Business Strategy of Maybank - PowerPoint

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					Budapest, 15 January 2008




Building profitable bancassurance business
in emerging markets
 Johan Hosselaer

 Fortis Insurance International




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Budapest | 15 Jan 2008 | Bancassurance in emerging markets




Contents

1. The Fortis Group

2. Key insurance concepts

3. Benefits and growing importance of bancassurance

4. Bancassurance models

5. Case: Fortis' bancassurance business in mature and emerging
   markets

6. Take-aways.




                                                                 2
Budapest | 15 Jan 2008 | Bancassurance in emerging markets




Fortis-ABN AMRO: top player in Europe set for growth




 23th February 2006
                                                             3
Budapest | 15 Jan 2008 | Bancassurance in emerging markets




Fortis-ABN AMRO: clear leader in Benelux financial services




                                                              4
Budapest | 15 Jan 2008 | Bancassurance in emerging markets




Fortis’ insurance businesses
                       Customers / Distribution                       Products and services
                     Belgium                                          −   Life
 Insurance             −   Individuals                                −   Non-life
                       −   Small and medium-sized enterprises         −   Employee benefits
                       −   Large enterprises
                       Via independent brokers
                       and the banking channel

                     Netherlands                                      −   Life
                      −   Individuals                                 −   Non-life
                      −   Business customers                          −   Healthcare
                                                                      −   Disability
                       Mainly via independent                         −   Mortgages & savings
                       insurance brokers                              −   Specialist insurance

                     International                                    −   Life
                        −  Bancassurance (Luxembourg, Portugal)       −   Non-life
                        −  UK: Non-life ; France: Life
                        −  Multi-distribution in Malaysia, Thailand
                           and China (both bank and agents)
                        −  New markets entered (Russia, Ukraine,
                                      15 Jan 2008Fortis Insurance
                           Germany,Fortis Insurance International
                                       India)
                                               International                                     5
    Budapest | 15 Jan 2008 | Bancassurance in emerging markets




 Insurance: Swift expansion outside home markets
                                                                                                                                        – Presence outside
–UK                              –Germany                      –Ukraine                         –Russia                                   Benelux
–EUR 1.0 billion gross inflow    – Sales via a.o. EB - CF      – Acquisition #7 player          – Greenfield
–Low cost operator               – Acquisition of small        – Leverage life product skills   – Direct, worksite marketing            – New markets in
                                   platform                                                                                               2006


                                                                                                                               –China (24.9% stake)
                                                                                                                               – EUR 1.1 billion gross inflow



–France
– EUR 0.4 billion gross inflow
– Own agency force                                                                                                             –Hong Kong
                                                                                                                               – Quality franchise with strong
                                                                                                                                 potential
                                                                                                                               – Platform for Asian growth



–Portugal (51% stake)                                                                                                          –Thailand (40% interest)
– EUR 1.6 billion gross inflow                                                                                                 – EUR 0.3 billion gross inflow,
  Bancassurance                                                                                                                  started in 2004
• Market leader in life                                                                                                        – Bancassurance sales boosted
                                                                                                                                 in 2006



                                                                                                                               –Malaysia (30% stake)
                                   –Turkey                      –India                                                         – EUR 0.8 billion gross inflow
                                   – Transfer from Fortis Bank   – 26% JV start-up                                             – Start in 2000, top 3 player
                                     Turkey                                                                                    – Acquisition MNIH
      23th February 2006
      30-11-201023th                                      15 Jan – Multi-channel starting with
                                                                  2008Fortis Insurance
                                   – Bancassurance skill Fortis Insurance International
                                                                   bancassurance
      February 2006                  transfer                    – International
                                                                   Leverage product expertise                                                           6
Budapest | 15 Jan 2008 | Bancassurance in emerging markets




Contents

1. The Fortis Group

2. Key insurance concepts

3. Benefits and growing importance of bancassurance

4. Bancassurance models

5. Case: Fortis' bancassurance business in mature and emerging
   markets

6. Take-aways.




                                                                 7
Budapest | 15 Jan 2008 | Bancassurance in emerging markets




Life insurance: not always what you think it is




– Life insurance: about life or about death ?

– Life insurance: about risk or about savings ?

– Life insurance: about tax or not about tax ?

