Author: Ashton Wenborn

Zurich Sigorta on Turkey’s growing insurance sector

Posted on by Ashton Wenborn

The Turkish insurance sector, like the country’s economy, has taken off in recent years, due to favourable demographics, urbanisation, and an expanding middle class. World Finance speaks to Yılmaz Yıldız, CEO of Zurich Insurance Turkey, to ask whether this growth is set to stay.

World Finance:Yılmaz, Turkey has been one of the world’ fastest growing economies. Is this still the case? And how does this translate in the insurance sector?
Yılmaz Yıldız: It was one of the fastest after China and India: eight, nine percent growth rates we’re talking about. But with the ‘new normal’ which you see… okay, America’s doing pretty well, but Europe’s slowed down, no growth. In China what they call the ‘new normal’ is around seven percent growth. So overall there’s a shifting paradigm in terms of slower growth than what we’ve seen before.

So that also impacts Turkey. On one side you have the Fed tapering, which is expected to increase the interest rates; and the slowdown in the global economy is impacting the Turkish economy as well. So our ‘new normal’ is three to four percent in the next few years.

The non-life insurance sector is very much impacted by what happens in the general economy

The non-life insurance sector is very much impacted by what happens in the general economy. So, when the Turkish economy was growing eight to nine percent, the non-life market was growing 15-20 percent. Now with three to four percent growth, the growth rate in non-life is expected to be 10-15 percent: still slower than before, but materially higher than Europe and most of the emerging markets.

World Finance: Well which insurance sectors are the most developed? What sort of coverage does the country have, and what do you focus on?
Yılmaz Yıldız: So if you look at non-life, you’re looking at a $10bn market, which is growing 10-15 percent per annum.

Now, half of the market is auto; then the second biggest segment is property, then health, followed by marine, construction, liability, and the others.

If you look at auto ownership in Turkey, and you compare that to Europe, it’s one third to one fourth. And with the Turkish economy’s growth and increasing GDP per capita, auto ownership is expected to increase.

Add on top of that the kasko [comprehensive insurance] penetration rates, which is hovering around 30 percent, you have the overall market growth, plus penetration being just 30 percent: huge upside potential. So the kasko is one of the main lines that is expected to grow in future years.

The second one is liability: overall liability is growing, and it’s expected to grow substantially as well. Health, similarly, the third line. And on the commercial property, marine, construction; all these are very much linked to the investment climate, and as the Turkish economy grows, those will grow as well.

And lately, environmental risks, and short-tier products are demanded. And so in fact, we will be one of the first in Zurich to provide those to the companies.

World Finance: Well the Turkish government has implemented a number of policies to encourage insurance, such as the 25 percent state contribution to private pension plans. What impact has this had?
Yılmaz Yıldız: The private pension system started toward the end of 2003, and you have the state’s mandatory social security system. And this is a complementary and voluntary system on top of the state’s social security system.

And from 2003 until 2014, we have five million citizens voluntarily entering the private pension system, and the funds under management have become about $15bn. And the average growth rate is 30 percent per annum.

The Turkish government is trying to increase the savings rate; and one of the best ways to increase your long-term savings rate is to convince the citizens that they should be part of this private pension system, and save for the long-term.

World Finance: So what funds do you invest in, and how do you manage risk?
Yılmaz Yıldız: Financial income is a vital part of insurance companies, and usually you make more money from financial income than from technical income, because of the nature of the insurance business. Because you collect the premiums, but the claims come later on.

We have a very well managed and very well governed asset management policy; basically with our colleagues at headquarters, and we have special committees that we determine the strategic asset allocation. And for each country that changes. In Turkey, depending on the Turkish economy and investment climate, plus Zurich Group’s approach to asset management and the strategic allocation, we determine what that strategic asset allocation should be, and then we invest.

We have a very well managed and very well governed asset management policy

World Finance: Well Turkey is a close neighbour to a number of politically unstable countries in the Middle East. What impact has this had on the insurance sector, and what challenges does it pose?
Yılmaz Yıldız: Well, what is happening in Syria and Iraq is very unfortunate. It’s a human tragedy, on the one side. And on the other side it’s having a major impact on trade, as well.

Iraq is in the top three, top four trading partners in Turkey. Syria was a major trading partner before these unfortunate events happened. As such with these events, especially in Syria – the trade with Syria has diminished substantially. With Iraq, Turkey imports oil and exports all types of consumer goods and infrastructure capital goods.

In terms of insurance, in that geography; insurance penetration is lower compared with the other parts, but certain products such as marine and auto are impacted negatively, because of the higher loss ratios, and what happened there. So yes, you do have damage due to uprisings and some other events, but the impact so far has been marginal.

World Finance: Well, many of the insurance companies in Turkey are foreign-owned or partnered, so does this mean that Turkey’s a good place to invest for companies looking for new growth markets?
Yılmaz Yıldız: The past 10 years, more than $100bn were invested across the sectors; but roughly one third has been in the financial sector. And within that, insurance took a big share.

We see interest continuing, actually. There are new entrants, there are mergers and acquisitions that are going on. And if you go forward, there will be certain consolidation in the market, and M&A activity will continue.

World Finance: Well finally, how do you stay ahead of the competition?
Yılmaz Yıldız: Going forward we have to continue our growth. We’re growing more, 40-50 percent faster than the market.

We’re one of the most profitable – if not the most profitable – non-life insurance company. And our multi-product, multi-channel strategy will continue, and we will make sure that we are the best judged by our customers, our employees, and of course, our shareholders and stakeholders.

World Finance: Yılmaz, thank you.
Yılmaz Yıldız: Thank you.

‘There is a much stronger culture of philanthropy in the US’ than the UK

Posted on by Ashton Wenborn

World Finance: Americans are more generous than Brits, that’s according to my next guest Rupert Scofield.

Tell me, that’s a pretty bold declaration to make, what was it all about?
Rupert Scofield: That there is a much stronger culture of philanthropy in the US. I mean something like 90 percent of US citizens make some kind contribution, whether it’s financial, or volunteering for a charity.

I think the reason that [philanthrophy] isn’t so developed in the UK is that the UK has a much more public service mindset

I think the reason that it isn’t so developed in the UK is that the UK has a much more public service mindset. So I think there’s an attitude by the Brits, well why are you asking me for a contribution? I pay my taxes. That’s the government’s job, to take care of social services.

World Finance: Now the UK is just one country that heavily taxes citizens. If you look across Europe, there’s larger social welfare systems frankly. How are you going to change the psyche of the average European to want to give back as you suggest?
Rupert Scofield: I think it’s a matter of education, Kumutha – and we have to do a much better job measuring and demonstrating our results, and also communicating.

For many years we were just so busy building out our programmes and channelling the money into loans to poor people, and we didn’t care about demonstrating the results or proving the impact. It was so obvious.

World Finance: Do you think this is the future of stemming poverty and corruption in terms of allowing people to transcend some of those local barriers and, like you said, move forward and build?
Rupert Scofield: It is a case, Kumutha, of an essential piece. I mean, how in the world is a country, how is a family going to get ahead if they don’t have access to basic financial services? It’s like water, it’s like oxygen. It’s necessary for development.

It’s not the whole story of course, but it is a big part of the story, and unlocking the enormous productive power of the people around the world.

World Finance: OK, well you’re a great salesman, I’m sure you’ve convinced many. Rupert Scofield, thank you so much for joining me today.
Rupert Scofield: Thanks so much Kumutha.

Hoidi Group’s win-win strategy drives China’s industrial insurgence

Posted on by Ashton Wenborn

The emergence of China as a global economic superpower over the last decade is presenting huge opportunities for the country’s manufacturing and engineering industries. A number of firms have established themselves as integral in a range of industries, growing from modest beginnings just a few years ago. Perhaps a clear example is Hoidi Group, the number one jack-up rig leg fabricator in China (see Fig. 1), which has rapidly transformed itself in its two decades of operation.

