John Cai: ways to stay ahead of the pack

A sin­gle-minded fo­cus on tar­gets has kept the CEO in the hunt for ex­cel­lence and helped him take in­surer AIA China to new heights. Hu Yuanyuan re­ports from Seoul.

China Daily (Canada) - - FRONT PAGE -

One of the key hunt­ing skills of li­ons is that they are to­tally fo­cused on their tar­get, be­lieves John Cai, CEO of in­sur­ers AIA China. And the same holds true for AIA.

Dur­ing mass wildlife mi­gra­tions, li­ons on the hunt have the pick of the an­i­mal king­dom to choose from. But once they have set­tled on a tar­get, they just keep their eye firmly on the prey even though many other an­i­mals may thun­der past.

And it is a sin­gle-mind­ed­ness akin to the king of the jun­gle that has helped Cai be­come an ex­pert in the in­sur­ance in­dus­try with an en­vi­able track record.

“For AIA, our busi­ness fo­cus is very clear. We’ll con­tinue to con­cen­trate on pro­tec­tionori­ented life in­sur­ance po­lices and pro­vide more cus­tomer­tai­lored prod­ucts and ser­vices,” said Cai.

Now 48, Cai started his ca­reer in the US in 1991 as a green­horn with no idea about the in­sur­ance sec­tor.

That was about two years af­ter he grad­u­ated from Xi’an Jiao­tong Uni­ver­sity with a Bach­e­lor’s in En­gi­neer­ing.

What at­tracted him most to the in­sur­ance in­dus­try in those early days was the prom­ise of fame and for­tune, pro­vided he was will­ing to work hard and face up to tough times, Cai re­calls.

In 2009, Cai be­gan his new ca­reer as CEO of AIA China in Shang­hai. That fol­lowed 18 years at French group AXA, af­ter it took over the com­pany that he worked for in the US. Those years saw him rise from be­ing an in­sur­ance sales­man to CEO of AXA Hong Kong.

Since tak­ing over the top job at AIA China, Cai has suc­cess­fully steered the com­pany through the harsh win­ter en­dured by the in­dus­try the past few years.

AIA China’s value of new busi­ness (VONB), a key in­di­ca­tor for an in­surer’s op­er­at­ing ca­pac­ity and growth po­ten­tial, tripled in 2013. It also re­al­ized its first five-year plan a year ahead of sched­ule, af­ter AIA Group listed in Hong Kong in 2010.

The com­pany grew a fur­ther 55 per­cent in 2014, with key in­di­ca­tors such as op­er­at­ing prof­its af­ter tax and an­nu­al­ized new pre­mi­ums ris­ing 38 per­cent and 25 per­cent year on year, re­spec­tively.

Strong growth in the main­land and Hong Kong led the group to achieve 20 per­cent growth in VONB to $425 mil­lion in the first quar­ter, ac­cord­ing to AIA Group’s lat­est fi­nan­cial state­ment.

Th­ese achieve­ments, ac­cord­ing to Cai, are mainly the re­sult of his first five-year strate­gic plan for AIA China.

He fo­cused on four strate­gies in the plan — trans­for­ma­tion of busi­ness model, ad­just­ment of prod­uct mix, in­no­va­tion of the mar­ket­ing chan­nel and change of man­age­ment mode.

“We trans­formed the scaledriven model into a value-driven one and posted a five­fold in­crease in new busi­ness value. The mar­ket­ing chan­nel has also been ren­o­vated by means of em­ploy­ing a ‘Pre­mier Agency strat­egy’. It has proved to be a good way to at­tract out­stand­ing tal­ents,” Cai said.

Among all the pos­i­tive changes brought by the five-year plan, what Cai is most proud of is putting AIA China’s busi­ness fo­cus back on pro­tec­tion-ori­ented life cover, the core of its prod­uct mix.

“In­sur­ance plays an im­por­tant role in the fi­nan­cial in­dus­try, and its core com­pet­i­tive­ness is not sav­ings but in­sur­ance guar­an­tee whose essence hinges on its func­tions of sta­bi­liz­ing and buffer­ing,” he said.