– Life insurance: about financial safety or not about financial safety ?

– Life insurance: about insurance or about banking ?
 30-11-201023th
 23th February 2006                 15 Jan 2008Fortis Insurance
                                    Fortis Insurance International
 February 2006                               International                 8
Budapest | 15 Jan 2008 | Bancassurance in emerging markets




Retail life/savings insurance: some definitons




                                                                                    increasing upside potential for the client

                                                                                                                                 decreasing market risk for the company
  Traditional Life guarantees a fix investment yield on the premiums paid
  and all future premiums till maturity, increased with profit sharing.




 Universal Life appears with two different guarantees:
  With a fix investment yield on the premiums paid, but not on future premiums
     Without a guaranteed yield neither on premiums paid, nor on future premiums
     (savings account) increased with profit sharing




 Unit Linked has no guaranteed yield and no profit sharing, the
 complete risk/return is for the account of the policy holder



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Retail life insurance: what about profit (1)


 Classical (Traditonal Life)                          New Generation (Universal Life,
 products                                             Unit-linked) products
  Small Market with :                                 Big Market with :

  •   Big margins for companies                       •      Small margins for
      and intermediary                                       companies and intermediary

  •   Good value for client only                      •      Good value for client
      through tax advantages                                 regardless tax advantage




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Retail life insurance: what about profit (2)




    No sustainable long term profit without
          risk (whole life) insurance




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Contents

1. The Fortis Group

2. Key insurance concepts

3. Benefits and growing importance of bancassurance

4. Bancassurance models

5. Case: Fortis' bancassurance business in mature and emerging
   markets

6. Take-aways.




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Budapest | 15 Jan 2008 | Bancassurance in emerging markets




Bancassurance
= win/win/win game for banks/bank clients/insurers
 Each partner should contribute to, and benefit from, the partnership, eg:

    Partner                 contributes                                   receives

  Bank           ►Brand                                 ►Cross-sell  revenue
                 ►Customerbase/ distribution            ►Enhanced customer loyalty
                 ►Complementary products                ►Customer profitability
                                                        ► Risk free fee based income
                                                          on existing bank ressources
                                                        ►Increased Return on Assets

  Insurer        ►Insurance underwriting and            ►Access to brand and warm
                  claims expertise                       customer base
                 ►Risk-bearing capacity                 ►Margin on core business

  Client         ►Brand  loyalty                        ►More        value for money
                 ►Track record on other
                  products
 23th February 2006                 Fortis Insurance International
                                                                                        13
 Budapest | 15 Jan 2008 | Bancassurance in emerging markets




Bancassurance still is a growing distribution channel in
Europe
(GWP 2005, EURP&C insurance market
            – billion)                                               – Life insurance market **
                                    – 100% – CAGR bank                                – 100% – CAGR bank
                                             1998-2005                                         2000-2005

   – Europe       7                   277       15.9                   37               394        8.0*


   – Belgium      9                   7         15.6                      45            25         10.2


   – France       9                   49        8.8                         62          120         6.3


   – Netherlands 16                   16        12.3                12*                 25          3.9


   – Portugal     10                  4         15.2                           86       9          22.3


                                                                                              – Share of bank
             * 2004
                                                                                                channel
                                           15 Jan 2008Fortis
            ** Group and individual (including pension savings) Insurance
                                                    International
       Source: Assuralia, FFSA, GFK, APS; team analysis                                       – Percentage      14
Budapest | 15 Jan 2008 | Bancassurance in emerging markets




Europe : recent developments show break-through in non
'bancassurance' countries also

           Portugal                              74%                          86%
                                                              65%
              Spain                         77%

             France                        57%                 62%
                Italy                     53%                 59%

             Austria           24%                         55%
                                                                                       2001
           Sweden                   35%                  50%                           Growth 2006
                                                                                       Loss 2006
          Germany             19%          25%

             Turkey          13%           23%

       Netherlands           15%          23%

                 UK 4%                19%
             Poland 3%              14%
                                           15 Jan 2008Fortis Insurance
                                           Fortis Insurance International
                        0%           20%          40%         60%       80%     100%
                                                    International                                    15
 Budapest | 15 Jan 2008 | Bancassurance in emerging markets