Formed as a small fabrication company in China back in 1994, with the goal of being the country’s best offshore engineering supplier, its founder couldn’t have imagined how one event would lead to its subsequent astronomic growth. Hoidi’s current position as the number one jack-up rig leg fabricator in China and one of the best EPC houses in China can be traced back to the trust that the Chinese national oil company COSL (China Oilfield Service) placed in Hoidi in the early 2000s, when it took the chance to support a local yet burgeoning entity and awarded the fledgling fabricator a contract – a break that has set Hoidi’s mission of creating mutually beneficial strategies for its partners, its people and the community.

“Our commitment to sharing our opportunities and creating win-win situations has been instrumental in our success,” says Philip Tan, General Manager of Hoidi International. “We won that all important first tender due to a combination of factors: our previous work, our experience in welding and fabrication, the strong group of employees supporting us and my CEO’s outstanding personality and work ethic,” he explains.

“But it was this project that catapulted us to fame as China’s pioneer manufacturer of jack-up rig legs for the international market, and one of the few non-shipyard firms able to offer leg segment fabrication and erection in the world. From there, we have been in a strong position to include others in our success, which in turn has contributed to our success and further growth.”

A niche market
From this one project, things moved rapidly. In the next two years, Hoidi won leg and piping EPC projects for Noble JU2000E rigs, which gained the company the attention of the international market. The momentum started to build over the next 10 years and over the last decade Hoidi has successfully established itself internationally as a quality and reliable manufacturer to the industry, supported by a strong partnership in its steel supplier, JFE Steel Corporation. “Getting JFE on board was a boon,” comments Dong Xue Yong, VP of Hoidi Group, “as there are only five to six different steel makers capable of producing the thickness that is required for jack-up rigs.”

Our commitment to sharing our opportunities and creating win-win situations has been instrumental in our success

Partnering with JFE was a risk initially, but not one unfamiliar to Hoidi. “JFE was not able to produce the required quality of steel at first,” recalls CEO Geng Yue Jie. “But I remembered the chance I had been given by COSL as we were starting out and I believed that by supporting JFE, we could finally find a strong and trusted supplier.” His faith paid off and JFE came through on every project. With Hoidi finally sure of a firm supply of quality steel, combined with its skill and well-earned reputation, the group was ready to compete in the international market.

Since 2010, Hoidi has manufactured almost 20 percent of the world’s new rig legs and over 50 percent of the new GustoMSC model jack-up rig legs. By 2017, the legs for 25 percent of the 72 new jack-up units to be delivered in China, and a total of 42 ABS approved rigs all around the world, will be created by the company. Hoidi will also be providing fabrication and installation to almost 70 percent of all jack up rig pipeline systems produced in China by the end of this year.

As a testament to its skill, Hoidi is able to produce a complete set of GustoMSC model CJ46 375ft jack-up rig rack and chord within a month, meeting all standard ABS requirements, while a typical whole rig leg production takes the company four to six months, as compared to the eight to 10 months required by its competitors.

New-build jack up rigs to be delivered by Hoidi Group infographic
Source: Hoidi. Notes: April 2014 figures

Getting in on the success
“It sounds like a cliché, but it is our people that got us to where we are today and will propel us into the future as we branch out into topside fabrication and detailed module fabrication. So Hoidi is committed to creating win-win situations for our staff to ensure that they are recognised for their achievements and that their well-being is taken care of,” says Tan.

With Quality, Health, Safety and Environment (QHSE) measures in place, Hoidi aims to ensure a ‘zero causalities’ and ‘zero accidents’ work environment for all. “We don’t believe that producing products is worth more than life,” he says. “In fact we would rather delay production than compromise safety.” Taking care of one’s staff is essentially taking care of the company, an internal positive representation in action.

Management views the company like a basketball team. Not everyone gets to touch the ball for the entire game, but every player is key to the game’s success. With its people as a top priority, Hoidi has set up several incentive programmes to ensure that employees stay motivated and contribute to Hoidi’s competitive edge. Yue Jie believes in rewarding hard work, understanding that it is through its people that Hoidi continues to grow and gain competitively.

One key programme is Hoidi’s Freedom of Project Platform (FPP) scheme, aimed at allowing people to grow by giving them the freedom to make decisions. On a project basis, trained members who have performed well in their division in past projects are given the chance to lead future projects or tasks while adhering to the company’s values of creativity, progression, high quality, hard work and commitment. They are given standard managerial controls such as ‘check ins’ and ‘update meetings’, but are mostly left to their own devices to see how they are able to express themselves. If they fail, they learn. If they do well, they grow.

“There are many ways to get things done, and not just my way,” Yue Jie admits. “Having this platform with the right amount of controls will expand our people’s talent and creativity and, if they make a mistake, they can always come back and clarify. I am always willing to teach, to listen, to see how we can do things better the next time.”

Sharing successes
Ever cognisant of its mission to create a win for all, Yong confirms that “Hoidi is all about relationships and building something greater than what we are.” Forming and strengthening local partnerships all around Southeast Asia is a top priority as the company expands, now that it has been strategically headquartered in Singapore since 2012. “We believe that the best way for us to proceed forward is to develop partnerships with local companies, as we have expertise in fabrication and also the track record, whereas some local yards may not have similar experiences,” he explains.

Hoidi has a strong corporate social responsibility programme in place that ensures that the company gives back to the communities it impacts

Hoidi also sees opportunities in the Southeast Asian region where there is a high demand for rigs and the lack of local expertise to fabricate them. “With plenty of shallow water, over 75 percent is under 200 metres in depth in oil production areas, and ever growing demand for the region; we are currently exploring with certain companies to form strategic partnerships to work with each other’s strengths,” says Tan. True to the company’s philosophy of sharing its success, Hoidi aims to ensure that both the country and the company win in terms of increasing the region’s offshore capability and oil production for growing energy needs.

In addition to sharing the benefits with other local or start-up companies and its employees, Hoidi has a strong corporate social responsibility programme in place that ensures that the company gives back to the communities it impacts and showcases the benefits of the win-win strategy.

Harsh weather conditions in the fabrication yards of China pose a continuous problem for the company in keeping its working environment safe for its workers. In early 2008, heavy snow and freezing temperatures in Hoidi’s Shen Zhen yard impacted production and morale. Hoidi initiated an employee emergency programme and started the ‘although the cold is here, so are we’ slogan to let the employees know that the management was there for them. The project site emergency response team promptly distributed quilts for ancillary workers and applied other measures to ensure that everyone had the warmth they needed. The workers responded well and even maintained the datelines needed for production.

The warmer months also present their own challenges. In the summer of 2009, with continued high temperatures plaguing the southern region, the safety and morale of all was severely impacted. Sunstroke was a concern for those labouring under the sun, and especially for employees welding in confined areas. To negate the potential health issues, Hoidi initiated sunstroke security protocols such as requiring covered areas to be set up and installing additional fans in confined areas. Work schedules were also changed to provide extended work breaks and to avoid employees working outdoors at midday in an effort to reduce the effect of the heat. Although time was shorter, workers work more efficiently in a comfortable environment, and produced higher quality of work on time.

From a simple start-up 20 years ago to China’s pioneer in jack-up leg production globally, Hoidi has never forgotten the opportunities it has been given along the way. Its commitment to creating winning opportunities for the companies, people and communities it touches has become an indelible and ingrained pillar of its corporate culture, and the very reason for its rapid growth over the last decade.

Unemployment special: statistics to get worse for South Africa in 2015

Posted on by Ashton Wenborn

Chronic unemployment has long hindered South Africa’s move towards becoming a developed economy – to the point where a BBC poll conducted in May 2014 found the biggest concern among young people to be finding a job. And with the unemployment rate sitting at a rather uncomfortable 25.2 percent, this isn’t surprising. In fact, joblessness hasn’t fallen below 20 percent since 1997, and the figures are particularly high among the younger population – for those aged 15-24, it climbs to around 50 percent; the third highest in the world.

While South Africa’s economic growth over the past two decades has averaged a solid 3.3 percent per year, that figure seems less impressive when compared with other emerging market economies, which have maintained an average above five percent. Persistent jobless growth – a term which refers to an economy that demonstrates growth while its unemployment stagnates, or in some cases, increases – has plagued the South African economy to this point and restricted its progress.

