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.
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.