 Contents
1. The Fortis Group

2. What is bancassurance ?

3. Benefits and growing importance of bancassurance

4. Bancassurance models

5. Fortis case: succesful introduction of bancassurance in an emerging
  market.

6. Lessons learned and take-aways for transferring know-how from one
  market to another.




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  Budapest | 15 Jan 2008 | Bancassurance in emerging markets




 Bancassurance Models
 [bancassurance is not the same as “bank + insurance”]
   Active client
   penetration                                 Integrated Model C
                                               • Full integration of front office
                                                 and processes
                                               • Control of sales and customer
                                                 experience by the bank
25% - 30%                                      • Exclusivity of partnership


                                    Intermediate Models B                           Integrated
                                    •More proactive selling
                                    •Lead generation for a
                                                                                      Model
                                     branch-based sales force
                                                                                           Belgium
                                                                                           Spain
                   Model A                             Intermediate                        Portugal
                   • Arm’s length
    10%            distribution                            Model
                   agreement
                                                                      Malaysia
                     Distribution                                     Thailand
     5%
                   Agreement Model                                    Luxembourg
                                            China

                                                                                      Sophistication of model   17
Budapest | 15 Jan 2008 | Bancassurance in emerging markets




The level of integration within bancassurance
              100% Non-Integrated              Intermediate             100 %Integrated
                   (Model A)                     (Model B)                 (Model C)

 Distri-    Contracts closed by        Bank agents act as          Insurance products
 bution     insurance sales agents     insurance brokers for       exclusively sold through
 system     after referrals through    different insurance         bank agents.
            bank sales force           companies
 Product    Taking products from the   A combination of traditional Products designed by the
 design     insurance company’s        and individually products    insurer for the banking
            traditional product        designed by the insurer.     partner on exclusively
            portfolio.                                              basis.
  Sales  Opportunistic selling         Active insurance portfolio Pro-active sales approach
approach concept: insurance            development, supported by balanced across bank and
         products merely sold as       insurance sales force.     insurance products (=one-
         supplement with bank                                     stop shopping)
         sales force taking no
         particular action
Branding Selling insurance             Selling all insurance       Insurance products are
         products close to the         products, more preference   complements of the bank
         established brand of the      for insurance brand         products.
         insurance partner.            products.
IT systems Bank implements a stand- IT system set up by the        Bank & insurance
            alone
  30-11-201023th IT or manual
  23th February 2006                 insurer on the banking
                                 Fortis Insurance International
                                 15 Jan 2008Fortis Insurance       integrated
            solution
  February 2006                      platform
                                          International            IT-solution.                18
Budapest | 15 Jan 2008 | Bancassurance in emerging markets




Contents

1. The Fortis Group

2. The benefits of bancassurance for banks

3. Growing importance of Bancassurance in Europe

4. Bancassurance models

5. Case: Fortis' bancassurance in mature & emerging markets

6. Take-aways




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Budapest | 15 Jan 2008 | Bancassurance in emerging markets




Successful expansion of bancassurance model                                                                              1




                                                                                     Initiatives aimed at
     1992 CaiFor (Spain)                Bancassurance                              boosting volumes
     2000 Mayban Fortis                    originated within ASLK                    Netherlands - Dedicated
      (Malaysia)                            since 1865                                 sales team started
     2001 TaiPing Life                  Fully integrated IT                         Turkey - Specialised
      (China)                               systems with bank                          agency force within the
     2004 Muang Thai                    Successfully integrated                      bank
      Fortis (Thailand)                     into enlarged bank in                     France - New business sold
                                            Belgium
     2005 Millenniumbcp                                                               via Fortis Banque France
      Fortis (Portugal)                  In 2006, EUR 3.2 billion                    Germany (2006) - Platform
                                            gross (Life and Non-
     2007 IDBI / Federal                   Life) inflow generated
                                                                                       acquired to also support
      (India)                                                                          consumer finance
                                            with Fortis Bank in
                                            Belgium (49% of total)


                              Exporting                             Cross selling
                            progressively                           systematically


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Developing appropriate channel strategy
in mature markets




Business Case: Fortis Insurance Belgium




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 Budapest | 15 Jan 2008 | Bancassurance in emerging markets




