Don’t treat Turkey as any other emerging market – Zurich Turkey
Yılmaz Yıldız, CEO of Zurich Turkey, explains why Turkey stands out from the emerging market crowd
This year is seeing emerging high-growth economies such as Turkey struggling with a number of issues: comparatively lower economic growth, high inflation, depreciating currencies, and uncertain geopolitics. But there are certain sectors bucking the trend. Zurich Turkey CEO Yılmaz Yıldız discusses how Turkey is outperforming other emerging market economies, the importance of achieving equality in the insurance sector, and how the company has bucked trends to maximise profits in non-life insurance.
World Finance: 2016 is seeing emerging high-growth economies such as Turkey struggling with a number of issues: comparatively lower economic growth, high inflation, depreciating currencies, and uncertain geopolitics. But there are certain sectors bucking the trend. With me to discuss is Yılmaz Yıldız, CEO of Zurich Turkey.
Yılmaz, uncertainty is plaguing most economies, developed and developing. How is Turkey responding?
Yılmaz Yıldız: The growth rate is around three or four percent. During a time of turmoil now, three or four percent is a pretty decent growth rate. Debt to GDP is around 35 percent of GDP, which is the best in Europe and one of the best in emerging markets. Budget deficit is around 1.5 percent of GDP. The low indebtedness actually reduces volatility and uncertainties that may come.
There has been the mistake of putting all these countries – emerging countries – into one bucket, and assuming that they all have the same characteristics. But what’s happening in commodity importing countries, when the commodities prices go down, these countries benefit. And Turkey is one of those. And according to the latest statistics, Turkey will benefit at least $25-30bn dollars from the reduction in oil and gas only.
And if you add a strong banking sector to that, and good infrastructure: I’m quite optimistic.
World Finance: And the insurance sector? How does that fit into this?
Yılmaz Yıldız: The insurance sector is very much related to what happens in the financial sector. Since the GDP growth rate decreased from six, seven percent, down to three, four percent, we see a similar trend in the insurance sector. In the insurance sector we have three big segments. One is property and casualty: historical growth rates have been 20-25 percent, now it’s down to 10-15 percent. The life business is related to the bank loan business – it is sold with retail loans, and what happens on the retail loan volumes has a direct impact. So again, the growth rates from 35-40 percent are down to 10-15 percent.
Private pension side has been growing quite substantially, and there the growth rates are still 25-30 percent, pretty strong growth – supported by government incentives in terms of tax breaks.
World Finance: Now non-life general insurance in Turkey – especially global players – is suffering from a lack of technical profitability. But Zurich Turkey is bucking this trend. Why?
Yılmaz Yıldız: For us we define success – or our targets – in three main areas.
One is the financial results: we have to deliver what our shareholder asks us to deliver.
The second part is customer satisfaction. And what we mean by customers are one, the end users, the end customer; second, our distribution partners; and third, our internal customers, our employees.
And the third part is the risk and compliance environment.
For the past three years we’ve been growing roughly 15 percent more than the market. Being also one of the most profitable.
First of all we have the right segment mix. The more profitable parts of the business come from personal lines, and certain niches of commercial lines. So that’s where we focus. Secondly, the most lucrative part of the distribution channels are the bank distribution. So we increase our bank distribution share to 75 percent of our total business.
And thirdly you need to have the right product mix. And while doing all that, you have to make sure that you do it in a productive way. And if you look at the past three years again, our top line increased by 70 percent, while our headcount stayed the same.
World Finance: All around the world the financial sector is known for its weakness in diversity and female equality – how do you deal with this?
Yılmaz Yıldız: We started about three years ago, and we said, look. Within the company we will reach 50:50 female:male ratio. We have achieved that.
Secondly, we said manager and up positions, we will achieve 50:50. We have managed to do that. And thirdly, CEO and minus one positions – so positions reporting directly to me – we have managed to achieve 50:50 there too.
But reaching those numbers is not enough. Because then the recruitment, promotions, trainings, need to be 50:50. And our employee engagement score, global employment engagement score, came out a few months ago. And we have a huge increase – 22 percentage point increase overall. But what is even better is, we have almost 30 percentage point increase in our female employees’ engagement. Which is great. So we intend to continue that – but it’s a major thing, and it’s a never-ending process. And you have to continue, you have to push for that.
World Finance: You also have a lot of CSR initiatives – now how do you merge your business goals with these initiatives?
Yılmaz Yıldız: Business has to have goals that go beyond just making money. Ninety-eight percent of our employees voluntarily participate in our CSR activities. We think that investing in children is the best insurance society can buy for the future. So we focus on orphan children, in many different ways, with many different projects.
The other part is art. We have been one of the major sponsors of Istanbul culture and art foundation. And just last year, for example, our activities attracted more than 200,000 people in Istanbul, which is great. It’s what gives meaning to what we do.
World Finance: And looking at Turkey more closely now, what would you say the investment sentiment is like in the country?
Yılmaz Yıldız: Overall I think that Turkey will diverge positively within the emerging markets. On the negative side is the geopolitics, and what’s happening across the borders. So that part I think is creating some negative sentiments.
But if you look at that geography – if you have the resources, and you need to allocate capital, Turkey is one of the few places in which you can actually invest in and expect sustainable returns going forward. And as any high growth emerging market it will have ups and downs, but the trend will always be up.