Various parties, including the IMF and OECD, have urged the South African government to undertake drastic structural reforms, stressing the importance of improving the flexibility of the labour market and increasing educational attainment to the creation of jobs. The WEF found that in the sub-Saharan Africa region, fostering innovation would be the best solution to persistent jobless growth, along with increased creation of the jobs themselves, and improvements to targeted vocational development. The root of the problem seems to be education – despite the schooling system having improved considerably in the past two decades, many schools lack basic learning materials and at present, just one in 10 students obtain grades that would allow them to attend university.

President-Renzi

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Unemployment special: out-of-work youths plague Italy

Innovation is certainly another weak point for the nation – research conducted earlier this year by venture capital firm Savannah Fund found it to be the most expensive country to start a tech company on the continent. Governmental funding for start-ups and SMEs, or increased tax breaks for such companies would help to create the right environment for start-ups, which are central to economic growth, to flourish. Even smaller initiatives, such as the introduction of entrepreneurship education in schools and colleges, could help.

This year saw growth in the catering and accommodation, finance, real estate, general government services, agriculture, forestry, fishing and transport industries, which bodes well for employment. These industries should continue to flourish well into the new year, and a weak rand has boosted the tourism industry – which can also be expected to continue thriving. Finance minister Nhlanhla Nene told CNBC Africa in October that “the completion of major energy, transport and logistics projects over the medium term will boost the growth potential of the economy”. These projects include several undertaken by utility firm Eskom, which, while a long way from solving the problem, will contribute additional jobs to its sector.

The National Development Plan (NDP) was launched in August 2012 with the aim of improving SA’s low employment rate. Its somewhat ambitious goals range from increasing labour force participation to 65 percent, to reducing unemployment from 25 to six percent, both by 2030. This would require the creation of an additional 11m jobs, and the IMF calculates that for the plan to work, economic growth must exceed five percent per year. We already know that hasn’t happened so far, and as South Africa’s unemployment problem is structural, governmental intervention is essential to its reduction. Structural reforms are urgently needed for Africa’s biggest economy to keep up with its other emerging counterparts. Unemployment is predicted to fall by just 0.2 points to 25 percent in 2015. If every year following that sees the same rate, a three percent reduction will have been achieved by 2030 – evidence that intervention is desperately needed for the plan to work.

The country is likely to be hit by the withdrawal of many investors from emerging markets; a move that began in May 2013 when it was first hinted that the US’s QE would be coming to an end, and has gained momentum in the latter half of 2014. In October alone, $9bn was withdrawn from stocks and shares across emerging markets, and as the Fed slowly begins to raise interest rates, this is likely to continue. While eastern Europe has been hit the hardest by this move – sentiment has been doubly dampened following geopolitical tensions in the region – sub-Saharan Africa faces difficulty in the midst of the Ebola outbreak.

The economic costs of chronic unemployment can be catastrophic. If drastic government action is not taken imminently, South Africa’s unemployment figures will continue to eat away at its growth until that also grinds to a halt – which would eradicate any prospects of job market recovery completely.

Chinese inflation hits five-year low

Posted on by Ashton Wenborn

New government figures show that Chinese inflation dipped to a five-year low in November, and a look at the country’s performance indicators suggests that growth in the world’s most populous nation is slowing. At only 1.4 percent, the November inflation rate is 0.2 percent shy of October’s, and represents the lowest monthly decline since the same month in 2009.

The figures have inflamed fears that the country could be heading for a deflationary trap

The figures have inflamed fears that the country could be heading for a deflationary trap, and further easing measures look a likely prospect if the rate continues to plummet in the months ahead. Towards the latter part of November the central People’s Bank of China cut benchmark interest rates for the first time in over two years, which goes to show that fears of deflation are rife even among the country’s leading policymakers. Analysts, on the whole, expect inflation to clock in at sub-two percent throughout 2015, which could merit further easing measures.

China’s close run-in with deflation echoes circumstances in both the EU and Japan, where policymakers are fighting the same problem in a bid to repay wayward debt obligations and set the countries on an upward trajectory. And although deflation in China is not as pressing an issue as it is in either the EU or Japan, the country is currently contending with a prolonged slowdown that threatens to hamper China’s former competitiveness.

The country’s disappointing performance was far from excluded to inflation, however, and China’s third quarter GDP growth, at 7.3 percent, was at its lowest since the beginning of 2009. To compound fears of a coming crisis, producer prices have now plummeted for 33 consecutive months, and this month’s 2.7 percent producer price index slide is the worst since last June. Already weak demand and falling commodity prices have heaped pressure on the slowing economy, though experts believe the issues will let up in the year ahead and do not pose a sustained threat.

Wheelock Properties makes biggest en bloc office purchase in HK’s history

Posted on by Ashton Wenborn

Hong Kong is an international financial centre with a well-established economy and legal system. The territory’s continued economic prosperity depends very much on its success in maintaining this status. To keep a competitive edge, Hong Kong must ensure a steady and adequate supply of Grade A offices and continue to develop new high-grade office clusters through land use planning, urban design, area improvement and the provision of better transport networks.

Although constantly striving for improvement in these areas, Hong Kong’s traditional Central Business District (CBD) can no longer satisfy the growing demand for office space. In particular, larger occupiers who are looking to consolidate operations in one location now find it challenging to secure sufficient space at the right price. Occupiers are also forever seeking more cost-efficient space and certain occupiers are looking for creative alternatives to satisfy their space requirements.

All this translates into increasing demand for office space in decentralised areas, where availability is normally higher and rents are more affordable. Occupiers are considering decentralised locations such as Kowloon East as solutions to their space challenges.

Hong Kong’s CBD2
Kowloon East is an area comprising the Kai Tak metropolis, Kwun Tong and Kowloon Bay business districts in Hong Kong. The government of the Hong Kong Special Administrative Region has adopted a visionary, coordinated and integrated approach to facilitate the transformation of this area into a commercial hub, with the expedition of the Energizing Kowloon East initiative, intended to fast track development.

Kowloon East has been growing steadily in importance as a CBD2 for Hong Kong

Wheelock Properties is a forward-thinking developer and a pioneer in initiating development in, and adding value to, non-traditional but upcoming commercial areas. In support of the government’s initiative, Wheelock Properties continues to invest in Kowloon East, showing a commitment to building a new commercial hub for the territory – one that is energised by well-planned infrastructure and community development and has a critical role in enhancing Hong Kong’s position as an international financial and commercial centre.

Since its birth, Kowloon East has been growing steadily in importance as a CBD2 for Hong Kong. It is likely the territory will see a further increase in occupier attention over the course of this year. This is, in part, due to the fact the right kind of space is available in the area for growing numbers of multinational corporations that want to consolidate their business and need to find an area in which to do so.

Part of this growing interest in Kowloon East is due to Wheelock’s en bloc sales strategy, which supports large corporations’ strategic space planning and enables them to consolidate staff into one building, enhancing operational efficiency.

Wheelock Properties sold the East Tower, One Bay East to Citi in a landmark, $70m deal, in June 2014. The deal marked the biggest en bloc office transaction in Hong Kong’s history. The deal was the second en bloc tower transaction at One Bay East, following the acquisition of the West Tower by Manulife (International) in April 2013. The acquisitions of Citi and Manulife (International) combined totalled $1.2bn. Both deals were advised by the world’s largest commercial real estate services and investment firm, CBRE Group.

An overview of One Bay East
Located at 83 Hoi Bun Road, Kwun Tong, One Bay East is a Grade A, waterfront, twin tower office development. Both towers stand 21 stories tall and total 512,000 sq. ft. each. The development has efficient office space and panoramic sea views over the new cruise terminal and the future Kai Tak metropolis. With good connectivity, convenience and state-of-the-art provisions and specifications, it is the epicentre of Kowloon East’s commercial hub.

Wheelock Properties has a proven track record in Grade A office development, and continuously delivers quality developments to meet the high standards of multinational institutions. Firms such as Citi and Manulife have very stringent requirements when selecting premises, and their acquisitions of towers at One Bay East illustrate their commitment to the Hong Kong property market, and to Kowloon East.

