THERE IS ‘IN­FI­NITE DE­MAND’ IN ASIA: PRU­DEN­TIAL CEO

Source: CNBC.com, 10 Au­gust 2012

Insurance - - COMPANY CORNER -

The in­surance in­dus­try is see­ing strong growth in Asia and the only lim­it­ing fac­tor is prod­uct distri­bu­tion, said Pru­den­tial CEO Tid­jane Thiam.

Ac­cord­ing to Thiam, Asia is the cen­tral growth area and the com­pany con­tin­ues to make progress across the coun­tries in the re­gion such as In­done­sia, Malaysia, Hong Kong and Sin­ga­pore. The main con­straint to growth is their abil­ity to put prod­ucts out there, be­cause de­mand is in­fi­nite.

Bri­tain’s big­gest in­surer has re­ported half-year prof­its which show an in­crease of 13%. It made an op­er­at­ing profit of 1.16 bil­lion pounds (US$1.81 bil­lion) for the pe­riod, beat­ing ex­pec­ta­tions. (1.00 GBP = 4.93 MYR) The com­pany has used funds from its U.K. op­er­a­tions to lead ex­pan­sion in the economies of South East Asia.

Thaim said that the pen­e­tra­tion

rate in In­done­sia is just 1%, in

Viet­nam 0.7% so, growth is de­ter­mined by the com­pany’s abil­ity to dis­trib­ute. How­ever, strong growth may not trans­late into re­duc­ing profit mar­gins.

Pru­den­tial has two distri­bu­tion chan­nels, agency and bank. Ac­cord­ing to Thiam, the bank­ing chan­nel is less prof­itable than agency but it is still very prof­itable by any mea­sures. With low in­ter­est rates around the globe Thiam high­lighted that it was a chal­leng­ing pe­riod for in­surance com­pa­nies with Pru­den­tial com­bat­ing this by pric­ing its prod­ucts ag­gres­sively.

The com­pany has also trans­formed the way it makes money by con­cen­trat­ing on un­der­writ­ing prof­its (the profit af­ter paying all claims), rather than con­ven­tional mar­gin in­come which is de­pen­dent on mar­kets.

Thiam also be­lieves that in­surance com­pa­nies are a sta­bil­is­ing fac­tor for the econ­omy and were wrongly tarred dur­ing the fi­nan­cial cri­sis by the near col­lapse of AIG. He is pos­i­tive on the is­sue of sol­vency for in­sur­ers.

The Sol­vency II Frame­work, which is due to be passed through the Euro­pean Par­lia­ment, is look­ing at cre­at­ing “coun­ter­cycli­cal” mea­sures – which aren’t af­fected as much by eco­nomic fluc­tu­a­tions.

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