Fortis Insurance Belgium
The largest insurer in Belgium, no.2 in Life and in Non-life

                     Business profile                                         Financial profile

– Serves its policyholders – retail customers and small and    8000
                                                                      Gross Inflow (EUR mln)
  medium-sized enterprises – through a network of              7000
                                                               6000
  independent intermediaries and through the banking           5000
                                                                                                  Non-life
  channel                                                      4000
                                                                                                  Life
                                                               3000
– Diversified distribution strategy in the employee benefits   2000
  market, where it stands out for its know-how,                1000
                                                                  0
  customisation and quality service                                    2004       2005     2006


                     Major strengths                                            Profit levers

  Broker channel                                               – Accelerate growth in Group Life
  – High broker satisfaction                                   – Leverage Bank van De Post distribution
  – Low cost position through Straight Through Processing
                                                                 agreement
    (STP)
  – Product innovation and quality of offering                 – Integrate Fortis AG and FB Insurance into
  Banking channel                                                Insurance Belgium
  – Market leader in bancassurance
  – Best-in-class IT tools
  – Low cost position
  – Product innovation ahead of competition                                                              22
 Budapest | 15 Jan 2008 | Bancassurance in emerging markets



Fortis Insurance Belgium
Single label, multi-channel & multi-product operating model


       Life insurance is                    Non-Life
              core                      insurance is core

                                                                      Group life brokers
        Fortis Bank                  Insurance brokers                   and direct


    Channel specific                  Channel specific                Specific commercial
  commercial functions              commercial functions                  functions


     Channel specific                  Channel specific
     admin processes                   admin processes
                                                                        Specific admin
                                                                         processes
        Insurance Retail cross-channel shared
                      functions
                                    15 Jan 2008Fortis Insurance
                       Fortis               Belgium
                                InsuranceInternational shared     functions                23
Budapest | 15 Jan 2008 | Bancassurance in emerging markets




Key characteristics of mature bancassurance model


1. Long term driven build-up of the business
2. Aiming at generating a secured stable and growing yearly return of assets under management
   rather than focus on short term maximisation of up-front commissions
3. Balanced and diversified development of basically three life product portfolios:
        - guaranteed save & invest
        - unit-linked
        - term life / protection
4. Fully integrated model
5. Close contact with the bank management at all levels
6. Alertness and pro-activeness towards changing needs of the bank and its customers.




                                                                                            24
Budapest | 15 Jan 2008 | Bancassurance in emerging markets




 Developing appropriate channel strategy
 in emerging markets



 Business Case: Mayban Fortis, Malaysia




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Budapest | 15 Jan 2008 | Bancassurance in emerging markets




Mayban Fortis

The insurance company : Mayban Fortis Holding
    – Joint venture between Fortis and Maybank Group (30%-70%)
    – Mayban Life Assurance Berhad
        – No 1 in single premium investment linked
        – No 2 in mortgage reducing term assurance (MRTA)
    – Mayban General Assurance Berhad
       – No 2 in Personal Accident Insurance
       – No 8 in Fire Insurance


The bank partner : Maybank Group
    – Largest financial services group in Malaysia
    – More than 7 million customer base
    – 22,000 employees




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 Budapest | 15 Jan 2008 | Bancassurance in emerging markets




Mayban Fortis
Mission and strategy                                          Organization
Mission:
Creation of a Malaysian national insurance champion                    Maybank                           Fortis
with a multi-channel distribution strategy
(bancassurance, agency, brokers, e-channel)
                                                                             70%                       30%
Strategy :
• Integrated Manufacturer-distributor Bancassurance                                Mayban Fortis
   Business model (cfr. Fortis Insurance Belgium)                                             100%
• Strengthen channel management
• Build fully integrated product factory for two lines of      Mayban Life   Mayban General           Mayban
                                                                                                                      Malaysia
  business: Life and General                                                                                          National
                                                               Assurance       Assurance              Takaful
                                                                                                                        Ins.
• Achieve post-merger operational efficiency through                                                                  80%
  consolidation, sharing of best practices and scale                                                                   Takaful
  advantages                                                                                                          Nasional


Business lines                                                 Breakdown GWP Malaysia (2006/07)