For Citi, which has a long history of making significant investments in Asia Pacific, the decision to purchase the East Tower, One Bay East, underlines a belief and confidence in Hong Kong’s continued growth as a leading global financial centre and hub for its core regional business.

Citi’s acquisition was the culmination of a longstanding relationship between CBRE, Wheelock Properties and Citi in Asia Pacific. It is an example of strong collaboration between three parties that have worked together to create a business case, understand market dynamics and move a deal to completion.

The group strives to develop sustainable developments in its master planning, detail design and landscaping

The deal
CBRE was appointed by Citi to advise on the financial institution’s future footprint in Hong Kong. CBRE saw limited options in the market and a small window of opportunity to execute a deal that would coincide with Citi’s lease expiries in 2016 and 2017. Citi and the CBRE team decided to investigate the purchase of a property, instead of leasing new space.

In April 2014, the East Tower, One Bay East was identified as the ideal property for Citi’s future home in Hong Kong. Citi embarked on a complex consolidation, relocation and purchase in which it would relocate all four of its Hong Kong Island offices to Kowloon. It submitted an offer to Wheelock Properties and, by mid-June, the deal was done.

The consolidation of Citi’s offices into East Tower, One Bay East will enable the company to implement an activity-based workplace strategy, significantly reduce its occupancy footprint and its annual operating costs. A strategic investment, Citi’s ownership of this asset in Hong Kong’s CBD2 will insulate the financial institution from Hong Kong’s volatile rental market. The building will be handed over to Citi in Q4 2015 for interior fit-out, with the first occupants due to move in during Q2 2016.

Future development in Hong Kong
Wheelock currently has more than 1.2 million sq. ft. of waterfront office portfolio under development in Hong Kong, to meet increasing office demand. This includes One HarbourGate at Victoria harbour cluster (680,000 sq. ft.) and the redevelopment of Wharf T & T Square (600,000 sq. ft.) in Kowloon East. One HarbourGate comprises twin, Grade A, office towers and a pair of low-rise retail villas with an open Victoria Harbour view.

The group strives to develop sustainable developments in its master planning, detail design and landscaping. Green provisions and energy-saving devices are provided to reduce power consumption for lights, air conditioning and water, which help operational savings in the long term.

Sky garden or green spaces will be provided in future developments to create a better work and living environment. Wheelock’s design team and landscape consultant take care of landscape design and maintenance to ensure green spaces fit each project. The group also promotes environmental awareness and encourages care for the environment among staff and business partners, while also supporting various green awareness activities. Beyond ensuring its properties meet high environmental standards, Wheelock Properties will continue enhancing the physical spaces and communities in which people live and work in Hong Kong.

Former Satyam chairman jailed in accounting scandal

Posted on by Ashton Wenborn

Ramalinga Raju, once the chairman of India’s fourth largest IT company, has been sentenced under the Companies Act by a local court for overstating profits several years ago.

Other senior executives including the CFO, CEO and former managing director – Raju’s brother – have also been jailed. The six-month sentence marks the longest possible under the Companies Act.

The six-month sentence marks the longest possible under the Companies Act

In a letter in 2009, Raju confessed to having overstated revenues several times in order to hide the company’s poor performance. “It was like riding a tiger, not knowing when to get off without being eaten,” he wrote.

In July several of the group’s former senior executives faced penalties from the market regulator with fines totaling $291m (Rs18.5bn), the FT reports.

According to Business Standard, the police’s economic offences wing (EOW) filed a separate case which saw Raju and others convicted of six out of seven accusations – they included fabricating balance sheets, accounts and dividends. The Central Bureau of Investigation (CBI) meanwhile filed another case, citing forgery, criminal conspiracy and fiddling records among other misconduct.

The scandal marked one of India’s most destructive in history, driving the Securities and Exchange Board of India to tighten up its corporate governance regulations. The case led to overseas investors fleeing en masse and saw Satyam verge on bankruptcy.

Indian IT group Tech Mahindra acquired the company in 2013 to save its reputation. Mahindra did away with the brand name and seems to have prompted a recovery, with shares rising 57 percent in 2014.

But the company has nevertheless suffered from the scandal according to Anand Mahindra, the group’s chairman. “We never expected this [legal battle] to be drawn out for so long, where the person who is part of the cavalry is being targeted and fired on,” he told Indian news agency Press Trust. “We are the rescuers… we are the white knights, we are not people who did the stealing.”

Binary options: why didn’t the regulators step in earlier?

Posted on by Ashton Wenborn

It is a rather one-sided market. But how do they work? Well, just like standard options they allow investors to place a bet on whether a particular stock – at a predetermined point in the future – will rest above or below a line drawn in the sand commonly known as a strike price. But unlike traditional options contracts, which provide a safer alternative to stocks, these all-or-nothing alternatives, expose investors to massive risks and minimal returns.

Binary options trading sites have grown in popularity among armchair investors, who like the allure and prestige associated with playing in the big leagues, but prefer the minimalism and effortlessness of betting that is reserved for online casino sites. Though these ominous options may look like an easy way to trade stocks. Those that do are more likely to find themselves with little but lint lining their pockets than they are of winning big. Binary options’ trading is more Fremont Street than Wall Street, with the sites responsible for pushing these junk instruments choosing not to generate revenue by traditional means, such as charging a commission fee. Instead, they make their profit from the ‘spread’ that exists between possible payouts and losses, stacking the odds in the houses favour. If investors intend on making any money at this table they are going to need skills that would put even Raymond Babbitt to shame. Even if you get the call right 55 percent of the time you will be lucky if you break even, let alone any sort of profit.

The fact that binary options customer base consists predominately of inexperienced retail investors, has had a big impact on the way these outfits choose to promote these financial abominations, with the marketing style for these toxic options drawing parallels with other ‘get rich quick’ schemes you see all over the web; promising everything and delivering nothing. Online adverts boast about how others are “earning over 70 percent every hour on the hour” in a desperate attempt to trick people into signing up. But at least their sad attempt at self-promotion helps expose these fraudsters for what they are, which is nothing short of con artists. That at least is the view now taken by regulators in several jurisdictions.

In order to protect investors from these cowboy casinos, regulators in the US decided to step in. And on June 6 2013, the US Commodity Futures Trading Commission (CFTC) issued an Investor Alert in an attempt to make investors aware of the dangers of binary options and the trading platforms that they operate on. Sadly, it has done little to deter people from throwing their money down the toilet.

It is common to see new financial instruments gain a bit of traction at inception because the initial excitement and lack of knowledge that surrounds them means that it often takes time for people to see them for what they really are, which is often worthy of contempt. Let’s hope that investors get wise quick before they end up losing too much of their hard earned money.

Thai Life Insurance cements itself in customers’ hearts

Posted on by Ashton Wenborn

The Thai life insurance market is booming. In the first five months of 2014 the sector grew by an astounding 20 percent, with new premiums skyrocketing up by 29.1 percent. These remarkable figures are due to the fact that Thailand is a relatively underdeveloped market, where penetration has been historically low. But following intervention by the government, the Thai population is increasingly aware of the many positive benefits of purchasing life insurance – and keeping it for good.

Thai Life Insurance has long since been a leader in the local life insurance market, and with the industry prospering, the company has decided to relaunch its mission and philosophy. “This year, Thai Life Insurance announced a change in its vision and mission, to become a people business giving priority to the company’s stakeholders, both direct and indirect,” says Chai Chaiyawan, President of Thai life Insurance.

“To this end, the company has had to change its beliefs and values because we not only sell life insurance, but more importantly, we sell trust, care, empathy and helpfulness. Thai Life Insurance’s new position from now on will be like a close friend that is prepared to stand alongside and do everything possible to make every stage in life of our customers secure. The key is true understanding of our customers. At the same time, we must not stop pioneering, finding new life insurance solutions to meet the needs of all life situations of everyone.”

The move could not have come at a more opportune moment; as the industry grows and attracts investment; Thai Life Insurance has clearly positioned itself as a consumer favourite brand, approachable and reliable. “Thai Life Insurance’s road map going forward will be in line with its new vision to be a People Business by determining a business strategy that is not merely re-branding or re-marketing. We will give importance to management in various areas,” says the Chaiyawan.

