An­bang turns Vi­vat a profit-maker

China Daily (USA) - - BUSINESS - By ZHUAN TI zhuanti@chi­nadaily.com.cn

Just one year after China’s An­bang In­surance Group bought the Dutch in­surer Vi­vat, it pulled off a sur­prise by turn­ing the loss-mak­ing en­tity into a prof­itable one through its ef­fec­tive man­age­ment and mar­ket-cen­tric strate­gies.

Vi­vat de­liv­ered a record net profit of 578 mil­lion eu­ros ($649 mil­lion) in the first half of 2016, ac­cord­ing to Vi­vat re­sults re­leased on Aug 31.

An­bang ac­quired Vi­vat in July last year with a sym­bolic 1 euro and a cap­i­tal in­vest­ment. Vi­vat is the for­mer in­surance arm of Dutch fi­nan­cial in­sti­tu­tion SNS Reaal NV.

An­bang ap­pre­ci­ated Vi­vat’s history of more than 100 years and its sta­tus as one of the top six in­surance com­pa­nies in the Nether­lands.

Christo­pher Bo­vis, pro­fes­sor of Euro­pean and in­ter­na­tional busi­ness law at the Univer­sity of Hull, says An­bang’s ac­qui­si­tion of Vi­vat ini­tially took many by sur­prise be­cause of Vi­vat’s low prof­itabil­ity and mar­gin ero­sion due to its di­luted and un­fo­cused strat­egy.

Howard Yu, a pro­fes­sor of strate­gic man­age­ment and in­no­va­tion at IMD Busi­ness School in Switzer­land, says An­bang’s suc­cess with Vi­vat ex­em­pli­fies a ground­break­ing model in which the Chi­nese ac­quirer in­jects new man­age­ment ex­per­tise into its Euro­pean tar­get, in con­trast with many Chi­nese out­bound ac­quir­ers that aim to learn from their West­ern tar­gets.

An­bang’s suc­cess is be­ing hailed as a tem­plate for a suc­cess­ful post-merger in­te­gra­tion that can be fol­lowed by other Chi­nese com­pa­nies. It comes at a time when Chi­nese out­bound ac­qui­si­tions are reach­ing record lev­els.

Un­like most Chi­nese ac­qui­si­tions, which only in­ject cap­i­tal and leave busi­ness de­ci­sions to ex­ist­ing over­seas man­age­ment teams, An­bang be­came ac­tively in­volved in Vi­vat’s man­age­ment and its strate­gic fo­cus.

Vi­vat CEO Ron van Oi­jen says An­bang en­hanced Vi­vat’s prof­itabil­ity by abol­ish­ing un­prof­itable busi­nesses, op­ti­miz­ing as­set al­lo­ca­tion and build­ing up Vi­vat’s core busi­ness model in prod­ucts, ser­vice and chan­nel in­no­va­tion. An­bang also en­sured ef­fec­tive im­ple­men­ta­tion of the strate­gies through op­ti­miza­tion of gov­er­nance, or­ga­ni­za­tional struc­ture and al­lo­ca­tion of per­son­nel.

“This might well be an­other in­di­ca­tion of Chi­nese en­ter­prise mov­ing up the value chain,” Yu says, adding that An­bang’s in­no­va­tive man­age­ment of Vi­vat, with its em­pha­sis on so­cial me­dia mar­ket­ing and on­line and mo­bile dis­tri­bu­tion, are key to its suc­cess.

Un­like the M&A ac­tiv­ity un­der­taken by Chi­nese com­pa­nies in the re­source sec­tor in de­vel­op­ing re­gions of Asia, Africa and Latin Amer­ica, An­bang was able to achieve suc­cess in Europe, the birth­place of the mod­ern fi­nan­cial mar­ket.

Un­der the man­age­ment of An­bang, cen­tury-old Vi­vat made a quick turn­around, prov­ing that An­bang has the ad­vanced man­age­ment ex­pe­ri­ence and abil­ity re­gard­ing in­ter­na­tional re­source in­te­gra­tion.

This in­di­cates how Chi­nese com­pa­nies are grad­u­ally evolv­ing within the global mar­ket­place. Ex­perts think that ver­sion 1.0 of the Chi­nese com­pa­nies re­ly­ing on cap­i­tal in­vest­ment to gain over­seas footholds has been re­placed by ver­sion 2.0, in which Chi­nese com­pa­nies ex­port their busi­ness mod­els and man­age­ment cul­ture.

Ja­panese com­pa­nies were his­tor­i­cally at the fore­front of Asian ad­vanced man­age­ment, but Chi­nese com­pa­nies like An­bang are now lead­ing the way. Against the back­drop of the Belt and Road Ini­tia­tive and sound global in­vest­ment op­por­tu­ni­ties, Chi­nese com­pa­nies will play an in­creas­ingly im­por­tant role in global in­dus­try in­te­gra­tion.

Ob­servers believe that the Belt and Road Ini­tia­tive of­fers Howard Yu, an im­por­tant win­dow for Chi­nese com­pa­nies to gain footholds over­seas. So far, An­bang has made over­seas M&A deals in Europe, Amer­ica and Asia, es­tab­lish­ing a solid pres­ence in those ma­jor re­gions cov­ered by the Belt and Road Ini­tia­tive.

In ad­di­tion to the Nether­lands, An­bang’s man­age­ment ex­pe­ri­ence has also been proven to work well in South Korea, where it ac­quired Tongyang Life last year. Within one year of com­plet­ing the deal, Tongyang Life de­liv­ered a record per­for­mance since its foun­da­tion in 1989.

The South Korean in­surer’s pre­mium in­come grew to 3.7 tril­lion won ($3.29 bil­lion) in the first half of this year, up a whop­ping 90.7 per­cent from a year ear­lier. The com­pany made 151.8 bil­lion won in net profit, up 19 per­cent com­pared with the same pe­riod last year. Pre­mium in­come and net profit ful­filled 79.6 per­cent and 96 per­cent of the an­nual tar­gets, re­spec­tively.

This might well be an­other in­di­ca­tion of Chi­nese en­ter­prise mov­ing up the value chain.”

pro­fes­sor of strate­gic man­age­ment and in­no­va­tion at IMD Busi­ness School in Switzer­land

PHO­TOS PRO­VIDED TO CHINA DAILY

The ex­ec­u­tive board of Vi­vat. The com­pany made 578 mil­lion eu­ros of profit in the first half of 2016.

The An­bang Fi­nan­cial Cen­ter, the head­quar­ters of the An­bang In­surance Group, is lo­cated in Bei­jing’s Cen­tral Busi­ness District.

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