Chi­nese life in­sur­ers are fo­cus­ing more on im­prov­ing their mar­gins than on ex­pand­ing mar­ket share, amid more strin­gent ban­cas­sur­ance sales rules and per­sis­tent com­pe­ti­tion from bank­ing prod­ucts, a re­cent re­port from Fitch Rat­ings said.

Boost­ing sales of the more prof­itable regular-pre­mium poli­cies and prod­ucts with riskpro­tec­tion fea­tures has helped sus­tain growth in the value of in-force busi­ness. This trend will con­tinue, and larger life in­sur­ers are bet­ter placed to pur­sue such qual­ity growth, ac­cord­ing to the Fitch re­port.

“If AIA China wants to sur­vive in this jun­gle amid fierce com­pe­ti­tion, it must be­come a clev­erer lion who clearly knows how to fo­cus on only one prey with fewer ri­vals but great po­ten­tial,” Cai said.

The per­fect tar­get for AIA China is surely safety-ori­ented life in­sur­ance prod­ucts. The main­land in­sur­ance pen­e­tra­tion, or the pro­por­tion of in­sur­ance pre­mium in­come in the coun­try’s gross do­mes­tic prod­uct, now stands at 3 per­cent, com­pared with the world av­er­age of 7 per­cent. That in­di­cates a mar­ket po­ten­tial of $1.9 tril­lion.

Safety-ori­ented in­sur­ance poli­cies now ac­count for 65 per­cent of all AIA China prod­ucts, ris­ing from 38 per­cent in 2009, ac­cord­ing to Cai.

What dis­tin­guishes AIA China from its ri­vals in this emerg­ing mar­ket is its sus­tained fo­cus on safety-ori­ented prod­ucts, Cai added.

“One must not for­get that more preys al­ways di­vert a lion’s at­ten­tion and make it dif­fi­cult for them to know where to start, fi­nally mak­ing them draw a blank.”

The cur­rent devel­op­ment of the in­sur­ance in­dus­try does not match the devel­op­ment of the main­land econ­omy, Cai be­lieves.

Though China could prob­a­bly be among top three glob­ally in terms of to­tal pre­mium in­come this year, the coun­try’s in­sur­ance den­sity, or the ra­tio of to­tal in­sur­ance pre­mium to to­tal pop­u­la­tion, is just over $200, in­dus­try statis­tics show, far be­low the av­er­age of $4,000 for de­vel­oped coun­tries.

The dis­tri­bu­tion of fi­nan­cial as­sets shows a sim­i­lar sit­u­a­tion. The amount of in­sur­ance as­sets in the main­land is around 8.7 per­cent of fam­ily hold­ings, much less than the 28 per­cent in the US and even Ja­pan, which has a sim­i­lar Asian cul­ture on money mat­ters.

How­ever, there is good news. And it comes in the form of the sup­port­ive poli­cies launched by the State Coun­cil last Au­gust to stim­u­late the devel­op­ment of the in­dus­try, Cai noted.

Main­land in­sur­ance pen­e­tra­tion is ex­pected to reach 5 per­cent by 2020, ac­cord­ing to the


A: plan put for­ward by the cabi­net. And in­sur­ance den­sity is es­ti­mated to hit 3,500 yuan ($565) per per­son by 2020, up from the cur­rent 1,266 yuan.

Ac­cord­ing to Dagong Europe, a branch of the China-based Dagong Global Credit Rat­ing Co Ltd, the main­land in­sur­ance mar­ket is set to ex­pand by about 15 per­cent in 2014-2015, with health and non-life busi­nesses ex­pand­ing faster than the life in­sur­ance sec­tor.

Hao Yansu, direc­tor of the School of In­sur­ance at the Cen­tral Uni­ver­sity of Fi­nance and Eco­nomics in Bei­jing, said those mea­sures will ex­pand the busi­ness scope of in­sur­ers and im­prove their in­vest­ment re­turns.

Such gov­ern­ment sup­port is re­as­sur­ing, Cai said, and has helped in­sur­ance bosses like him de­velop a clear strate­gic tar­get, es­pe­cially with an em­pha­sis on ac­cel­er­at­ing


John Cai, CEO of AIA China and a keen golfer for more than two decades, tack­les pro­fes­sional chal­lenges with the same calm ap­proach that he adopts on the links.

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