$200

Life insurance density in Thailand

Thailand is a high-growth market for insurance. Market penetration is a low 2.6 percent, while other Asian powerhouses like Singapore and Japan boast penetration rates of four and nine percent respectively. Furthermore, the life insurance density in Thailand currently stands at around $200, a fraction of Singapore’s $2,000 and Japan’s astronomic $4,000. That means that opportunities in the sector are plenty, for companies that have clear strategies.

Life planners to life partners
“Thai Life Insurance’s new vision will focus mainly on people, giving importance to internal personnel by developing and driving personnel both at the head office and branch offices to be more than just employees of a life insurance company,” says Chaiyawan. “They must think of customer needs as well as give importance to doing good deeds. In this regard, the company has supported its personnel to continuously engage in social contributions.

“Meanwhile, sales personnel must not merely be life insurance agents. They must develop from life planners into life partners, like life companions in every situation for policyholders or people in society. They must be capable and knowledgeable persons in order to offer total life solutions. At the same time, they must be good people with integrity, ethics and conscience as well as be givers. Thai Life Insurance personnel must continue to learn and never cease to innovate to be on top of every situation and be able to add security for customers and society.”

Though small, the Thai market is fiercely traditional, with most of the business being conducted in specialised agencies. Thai Life Insurance is looking to innovate in this respect as well, and as such has invested heavily in the training and dispatching of its agent force. “Creating sustainability for our main sales channel is very important at present as customers demand better services and demand better understanding of products in order to be able to make comparisons with products and services offered by other companies,” says Chaiyawan.

“At the same time, life insurance products are becoming more sophisticated, such as investment linked products, while agents are getting older. Despite the benefit in terms of good relationships between agents and customers, we must not forget that it is harder to motivate or manage older agents to have skills in selling new products. We must make Thai Life Insurance agents to be more than just life insurance agents. They must be trustworthy, be able to take care of clients and provide better services, clearly understand products and customer needs, as well as be professional advisors.”

New and innovative life-insurance products are another key factor in the company’s development plans. “We have been busy creating value for alternative channels such as bancassurance and direct marketing. We must create a business model that can be integrated. For example, Thai Life Insurance products can be bundled with other products based on customer preference as well as making life insurance integrated into the bank’s incentive system,” says Chaiyawan. “At the same time, work processes must be able to be integrated with the banks. Life insurance companies must be able to create value added which will support customise marketing for the banks, such as producing training materials and organising CRM activities for customers from the banks.”

Staying at the top
Part of these innovations have been to ensure that Thai life Insurance can remain at the top of its game, and continue to compete successfully, as the local market heats up. The company is reviewing its product portfolio in order to come up with new products to meet their customers’ every need. “Products that do not meet our clients’ needs must be changed,” says Chaiyawan.

We cannot work independently. Everyone is like an orchestra that must synchronise and play together in unison to deliver a harmonious song

“The work will integrate insurance mathematics, underwriting, and marketing in order to innovate new insurance products that will satisfy customers. The integration process involves setting up joint working committees such as the Product Committee. At the same time, evolution of the IT system and business process requires better management. Thus, management of talent and creation of a corporate culture is essential. We cannot work independently. Everyone is like an orchestra that must synchronise and play together in unison to deliver a harmonious song. This translates into strong teamwork.”

Thai Life Insurance’s innovative new business plan is also committed to generating sustainable profits, and optimising the company’s returns. This is because Thailand has proved to be an increasingly volatile market over recent years, with political instability threatening the development of the economy, and a growing propensity for epic storms potentially causing trouble for insurers.

“[We must be] giving importance to investment and professional risk management with rationalised investment decisions, consideration from risk perspective, and emphasis on asset liability and risk management process,” says Chaiyawan. “At the same time, in managing the business, we not only focus on growth. To create sustainable profits, we cannot emphasise solely on growth; we must also focus on the company’s value paradigm. Thai Life Insurance is committed to optimise profits and return profits back to society in the form of corporate social responsibility. In creating profits, the company must maximise products and sales channels as well as put cost perspective into operation management in all areas. ”

An open market
Thai Life Insurance, though a traditional and recognisable Thai brand, is taking its expertise and know-how to launch across number of other ASEAN markets. This rapid-growth region has been increasingly targeted by insurances companies from all over the world, but because of Thai Life’s strong presence in it native Thailand, they are optimally placed to expand across the region fast. “Preparedness in terms of brand is essential,” says Chaiyawan. “Today, we have already refreshed our brand. Furthermore, we have formed a strategic partnership with Meiji Yasuda, making us ready to effectively compete.”

The goal of Thai Life Insurance is to be the life insurance company that is in the hearts of customers, both in Thailand and those in ASEAN, because in the near future, it will step into the AEC. In order to be remembered, everyone, whether policyholders or not, must remember Thai Life Insurance as a part of society, an organisation that has received recognition from society and is able to be a sustainable part of society. Chaiyawan puts it concisely: “What defines achievement of our goal to be an iconic regional brand.”

‘Kuwaiti Banks are well-placed for potential risks and shocks’, says KIB

Posted on by Ashton Wenborn

Kuwait’s banking sector hit record highs in the first half of 2014, reaching profits of $13.3bn. World Finance speaks to Mourad Mekhail, Board Advisor of Kuwait International Bank, to discuss what’s driving the country’s banking industry success.

World Finance: Well Mourad, Kuwait ranks fifth in the world in terms of highest density of millionaires. Would you say this is a good representation of the country’s economy as a whole?
Mourad Mekhail: Indeed: Kuwait has a strong and solid economy, driven by oil and linked to the oil price.

The high growth in private wealth is driven by the high growth of the saving rates. Kuwait International Bank is always developing new, innovative products to accommodate and exceed the needs of these high-net-worth and ultra-high-net-worth individuals.

Kuwait has a strong and solid economy, driven by oil and linked to the oil price

World Finance: Well how well developed would you say the banking sector is in Kuwait, and what do you think is driving the profits?
Mourad Mekhail: The Kuwaiti banks are well-regulated by the Central Bank of Kuwait. Driving forces are high liquidity, high capitalisation – which, by the way, exceeds the international requirements of Basel III.

Again, high-improved asset quality, high provisioning, declining of non-performing loans, and continual profitability.

By the way, these factors and these criteria: they were the driving forces for our bank at the beginning of the year to receive the upgrade for its rating to A+.

The results of stress test exercises by the Central Bank of Kuwait shows that Kuwaiti banks are really solid and well-placed for potential risks and shocks.

World Finance: What’s Kuwait International Bank’s share value, and what keeps it competitive?
Mourad Mekhail: The share value is increasing tremendously in our bank, and comparing to the last four years we have doubled it. We have achieved a record high of 320 fils (KWD 0.32; $1.10).

I really take this opportunity to congratulate everyone in my bank for these achievements, and in particular Sheikh Mohammad Al-Sabah. He managed and succeeded again and again to optimise the performance and the share value of multiple institutions – among them is Kuwait International Bank – by taking wise decisions and managing certain crises in his banking career, bringing the share price of the bank to that level and value.

World Finance: So what’s your approach to crisis management? Especially considering the amount of political instability in the region?
Mourad Mekhail: Kuwait International Bank is a transaction and profit-oriented bank. We are always pursuing certain transactions which we feel that we have competitive advantages in these transactions.

I really take this opportunity to congratulate everyone in my bank for these achievements

Competitive advantages in terms of: that we understand these transactions, we understand the risks embedded in these transactions, we know how to mitigate and hedge the risk in these transactions. Also in certain markets that we feel that we don’t have high competition, and if we have all of these last three factors we are in a position to achieve higher returns.

World Finance: Well finally, what do you see to be the trends that will affect the banking sector in Kuwait in the future, and what are you targeting for growth?
Mourad Mekhail: The Kuwaiti market is a small, very highly competitive market.

Nevertheless, in the local and domestic market there are big opportunities, alongside the ambitious governmental development plan, which is very important for the next few years.

