Ready for health biz too: Prudential CEO


Mumbai: In the last three years, Prudential Plc has transformed into an Asian insurer with the clean demerger of its European business into M&G. India is now one of the four growth markets identified by the insurer, says group CEO Mark FitzPatrick…
Why have you not hiked stake in the life insurance joint venture ICICI Prudential from 22% despite the headroom being available to go up to 74%? Are you likely to look outside this JV for opportunities?
We love the fact that there is now an option for us to be able to increase our stake. We are getting closer to understanding better the market, the regulatory environment and how we can support and grow the business faster. We have identified India as one of the four growth markets besides Indonesia, China and Thailand. We will look at this without making any commitment at this stage.
For us to start anything new from scratch when we have such a powerful business here would be a far more complex execution. We have a business that is a fantastic brand and an excellent management team, and to walk away from a business that has all that and start something that has none of those things makes no commercial sense. We are going to continue to work closely with ICICI Bank.
How does the global increase in rates impact life insurers?
An increase in interest rates is positive for insurance companies as it allows them to offer products with a high rate of return and a broader range of products. The transition from lower rates to higher is painful. As one settles down to higher rates, the guarantees we can offer consumers are much more attractive. In Europe, where rates have been low or negative, it has been difficult for insurance companies to develop products that provide a meaningful, guaranteed return.
The new insurance regulator has proposed major changes…
Having that vision and aspiration, I think, will shake up the whole industry and get people looking at things differently. If you approach things incrementally, it will take so long to achieve. If you create a very lofty vision, you encourage people to be more innovative in what they do and you accelerate the pace of change. The vision of ensuring that by 2047 every Indian has access to some element of protection is a fantastic vision. We really applaud that aspiration and look forward to supporting it.
What regulatory changes would prompt you to invest more?
We understand that the industry here is likely to move towards a risk-based capital regime in future. We have seen many markets worldwide move toward a risk-based capital regime. In Europe, Singapore, China and Hong Kong — we see an uplift in our capital because we manage our business in a very conservative fashion. If it comes in, it will free up more capital for insurers who write quality business.
There is debate over allowing life insurers to sell health indemnity. Would you be interested in health?
We would absolutely welcome the opportunity to do that. There is more than enough opportunity, and the market is big enough to be opened to life insurers. Life insurers understand underwriting and can do this business sensibly and responsibly and get greater coverage through agency and banking networks. In other markets, we operate in Singapore and Hong Kong, we offer that kind of product, and we can bring that expertise to Kannan (NS Kannan CEO of ICICI Pru Life) and his team.
Will hike stake in ICICI Pru Asset Management?
The business is doing fantastically well, and there is no intention to change anything. One of the things that we look at from the regulatory side is digital identification — the element that can expedite the onboarding of customers. There is a real potential to operate in a slightly different way than the way it is operating today. At the moment, they still need to do their KYC, and with the digital ID there is an opportunity to streamline it further.
Do you see India servicing Asian operations?
Some of our best talent has come from the ICICI Pru stable. We have created an operation in Bengaluru to access some of the best talents in the digital space to help us with coding and our digital architecture. There is a lot of digital transformation taking place in insurance and in the asset management space. We have to be alive to what’s happening in the market and how the digital competitors are trying to operate. We have accelerated our digital strategy through Covid, and Covid probably accelerated the uptake of digital capability by five plus years.What was the reason for the demerger of the Asian business?We have invested over $11 billion in Asia over the last 10-11 years. At the same time, our investments in Europe and America were minimal as the return in Asia was a multiple of what we could get from the UK or the US. We decided to create a UK-European business where investors could look for dividend income and a yield play. The expectation from an Asia-focused company is growth. For every dollar of new business investment in Asia, we make about $4 of new business profit, and we can’t see that multiple anywhere else. So, we decided to create a pure-play growth organisation.
Why are so many Asian insurers trading at a discount to embedded value despite growth?
ICICI Prudential trades at a multiple of its embedded value, likewise HDFC Life. So, quality business trades at a multiple of embedded value. What I think you are seeing in some markets, for example in China, is a major structural change from a very large agency-led industry with 12 million agents to about four million agents, and there is a big push by the regulator toward high-quality agents. We have outperformed in China because we had a philosophy of a professional agency force. You are seeing an adjustment in values because some of the market expected the big local players to continue as they were. The regulatory environment has changed, and we are seeing an adjustment.
Do you see agency as a channel growing?
Agency will continue to be important in the future because a lot of education and explanation is required as some of the products are complex. When things start to get difficult, an agent is valuable to remind people of the benefits of their policy and therefore protecting the persistency of our business. We generally see margins of agency business being higher than bancassurance as agents tend to sell more protection, and through a bank it tends to be more savings related.





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