                                                                                          20%
 LifeInsurance – Mayban Life Assurance, Malaysia             Euro 880 mio*
  National Insurance
 Non-Life Insurance – Mayban General Assurance,
  Malaysia National Insurance
 Takaful Insurance – Mayban Takaful, Takaful                                                                        58%
                                                                                       22%
  National

   30-11-201023th
   23th February 2006                     Fortis Insurance International                  Life       Non-life   Takaful
   February 2006                                                                                                             27
 Budapest | 15 Jan 2008 | Bancassurance in emerging markets




Mayban Fortis: Distribution channels
From agency controlled to multi – channel (bancassurance)
                    –Mayban Fortis             –Malaysia National Insurance           –Takaful National



Agents                                               –Extensive agency                                                      Extensive
                 –No agency (except some                                           –Extensive agency network
                corporate agents in General)
                                                      network ~5,000
                                                                                        ~10,000 agents
                                                                                                                          agent network
                                                          agents                                                            of 15,000


Banc-          –Leading bancassurance player                                                                                Leading
                                                                                          –No captive
assurance         in Malaysia, with captive              –No captive                                                      bancassuranc
                                                                                         bancassurance
(captive)             Maybank channel                   bancassurance
                                                                                                                             e player


                                                                                        –Small bancassurance              Relationship
                                                  –Growing bancassurance                  business; building
Banc-                –Small 3rd
                              party                                                                                       with 14 third
                                                   business; dependent on              partnership with 3rd party
assurance            bancassurance                                                                                            party
                                               partnership with 3rd party banks,            Islamic banks
(3rd party)                                                                                                              bancassurance
                                                     i.e. OCBC, Citibank


Broking/                                            –Strong relationship within      –Substantial business with              Leading
Enterprise &     –Small enterprise segment           Government and GLC,             Government, e.g. Federal               enterprise/
Direct                                                   esp PNB related                    Treasury                        corporate
                                                           companies                                                          player


Alternative     –Direct marketing with                                                 –Experience leveraging                 Leading
                                               –Experience leveraging contact                                               alternative
                      Maybank                                                          internet e.g., motor.com
                                                 center i.e., MNI ONELine                                                   distribution
                                                     Fortis Insurance International                                          provider*
                                                                                                                                           28
         * Multiple alternative channels – Maybank Group Call Center (MGCC), MNIONEline, Takaful Internet Portal, Direct Mail
Budapest | 15 Jan 2008 | Bancassurance in emerging markets




Maybank’s bancassurance model is successful

•   Number 1 in Malaysia for new life business premium end-2004
    (number 3 in June 2005)

•   Most successful bancassurer, compared to competitors ( MNI &
    OCBC; Prudential & Standard Chartered; Uni Asia & EON Bank;
    AmAssurance & AmBank; Commerce Life & BCB; Hong Leong
    Assurance & Hong Leong Bank; Allianz & RHB)

•   Single premium / investment linked products as key driver

•   Bancassurance has taken over market leadership (49%) from agencies
    (45%) in 2004 in Life business




                                                                         29
 Budapest | 15 Jan 2008 | Bancassurance in emerging markets




 Contents
1. The Fortis Group

2. Key insurance concepts

3. Benefits and growing importance of bancassurance

4. Bancassurance models

5. Case: Fortis' bancassurance business in mature and emerging markets

6. Take-aways.




                                                                         30
Budapest | 15 Jan 2008 | Bancassurance in emerging markets




Pre-conditions for successful bancassurance

1. Customer centricity is a key driver of bancassurance.
2. Suitable Products & Natural Fit: products for bancassurance must be packaged and cross-sold at the
   banking moment; must look & feel like banking products (Bank + “Protection”, terminology,
   transparency); must have natural fit (clients and bank staff both feel like it is natural).
3. KISS: Keep it simple and standardised: to maximize sales-capacity.
4. Suitable Commission and reward structures
5. Suitable end-to-end processes & top quality service delivery
6. The barriers to the creation of synergy must be identified
7. The elements for the creation of synergy must be identified
8. It must be taken into account that
       Bancassurance models need to be tailored and adapted for each context.
       There is contradiction between sales & process / transactional culture of bank and insurance
       There are conflicting interests of the bank and the insurance company


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Budapest | 15 Jan 2008 | Bancassurance in emerging markets




Thank You.




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