Kuwaiti banks have to continue adopting the universal banking model; holistically offer retail, private and corporate banking to their potential clients; also beyond the domestic market.

Expanding internationally will bring them to a position where they are reducing their risk and increasing their return, which will be reflected in the share value of their banks.

World Finance: Mourad, thank you.
Mourad Mekhail: Thank you.

Africa after Ebola: what healthcare and economic infrastructure upgrades are needed?

Posted on by Ashton Wenborn

The greatest revelation from the Ebola crisis was how much healthcare and economic infrastructure upgrades are badly needed in Africa. World Finance speaks to Rupert Scofield – President and CEO of FINCA (Fighting Poverty with Financial Inclusion) – about changes in the continent.


World Finance: As we think about how West Africa can recover from this crisis, do you think that the international community, local stakeholders, should focus more on the people who are frankly building local economic infrastructure than on governments?
Rupert Scofield: Kumutha, if there’s two things that I think would unleash the enormous productive potential of the African continent, one would be dealing with rule of law, allowing the smaller people justice through the court system.

Also, investing in infrastructure like power. I was at a conference on energy the other day and, incredible statistic, the World Bank estimates that if all people could get access to power in Africa, the GDP would grow by four percent a year.

I love the African people and the continent. It’s been one of the greatest experiences of my life

So I’m optimistic, I think the governments are becoming much more responsive, so hopefully we’ll see change on both these fronts.

World Finance: Beyond governments, who else needs to get involved, and in a more aggressive way? Emerging middle classes perhaps?
Rupert Scofield: You know, there’s an attitude of sort of helplessness on the part of many of, even the elites and the affluent, but certainly the growing middle class. There’s an inclination, I’m going to stay out of politics, it’s a dirty business, but they actually have to get involved.

I can’t really speak of my country, because we have enormous apathy on the political front in America. I think something like 40 percent of the population votes in elections, which is shameful. But if you stay on the sidelines then you have to be responsible for the lack of progress.

World Finance: And speaking of America, if you want to talk about the most vocal business community, the American business community drives elections.
Rupert Scofield: It certainly does.

World Finance: So is that what we’re going to see in a more mature Africa? I hate to gloss over the whole continent as one, but as it moves forward are we going to see that sort of push, the political machine?
Rupert Scofield: I certainly hope so. I love the African people and the continent. It’s been one of the greatest experiences of my life, and the people are fantastic, but they do absolutely have to get involved.

I believe, being a businessperson myself, that is the key to economic development. It’s not going to be government infrastructure or World Bank investment. It’s going to be millions of small and medium enterprises, just like in the US, that provide the employment and the production, and generate the wealth for the future.

We make loans for school fees to the women who live in those communities

World Finance: Finally, Rupert, this is your plug. Tell me how FINCA Plus is going to play a role in this future.
Rupert Scofield: FINCA Plus is the term we use for going beyond just microfinance, and getting involved in energy, education, healthcare.

In fact, what’s really interesting Kumutha is a lot of our clients on their own initiative are entering these sectors. We have teachers who leave the public education sector, take loans from FINCA and set up little schools and communities, and they hire other teachers, and they build infrastructure. So you get a school that is in the community, the children don’t have to walk 10 kilometres to the public school.

Also, we finance the demand side. We make loans for school fees to the women who live in those communities, so their kids can pay for the tuition.

Britam: ‘Kenya has successfully entered the bond market’

Posted on by Ashton Wenborn

Kenya is leading its African neighbours by raising $2bn in the sovereign bond market. World Finance speaks to representatives from British American Insurance Co. Kenya, Stephen Wandera and Ambrose Dabani, to find out how this move is helping to boost investment products.

World Finance: Now, Kenya is rivalling its neighbours – we’re talking about Zambia, even South Africa – in terms of its investment prospects. Can you tell me what entering the bond market has meant?
Stephen Wandera: Kenya has successfully entered the global bond market. And this has increased foreign direct investment in the country. It has also reduced the crowding-out of the domestic borrowers’ market. And it also has resulted in the entry of Kenya into the top three bond markets in sub-Saharan Africa.

We’re looking at a bond market of $15bn, and this has increased liquidity tremendously. And of course, this means that opportunities for price discovery, and the stabilisation of the bond market, have increased very dramatically.

World Finance: Ambrose, tell me: how is this money being invested? Both locally and internationally.
Ambrose Dabani: Kenya’s embarked on a ‘Vision 2030,’ where we hope to place ourselves as a middle-income country. Therefore, it’s key that we are investing in our infrastructure.

We’re looking at a bond market of $15bn, and this has increased liquidity tremendously

Here I’m talking about road infrastructure, rail infrastructure; we’ll also need to invest a lot in the energy sector. And here we’re focusing on geothermal energy.

We’re also investing in food security and general security, because of the increased terrorism risk in the region.

World Finance: Very interesting; now we know that the information communication technology sector is expected to get a big boost from the entry into the bond market; tell me how this money is going to be spent?
Stephen Wandera: The ICT industry provides direct investment opportunities for investors. Apart from that of course, it has also resulted in business tapping opportunities for revolutionising the business, automating business. We have got fibre-optic cabling solutions all over the country; four options as a matter of fact, for anybody, at any time, to tap into.

World Finance: Now we’ve got the momentum that we just heard about, but there have been recent events that have impacted the industry. There’s been a temporary shadow in fact, following the terrorist attacks in Kenya. Tell me, how has that – or has that? – affected investor sentiment.
Ambrose Dabani: The recent events you’re referring to, the Westgate attack, and more recently the attacks that happened in the Lamu, one of the coastal towns in Kenya. Our take on that is, we haven’t seen the investor sentiments come down. In fact investors have been very bullish. Last year alone, Kenya still got $510m in terms of foreign direct investments.

I think the investor community realises that terrorism is a global menace. It is not restricted to Kenya. Even here in London, you also issues around terrorism. And the investor community is also very keen on what the government is doing. And I think they approve of the successes that we’re having in Somalia, in terms of downgrading Al-Shabaab capabilities there.

They also approve of the security measures that the country is taking. Part of the money that we raised is investment in security operators. And therefore we’re seeing the investor community approving those actions. They’re looking at us, and looking at the partnerships that we have now. d partnerships that are developing around terrorism. And therefore we believe that the market will learn to ignore terrorism as a factor when it comes to doing business with Kenya.

World Finance: Can you tell me a little bit about frontier markets, and what your long-term investors are looking to take advantage of?
Stephen Wandera: Our long-term investors are very bullish about Kenya at the moment. We’re looking at a GDP which has been in excess of five percent over the last three years. We’re looking at an IT platform which is available to the entire economy. We’re looking at a very, very capable human capital base, which has made a contribution in the West. We have got a very significant diaspora.

Investors really are looking for higher risk-adjusted returns

We’re looking at a market within the region of 160 million people.

Over and above that, we’re looking at natural resources, which are being discovered at this particular time. Some of them extremely exciting; particularly in the petroleum industry – oil, gas, and so on. Not just in Kenya, but throughout the entire region.

Over and above that, we’re looking at an internal market where we have devolved government. So there are lots of opportunities within the country itself.

So it is a very, very exciting story. Investors really are looking for higher risk-adjusted returns. And certainly these returns are available within Kenya and throughout the region.

World Finance: Given those lofty expectations, can you tell me where do your long-term expansion plans fall into the mix?
Stephen Wandera: We believe that our insights and our business – our insights of sub-Saharan Africa – give us an edge over our competitors, both within Africa, and outside.

Then we’re looking also at devolved government in our own country, which has resulted in absolutely amazing opportunities, including opportunities to penetrate the country, and to really take advantage of the catchment areas that have become more accessible as a result.

World Finance: Stephen, Ambrose, thank you so much for joining me today.
Both: Thank you very much.

BOCG Life on Hong Kong’s dynamic RMB insurance market

Posted on by Ashton Wenborn

The RMB insurance market in Hong Kong is best characterised by untapped potential, save for a select few institutions whose understanding of the sector has seen them rise above the rest and capitalise on what lucrative opportunities exist. World Finance spoke to Terry Lo, CEO, BOC Group Life Assurance about the market, and the many ways in which the company has capitalised on the still expanding RMB insurance business.

