-selling Multi-channel distribution Enhancing quality and productivity of agency force (rationalize to only 180,000 agents); improve skills, sales management, support infrastructure Securing exclusive bancassurance relationships Call centers for tele-marketing Group members being cross-sold annuity and non-life products Products Broad range of products but profitability focused even at loss of market share Emphasis on regular premium as they provide stable revenue, higher margins Infrastructure Increased centralisation; streamlining of back office KPIs and incentives across all business functions 6 * Based on 2006 analysis of business strategy