What is Krungthai AXA’s business mix today?
KORUNIC: In terms of business mix, we are currently selling 80% savings plans and the rest of the 20% are made up of long term endowments, mortgage plans, some health plans, etc. But the bulk of it will be around the short term savings. We have achieved over the past 6 years an average of 50% growth year-on-year (yoy).
What is Krungthai AXA’s investment strategy?
KORUNIC: We are currently mainly investing onshore in Thailand. The bulk of that will be in government bonds. We will also have corporate bonds, and about 12.5% to 15% of our investments will be in equities, so in the stock market. We do have some property funds. We are also starting to invest offshore and in derivatives.
In terms of our investment strategy going forward, I think things will remain largely the same. We will be looking at infrastructure funds as they come out with the bond portfolios. In terms of equities, we still have a strong belief in the Thai stock market, so that will continue. We will start to invest a little bit more into derivatives and offshore bonds. There are some limits in terms of regulation that you can only invest up to 20% offshore.
How have recent risk-based capital (RBC) regulatory reforms impacted Thailand’s insurance sector?
KORUNIC: Overall, I do not see the RBC reforms as having that big an impact on the market. Most of the companies in the market are compliant. There is only one or two companies at the lower end that are struggling. But I think things are as normal, nothing has really changed. For us for instance, we work on international best practice and by the end of next year we will be fully compliant with Solvency II as well. As such, I do not think the RBC reforms are having any impact on us.
With over $100 billion in insurance acquisitions in Asia since 2009, can we expect more M&A activity?
KORUNIC: In terms of mergers and acquisitions, Thailand has 24 companies at the moment. Personally, I feel that the market can probably sustain anywhere between 10 and 15 companies. So I think we will see more M&A deals going forth. Maybe with 2015 coming up with AEC, we may see some more foreign players working to get into Thailand, and with the restricted number of licenses, you may see some of them getting purchased at the lower end as well.
Regulatory snags, distribution issues, and competition have been sighted as the biggest challenges facing insurers in Asia. How have each of these challenges impacted business for you?
KORUNIC: Thailand is currently still an agency push basis of sales. As such, I think over time, you will see that moving towards more of a needs based selling approach. We are being quite proactive in setting up training programs, training our agents and bank distributors to sell on more a needs based approach. So I think that will be one of the main challenges going forward.
What are penetration rates at the moment?
KORUNIC: I think currently around Thailand the penetration rates are at the 24% mark. So compared to other countries, it is still relatively low. I still think there is a large education process to go through with the Thai consumer about insurance. Currently, the market is mainly savings driven, and that is the first wave. The second wave we see is protection and health, which we are moving into at the moment. That third wave will be mostly investment linked and unit linked type products.
In terms of mergers and acquisitions, Thailand has 24 companies at the moment. Personally, I feel that the market can probably sustain anywhere between 10 and 15 companies. So I think we will see more M&A deals going forth.
What role does Krungthai AXA take in educating the populace?
KORUNIC: I think all insurance companies in Thailand have a responsibility to ensure that there is an education process for the Thai consumers. We want to take a leading role in that in terms of a lot of our marketing strategies. We run what we call a weekly basis caravan health check, so we are out in the provinces and up country. We partner with a local hospital, and then we provide medical health checks and during that we use that as a selling basis as well. That is also an educational process for us.
What is your outlook for Thailand’s insurance sector?
KORUNIC: I think there is a huge potential in Thailand. That 24% that we just talked about in terms of the penetration rate is a key indicator that there is a long way to move here. In terms of the economy itself, it is still a growing economy. Even through the last financial crises, Thailand came through that pretty unscathed. As such, we have seen some very high growth rates in the insurance sector.
What does Krungthai AXA do to give back to Thailand?
KORUNIC: In terms of giving back to Thailand, we see that as a key strategy to our organization. Unlike a lot of other organizations who give charitable donations, that is something we do not believe in. The strap line for our company is ‘opportunity not charity’. As such, we want to look at building a sustainable income source for the villages around Thailand. In that way, we feel that we are able to give back to the villages in that they earn self-respect and become self-reliant, rather than just relying on donation cheques.
So we have been able to do that in a lot of cases. Our policy covers are made of hand woven fabric by about 7 villages across Thailand. We have also helped a village up North to start rice production. It is a village full of orphans and they use the rice production for their food as well as half of it for their income source. There is another village that is very interesting, it is a village of 400 disabled people in the North and they make all of our birthday cards for us. So every time we sell our birthday cards to our distributors, a portion of that income goes straight back to that village so that they have a sustainable income from that as well. Again it is all about giving opportunity rather than giving charity.
How would you describe the partnership between Krungthai Bank and AXA?
KORUNIC: With Krungthai Bank, for me it is the best partner I have ever worked with in my career. We see it as a marriage of 2 equals. So 2 partners coming together and both bringing into the relationship their own specific strengths. So on the Krungthai Bank side, they have a fantastic name. You go out onto the street and everybody knows Krungthai Bank. They have a great distribution network of over 1,000 branches across Thailand. They have a hugely dedicated staff who also sell our policies. In terms of AXA, being a global insurance brand and a leader in insurance worldwide, they bring international best practice and international know-how on the insurance side. So marrying these two companies together has been the success behind us.