Tell us about the RMB insurance market and your firm’s role in it
Sales of RMB life insurance policies have more than doubled since 2010, according to the Office of the Commissioner of Insurance (OCI). Hong Kong policyholders spent $1.5bn on RMB life insurance policies last year, up from $52m in 2010, and OCI figures showed that more than 12.5 percent of new policies sold last year were for RMB insurance, up from seven percent in 2010.

The growth momentum in the local RMB insurance market continued in the first quarter of 2014. New business recorded year-on-year growth of 44 percent, reaching $5.5m and accounting for 16 percent of total premiums. As the market’s number one in business volume we were the first to launch a RMB insurance product, the first to roll out RMB universal life insurance product, and the provider of the most extensive range of RMB insurance products, BOCG Life specialises exceeding expectations. In the first quarter of 2014 alone, the company’s market-share in RMB insurance increased to 75 percent, reaffirming its leadership in this sector.

Hong Kong’s economy has gradually glued to that of China, as the majority of living staples and necessities are imported from there

BOCG Life is expanding its RMB business. How is this most noticeable?
At BOCG Life, we recognise the importance of meeting customer demands and creating awareness of our offerings through an effective marketing strategy. That’s why we decided to develop a RMB solution marketing campaign. 

The campaign began by capitalising on the knowledge and experience of its bancassurance channel, which covers more than 260 bank branches and serves more than 3.5 million customers under the Bank of China Group. Next, effective profiling of integrated data created a multi-dimensional view of customers’ and prospects’ motivations for buying life insurance.

Hong Kong’s economy has gradually glued to that of China, as the majority of living staples and necessities are imported from there. Many customers plan to spend their retirement in China, and make frequent pleasure and business trips. As a result, and to hedge against inflation and to keep abreast of the currency’s appreciation, customers are keen to preserve and grow their wealth in the RMB currency, and buying a RMB insurance product becomes an integral part of their wealth management.

Can you expand on your insurance products and how they differ from other firms?
Riding on competitive edges in RMB insurance, BOCG Life now enjoys a leading position in the RMB insurance market, both in terms of market share and product diversification. It currently offers 12 RMB insurance products, ranging from whole life, universal life and annuity, through to endowment, medical and health policies, and retirement planning. In 2013 and the first quarter of 2014, one of its best-selling products, the Income Growth Annuity Insurance Plan, accounted for more than 30 percent of new standard premiums in the RMB insurance market.

Drawing on a diverse range of multi-currency product services, BOCG Life’s offerings continue to evolve in parallel with customers’ changing needs. The issue age of most insurance products has been lowered to zero to encourage parents to plan and save for their children’s future. And whether a customer is seeking short-term income protection, annuity income streams for retirement, or a comprehensive package to achieve diverse financial goals, BOCG Life consistently delivers solutions that meet each individual’s needs. 

How has this past year been for BOCG Life?
In 2013, BOCG Life delivered another year of stellar results. Total premiums clocked in at $2.3bn, representing year-on-year growth of 51 percent, while new business rose to $80m, up 29 percent from the previous year. Its market ranking climbed from eighth place in 2008 to third in 2013 and to the top place in the first quarter of 2014 in terms of new business, and recorded a profit before taxation of $1.5m in 2013 and total assets of $10.2bn as of December 31 2013.

BOCG Life’s strategic focus on RMB insurance products continued to drive immense business growth in 2013. This momentum was sustained into the first quarter of 2014 when the market share in RMB new standard premium rose from 68 percent in 2013 to 75 percent, which again reinforced the company’s leadership in the market. BOCG Life has been granted a financial strength rating of ‘A’ and an issuer credit rating of ‘A’ by the international rating agency AM Best, in addition to a rating of ‘A2’ by Moody’s Investors Service in recognition of its strong financial position.

What factors have affected your business and to what extent?
Currency appreciation and the possibility of appreciation over the longer term continue to stimulate the demand for RMB insurance policies, giving BOCG Life the opportunity to lead in this market space. One of its best-selling products, the income growth annuity insurance plan, accounted for more than 30 percent of the new standard premium of RMB insurance in the market last year and in the first quarter of 2014.

What key developments has the firm seen in the past year?
Responding to market growth, BOCG Life has diversified its distribution channels aiming to offer all-round, wealth management services. It has developed an agency channel to serve non-bank clients while expanding into the broker channel to target on high net worth clients.

What has been the motivation for these developments?
Our service pledge aims to provide customers with convenient and reliable services. BOCG Life continues to evolve in parallel with customer’s ever-changing needs. With a network of over 260 bank branches and more than three million customers, the company is well positioned to harness customer insight and understand what kind of insurance products people in Hong Kong might need. We’re committed to helping customers with their life protection and financial planning needs, becoming their lifelong partner of choice, and working hard to provide them with best-fit insurance solutions.

How are your customer numbers and what is your current customer strategy?
Currently the types of BOCG Life’s customers range from wealth management and retirement planning, through to life and medical insurance protection. The company has a customer centric culture and is passionate about creating superior experience for them. The sheer range of tailor-made life insurance plans and multiple distribution channels represent only a select few examples of how it puts customer first. BOCG Life is also the first and only insurance company that makes its service pledge public, showing a strong commitment in the service standards delivered by its people.

How is this strategy reflected in your customer service and overall customer satisfaction?
BOCG Life prides itself on maintaining an exceptional service turnaround time in every aspect of its back-office operations. According to a satisfaction survey conducted in 2013, BOCG Life achieved promising results with customer services perceived to be superior to key competitors. More than 55 percent of customers rated its services as very good or good. It also achieved a perfect score on claims, which was significantly higher than the industry benchmark of 70.

How does your firm develop sales across channels at the moment, and how does this benefit the group?
To really be all-inclusive, BOCG Life has expanded into the broker and agency channels that focus on segments like high net worth, mainlander and mobile customers. Not only products but also service models and business support services are specifically designed to help the company acquire, grow and retain customers from different channels.

Another major initiative for BOCG Life this year is the launch of an e-channel platform. It will enable interested buyers from any segment in the community to take out life insurance instantly online, giving them a brand new experience in getting the protection they want. 

What is your focus for the coming years and how do you expect your firm to develop?
In the years to come, it is high on BOCG Life’s agenda to maintain a leading position in the market. By enhancing our distribution capability and product offering, we expect to further capitalise on our extensive experience in RMB business as a key differentiator to win more customers.

CorpVida helps to solidify Chile as a life insurance leader

Posted on by Ashton Wenborn

Over the past few years Chile’s insurance market has grown faster than that of any other country in Latin America, and it’s current growth rate is almost double that of its GDP – that’s predicted to increase further in the future as its population ages and attitudes continue to evolve. With those changes come challenges, however, and that’s something the country’s financial companies have to recognise and adapt to.

One of the country’s leading life insurance firms CorpVida has been privy to that growth, developing significantly since its founding over 20 years ago through community involvement, corporate responsibility and a customer-focused vision. CorpVida’s General Manager Christian Abello spoke to World Finance about Chile’s life insurance market and how the company is stepping up to the challenges while helping the wider community.

How has the life insurance market in Chile grown over the last few years?
The life insurance industry has been growing at a much faster rate than the country’s economy in recent years. We believe this will continue over the next five to 10 years given that incomes have now increased and people are becoming more aware of the need to protect incomes and secure a successful retirement.

Chile has the highest penetration of insurance premiums in the region (4.2 percent, compared with a Latin American average of 2.8 percent). It has a per capita premium of almost $700 – significantly higher than the regional average of $300. We believe there is still space for further development however, given that premium levels per capita in Europe and the US are between three and eight times higher than here. Chile’s large number of insurance companies suggests a promising future.

40%

Growth in CorpVida market share in five years

Has CorpVida’s performance been in line with that of the market or exceeded it?
Our performance has been in line with what has happened in the market. In recent years we’ve had consistent growth in life insurance, traditional products and retirement funds. We have achieved almost 40 percent growth in our market share over the last five years.

