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August 10, 2015

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Allianz sees wider prospects as market opens

This has been a good year so far for insurance companies, with industry-wide profit doubling in the first half, thanks to the stock market rally. However, foreign insurers remained a fragment of the market. Two decades after China opened its market to foreign insurers, the combined market share of 28 overseas life insurance companies stood at 5.5 percent in the first half, up by half a point from a year earlier. The 22 non-life insurers hold less than 2 percent, showing flat growth.

Shanghai Daily sat down with Manuel Bauer, a member of the Allianz SE Board of Management responsible for insurance growth markets, to discuss the challenges and opportunities for China from a foreign perspective.

Bauer has worked in Germany, the Middle East, South Korea and Eastern Europe, and has visited China's mainland more than 30 times in the past seven years.

Q: The life insurance unit of Allianz in China recorded its first profitable year in 2013, after 14 years in this market. Are you satisfied with that performance?

A: Chen Liang took over as new CEO from his predecessor, an English CEO, about three and half years ago. Being a quick learner, he could understand the group’s objectives and goals in a short time. He has not only achieved very satisfactory financial results but has also enhanced the company a good reputation of Allianz in the country. But we still need to do more and become even more customer-centric than we are today to maintain our reputation and sustain the growth in the coming years. We are an insurance company, and we need to listen to consumers more than anybody else. It is not as simple as a telecom manufacturer creating futuristic or modern phones.

Q: What's the difference between having a Chinese CEO and a foreign one?

A: A local CEO can detect landmines earlier. He knows how to spot emerging trends in the country and also grasp the requirements of regulators more professionally. A local CEO can identify problems that may occur much earlier and deal with them proactively. In addition, being a local CEO who can speak the local language and its many dialects, he can also effectively communicate with our clients and partners.

Q: Do you feel it difficult to do business in China?

A: At the beginning, it was very tough for me as a foreigner to do a simple task like finding my way from the airport. However, over the last six or seven years of my numerous visits to this huge country, I have found that it has become a place where you do business like anywhere else. I have also met many new people, interacted with numerous business leaders and we have started to get to know each other. Then, China suddenly changed from a very scary huge country to a normal place where you do business as everywhere else. It is a simple and straightforward country if you deal with the right people in the right way. But I always make sure I do enough research on the countries or markets that I am visiting. So I have no fears as I feel I’m informed. My past experience also helped in my early years in China. For example, I spent three years working in South Korea, which is similar to China in terms of the difficulty in understanding the language, though it is a smaller country. But I found that, except for the language and written characters, when it comes to basics, people everywhere in the world share the same concerns and they differ only in their business etiquette.

Q: Several years ago, I heard rumors that Allianz was considering exiting China's life insurance market. Is that still a possibility?

A: Allianz China Life is a joint venture with the CITIC Group, and there may have been times of uncertainties in the past. But today, those are not even worth mentioning. We never wanted to exit China. It is important not only as a market for life insurance, but also for property and casualty, credit insurance, assistance and the corporate businesses, as we are a financial service provider and not only an insurance company. This is also an advantage for Allianz. We have an array of some 10 business lines across six entities here, which contributed a combined total of 915 million euros to the group. China's mainland is the third-largest market for Allianz in 2014, making us one of the most successful companies here. But we want to extend our expertise in other areas, however we will like to be in a sector where we can add value. Over the next few years, opportunities will emerge in the pension sector, and we hope that foreign insurers will have more freedom to operate in the market.

Q: Allianz last year set up a joint venture with China Pacific Insurance Group, specializing in health care insurance products. How is that company faring?

A: The joint venture officially started operation in January and is slowly generating revenue. We've just had a meeting to analyze the progress made and prepare business plans for the coming years. It is similar to developing a new car. The vehicle is ready to go on the road, but we are inspecting and fine-tuning the last few components.

We are sharing the experience that we have gathered from other global markets to help accelerate the company's business growth. We don't have major problems, but we are encouraging the team to launch and develop new products that are need-based insurance solutions for our customers.

Q: Are you concerned with competition between the CPIC joint venture and Allianz China Life?

A: No, their businesses are not overlapping but run in parallel to each other. In the joint venture with CPIC, we predominantly sell conventional health insurance products, but not life insurance products. We will not try to encroach on each other's territory or compete with one another. But if a situation arises, for example, where both companies need to collaborate for developing a customer-centric product, then why not? However, currently there are no such plans as both companies are in different growth stages. At the moment, Allianz China Life is so far the largest unit of Allianz entity in China, but I think the health joint venture with CPIC could well outpace it over the next two years.

Q: In terms of the Chinese market and foreign investors, what would Allianz like to see?

A: In various forums, several players in the Chinese industry have raised their concerns and I am sure that the government is taking note of it to improve the lives of its citizens. It will be good if some of those concerns are addressed like insurers being allowed to invest in infrastructure projects, which are very important for any nation, including China.

At the moment economic growth is slowing a bit but not drastically and I think the government is taking corrective actions like controlling inflation, steering sustainable growth at around 6 percent, maintaining cool inflation, and investing in infrastructure to steer growth and providing essential facilities. I am sure that the government is also equally concerned and taking measures to improve peoples’ lives. There may be several foreign companies who may be interested in helping to fund such measures. But it has to be coordinated in a way that is financially appealing to foreign investors.

Q: The use of the Internet, and mobile phones, may be more prevalent in the life of the young generation than in other countries. Is the market potential there something on your agenda?

A: Yes, you are right and we are planning to attract young customers. We are one of the leading companies in digitalization. For example, we have set up a Digital Lab in Singapore to lead our digitalization efforts. The newly created innovative solutions can be used not only in Singapore but for the entire Asian market including China. One of the Digital Lab projects is headed by James Chen, who is from China. Currently, the processes involved in buying or managing an insurance policy using your mobile phone are difficult, and I am looking forward to seeing James and his team to provide an easy and convenient solution so that the customers can be in touch with us through their smartphones.


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