What new initiatives is Allianz Ayudhya currently involved in?
SMITH: We've worked in a lot of different areas. I guess one unique feature of Allianz Ayudhya in Thailand is that we are a very broad distribution company. We cover agency, bancassurance, and direct marketing. We’re strong and growing in all three of these channels, which is really unusual here in Thailand. The one we are investing heavily in this year is agency, where we've seen dramatic growth. We now have 16,000 agents. We are working on improving our professionalism quite dramatically. We've invested in 4 training hubs all around Thailand and we’re doubling the number of our trainers. The whole objective is to grow professional skills in our agency force to really take a leading position in Thailand in agency distribution. We recognize today that we are a leader in direct marketing; we have about 35% market share. We have a very strong bancassurance alliance with Bank of Ayudhya hence we think agency, with 16,000 agents, offers another opportunity to leapfrog our growth here.
How have the floods of 2011 affected the insurance market in Thailand?
SMITH: The floods in 2011 had a significant impact, particularly on the general insurance side of the business. Property impact was quite dramatic. I know the general insurance industry itself suffered quite significantly. On the life insurance side, it was just the reverse. People recognized that the impact of the floods was that they needed to protect themselves and their families a great deal more. So insurance, life insurance, and health insurance took off straight after the floods. Last year was a very successful year for life and health insurance. I think people recognize now that there is a greater need in situations like that to protect themselves and their families.
The Thai life insurance industry is expected to grow about 15% in 2013. What are the underlying reasons for this growth?
SMITH: It’s a very dynamic market. If you look across Asia, the markets that are growing very quickly are Indonesia, Malaysia, and Thailand. In Thailand, we have a lot of unsatisfied demand for insurance. The penetration is relatively low and awareness of insurance needs is going up with the Thai population, as there is a greater obvious need for insurance, both health and life insurance. Many people also recognize that there are strong tax benefits from getting a life or health insurance policy, so that has helped the growth of the market. I think all of the international and local insurance players have really recognized that it’s important to invest in this market. I think that promotion, publicity, distribution, and general investments on training have all helped raise awareness and raise the capability of distributing insurance here in Thailand.
Life insurance penetration is at a relatively low 2.7% in Thailand. What role is Allianz Ayudhya playing in overall education efforts aimed at increasing market penetration? What are your projections for market penetration for the next 2-5 years?
SMITH: We've taken a leadership role in social media here in Thailand, so we actually are investing quite heavily in areas like Facebook. We use online communications and it’s all very powerful in terms of just communicating the insurance industry trend. There are other things like direct response television (DRTV). We've taken a position that we think DRTV is a new growth channel to compliment our leadership position in direct marketing. We also feel DRTV offers an opportunity to communicate to the mass market in Thailand. We've invested in DRTV for about 2 years now. It’s a very successful way of communicating what insurance is about but also educating and approaching new segments of the market as well. Finally, we've invested a lot in agency. We feel that with our very large agency force of about 16,000 agents, we have a great chance to communicate, not only in Bangkok but also up country on the direction of insurance, and the opportunities that people would have to protect themselves and their families. We feel that a strong, well educated, and trained agency force is an excellent way to communicate the insurance trends that need to be addressed in the general Thai population.
Allianz Ayudhya currently holds the top position in first year premium (FYP) sales in direct marketing. How will this affect your bottom line in 2013?
SMITH: It’s about 25% of our total new business. It’s around 35% Life Direct market share here in Thailand and it generates about 20-25% of our bottom line as well. It’s very successful for us. I think we've taken a leadership position because we've invested heavily in building professional business partnerships. We've got some very strong relationships, particularly with financial institutions here in Thailand, that have basically cemented our position. We've focused a lot on execution, capability, and delivery of our commitments, both to our customers and to our business partners. I think that’s the reason we have established such a strong position.
It’s a very dynamic market. If you look across Asia, the markets that are growing very quickly are Indonesia, Malaysia, and Thailand. In Thailand, we have a lot of unsatisfied demand for insurance.
ASEAN Economic Community (AEC) liberalization measures in 2015 will likely result in a great amount of consolidation in the life insurance sector. What are your M&A projections?
SMITH: We have certainly said that there is good opportunity for organic growth in the business. But we would be very open to mergers and acquisitions. I think you’re aware of the recent acquisitions that have occurred with Thanachart and ING in Thailand. We would certainly be seeing that as an opportunity to expand in complementary insurance operations, these would be very attractive to Allianz Ayudhya. If there is such an opportunity arising, we would certainly be in the forefront of contenders to consider that as an option.
Despite ownership restrictions by the Office of Insurance Commission (OIC), foreign ownership and FDI has a strong presence in the Thai life insurance market. What percentage of Allianz Ayudhya is foreign controlled, and what are your goals going forward?
SMITH: In Thailand, the OIC has regulations where foreign insurers could not hold more than 25% unless special exceptions apply. So we would obviously be looking to continue, with regulator approval, to increase our shareholding in Thailand. We see that Thailand is a core-strategic country for the Allianz Group. As such, we would definitely view that further investment here in Thailand would be of value. We will of of course comply with all OIC regulations and would consider an opportunity should it arise to either increase our shareholding, or as we talked about earlier, look at mergers and acquisitions to extend our presence here in Thailand.