In terms of retirement annuities we continue to occupy a leading position, with a market share of almost 15 percent, which puts us among the three biggest companies in the country for that sector. We are the largest firm in terms of pensions paid, serving more than 90,000 people.

With around 270,000 customers and branches throughout Chile, our main mission has been to ensure a secure future for people – we’re achieving that promise through commitment, professionalism and a highly qualified and motivated workforce which delivers excellence in providing advice, services and solutions to customers.

What opportunities are there in Chile for the insurance market?
We hope to expand the market in Chile and to reach different segments of the population through affordable insurance plans. It’s also important to introduce new incentives to encourage people to save in preparation for their retirement, for example by creating group saving plans for employers.

How much further development does Chile require in order to catch up with developed markets?
We have encouraged regulatory changes to modernise and further strengthen CorpVida. We are actively involved with the risk-based capital (CBR) approach, which allows asset and insurance risks to be managed effectively – providing reassurance to shareholders, policyholders, regulatory authorities and the community.

The insurance industry accounts for the second largest institutional investor in Chile’s financial sector, so as a country and industry we are constantly developing solutions to leverage financial instruments. Local rules and regulations help us to do that.

What challenges does the industry face in the coming years?
The first challenge is the consumer; there has been a significant change in consumer behaviour and education, meaning they now demand better insurance services and more transparency. Insurers need to innovate in order to manage consumers’ financial risks and protect their quality of life. We believe technology will play a big role in the future with internet usage increasing, so we need to embrace that in order to improve our customer offering.

The second is regulation; Chile joined the OECD, which means increased regulation for the country’s financial sector – that’s had a strong impact on the insurance industry, and it’s likely to continue to have an effect in the future. A new trade act was introduced to provide consumers with more rights and to protect policyholders.

One of the biggest challenges the new regulatory environment entails is the need to monitor risk-based capital, which our head of securities and insurance is overseeing. We will follow international best practice guidelines to streamline our processes.

What impact will higher life expectancy have on the industry?
Our industry is heavily influenced by global economic trends. But there is another important factor influencing us, and that’s the country’s ageing population as life expectancy increases (see Fig. 1).

According to the Association of Insurers, there are currently 1.8 million people over the age of 60 living in Chile, and that’s expected to double by 2020, before reaching six million in 2050. The Annuities products we offer are therefore becoming increasingly appealing as they have a currency-indexed fixed income and therefore don’t entail the risks that pension funds do. We are committed to improving quality of life for those retired by helping people make informed decisions in preparation for their retirement.

How has CorpVida developed its culture of ethical responsibility over the past few years?
We’ve designed a vision of corporate sustainability and corporate social responsibility to strengthen the economic value of the business and contribute to social development. In so doing we aim to meet the expectations of shareholders, customers, employees and the local community.

Chile has the highest penetration of insurance premiums in the region

In the past three years we have worked on strengthening our corporate culture, focusing on transparency, commitment and accountability by establishing a set of values ​​that are now recognised as being among the most important assets of the organisation. We have developed our training programmes at all levels of the business to secure a skilled team of ambassadors.

We are focused on developing people and their families by offering protection and savings solutions, and we do it in an ethical and transparent way. We have been involved with various outreach programmes, such as helping people with disabilities get into employment in the industry. We believe building policies around equality and diversity is incredibly important for the development of the country.

How is the company’s strategy helping the wider Chilean economy?
The insurance market relies heavily on the trust customers place in its long-term plans – acting ethically and responsibly is thereby of the utmost importance to us and we are committed to improving quality of life, not only for our customers but also for our employees and the community in general.

Our company is strongly committed to the creation of sustainable and long-term value for its stakeholders. For our shareholders we obtain financial value, strictly monitoring risks and maintaining our solvency and reputation to increase that value over time. For our customers we offer support at all stages of their lives, providing appropriate and timely advice and offering the highest standards in service. We take care of our staff and their development and contribute to the growth of the community.

Source: The World Factbook
Source: The World Factbook

We are focusing on international best practices through the aforementioned CBR. We believe the improved regulatory framework will help us and other key market players, reinforcing transparency and accountability in the industry as a whole and creating a sustainable balance between economic value and social value for our country.

What does the future hold for the firm?
We aim to continue to set the benchmark for the industry while remaining one of the country’s leading life insurance companies, offering innovative products and cultivating long-term, responsible relationships with our customers.

By focusing on creating a sustainable relationship with our customers and producing shared value we will continue to strengthen our sales and service models. Our new practices will continue to ensure we deliver professional advice based on real needs, offering solutions consistent with our promises – in so doing we aim to cultivate even stronger customer loyalty. We believe that embracing technology by offering online services will help us to increase customer satisfaction.

Our vision is not only to offer the best products, services and advice to clients, but also to ensure that our business model generates and adds value; value we share with our stakeholders. That for us defines sustainability in both the short and the long term, as we continue to work in harmony with the environment and with current and future generations.

Fubon: ‘the Taiwan insurance market has grown very fast in the past few years’

Posted on by Ashton Wenborn

Taiwan is the second largest market in the Asia Pacific region after in Japan, in terms if insurance penetration. World Finance speaks to Executive Vice President of Fubon Life Insurance, Tsai-Ling Chao, to find out how the industry is developing.

World Finance: Well Tsai-Ling the Taiwan Insurance industry – how has it developed in recent years?
Tsai-Ling Chao: The Taiwan insurance market has grown very fast in the past few years, due to a few reasons. Number one is that Taiwan is facing an ageing population problem, which creates a very high demand for retirement planning products.

The low interest rate also makes insurance products attractive – especially the single premium endowment products that make the bancassurance channel grow very fast in the past few years.

The ageing population also creates a high demand for long-term care products.

The ageing population also creates a high demand for long-term care products.

World Finance: Well Taiwan’s government has recently unveiled measures to enhance the insurance industry’s competitive edge, in light of increasing liberalisation and vibrant growth in Asia. What’s been the knock on effect from this?
Tsai-Ling Chao: The insurance companies have varying capacity for these changes. The most popular one is that the government allowed the insurance companies to invest in international bonds issued in Taiwan, and therefore allowing the insurance companies to exclude those from the oversees investment remit.

The second one allows each company to convert insurance policies to long-term care or annuities for aged policy holders. And those policies are usually guaranteed at a very high interest rate, which will allow insurance companies to reduce the net interest spread. The government also encouraged the insurance companies to spend oversees. Taiwan is a very mature market and older insurance companies have lots of capacity, so we hope to take the opportunity to expand oversees.

World Finance: The government has also proposed plans to introduce offshore insurance units (OIU) to develop Taiwan into an international wealth management centre. Now this would create opportunities for domestic insurers to offer policies to foreign nationals, while foreign couriers can also offer products to the Taiwan market. How prepared is the industry for the competition?
Tsai-Ling Chao: The Taiwan Insurance market has a lot of experience servicing high net worth policy holders in the past few years. We can take advantage of OIU to serve high net worth policy holders better. And we can also develop insurance products to combine with good medical services in Taiwan. So we think insurance companies are ready for the OIU.

The Taiwan Insurance market has a lot of experience servicing high net worth policy holders in the past few years

World Finance: And what are Fubon Life Insurances top three priorities for the coming years?
Tsai-Ling Chao: We will continue to build up our agency force. Right now we have about 16,000 agents but most of them are gathered in the North and metropolitan areas. We will try to build more of a force in the South side.

Secondly, we will strengthen the use of technology and make sales and services more efficient.

We will look for oversees investment opportunities. We will apply for a license in Hong Kong next year, and we will look for new investment opportunities – especially in China and Asia.

World Finance: Finally, what trends do you see impacting the industry in the future?
Tsai-Ling Chao: The high net worth population will continue to grow, that will create new opportunities for insurance companies. So insurance companies will design special products and as result serve those sectors better. The insurance companies will look for oversees opportunities. The life sector will use more technology, especially focusing on online sales.

World Finance: Tsai-Ling Chao, thank you.
Tsai-Ling Chao: You’re welcome.