Transcript How to engage in the chosen markets? - International

Best Countries for Expansion Strategies
Alexander Rinnooy Kan
Executive Board Member, ING Group
International Insurance Society, Hong Kong
11 July 2005
The Key Questions
• What are the important global trends?
• Which trends are important for you ?
• Where are the opportunities and profits?
• Which opportunities are relevant for you?
• Where can you get profitable growth and
value creation?
• How to engage in the chosen markets?
• What business model would you choose?
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Summary
• There are a
number of
attractive
opportunities
• Each company
will have its
own unique
and optimal
solution
Developing Markets will Overtake Mature Markets
Top 10 economies in the world
2013
15,028
US
Japan
2050
5,206
China
US
Germany
2,817
India
China
2,636
Japan
UK
2,302
France
2,136
Italy
1,782
44,450
BRICs will
gain
significant
importance
in the next
few
decades.
•
Three of the
top four
economies
will be in
Asia.
35,160
27,800
6,670
Brazil
6,070
Russia
5,870
UK
3,780
Canada
1,172
Germany
3,600
India
1,070
France
3,150
Spain
1,044
Italy
2,060
*Real GDP in US$ billions at 2003 current prices
Source:WEFA, Goldman Sachs Economic Research
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•
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Asia is, by far, the Biggest Developing Market
1
100%
7
7
9
16
8
6
14
7
12
6
80%
19
8
10
60%
M. East
22
21
Africa
E. Europe
40%
73
62
48
46
GDP USD
8147bn
Non-life
premiums USD
123bn
20%
Asia
0%
Population 5.4bn
Source: Swiss Re economic Research & Consulting
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L. America
Life premiums
USD 194bn
Asia is the World’s Largest Developing Market and …
ING Asia/Pacific Countries 2003:
Korea
48m
China
1.3 b
Taiwan
22m
India
1.1 b
Malaysia
23m

% of World Population
44%

% of World GDP
23%

Hong Kong
7m
Thailand
64m
Japan
127m
Philippines
85m
% of World Life Premium
(Asia ex Japan)
Huge opportunities life insurance
given low penetration
Australia &
NZ
24m
Source: “Sigma, World Insurance in 2003: World Insurance on the road to recovery” by Swiss Re
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5
9%
… Life Insurance Penetration is higher in Asian Markets than
in Other Developing Markets…
Asian Countries are among the
most attractive in the world
Premiums/GDP (2003 figures)
Ukraine
Bulgaria
Peru
Mexico
Greece
Poland
Russia
Hungary
Emerging market countries, average
Source: Swiss Re Economic Research & Consulting
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Brazial
Industrialised countries, average
Slovakia
Czech Republic
Thailand
China
Chile
India
Malaysia
Australia
Hong Kong
South Korea
Japan
Taiwan
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
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.. while Aging Populations are Driving the Need for Pensions
Percentage population age 60+
45
40
35
30
25
20
15
10
5
0
World
India
2000
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China
South Korea
Japan
Thailand
Austr.
US
Source: United Nations, 2002
2050
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Key Strategic Considerations for Growth
Developing
markets will be the
biggest battlefield
for the next decade
Don't
underestimate the
locals!
For foreign players,
a question of
timing
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• Rapid market and regulatory changes expected; big
opportunities and also big risks. How prepared are you?
• Insurance: land grab opportunity versus structured
growth
• Asset management (new products, new regulation, new
customer expectations)
• Banking? Other consumer finance businesses?
• Locals often have strong customer franchises, distribution,
relationships
• Locals are quickly catching up ... old state-owned mindset is
changing to aggressive competition
• Locals must further improve credit risk management, pricing
and lending practices
• How to get to position and profitability in the shortest possible
time?
• Trade off between early entry and late entry?
• What to do now to be prepared? What is the portfolio of
options?
• Controlled organic growth?
• Minority investments?
• Other creative solutions?
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Other strategic considerations
What is the
targeted market
presence
What is the profit
mindset?
Corporate and
social
responsibility
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• Go deep in a few markets or businesses ? Multi-local or
national?
• Own the customers?
• Own distribution versus alliances? What is the right alliance
model?
• Know how to bet - big when necessary, hedge if possible
• Capitalise on market volatility?
• Specialise in 2-3 areas?
• Pick (the right!) local partner? Ability to face (and finance)
thinner margins as competition rise?
• Role of acquisitions and ability to turn-around businesses
• Ability to leverage regional scale?
• Global business systems versus local solutions?
• Are local resources adequate? Desirable? Skill transfer
capabilities?
• International accounting and taxation principles?
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ING Evaluates its Growth Options in the Following Framework
Current Major
Activities of IAP
Emerging
customer
segments
No New
Countries
Selectively
approach new
segments
SME
Institutions
High net worth
(IIM only)
Singapore
Philippines
Pakistan
-
Mass Market
Increase Focus on
Large Countries
Thailand
China
India
Malaysia
Hong Kong
Australia/NZ
Taiwan
Korea
Japan
Asset Management
Insurance
Traditional Life Insurance
Unit-linked
Mutual Funds
Health Insurance
Group Insurance
Pensions
Direct
Grow the
bancassurance
channel
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Increase Focus
on Pensions
Pensions business
Tied Agents
Bancassurance
(Semi) Independent Agents
New viable
distribution
channels
New types of
business
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New products
which rapidly
impact market
shares
Create profitable
products using
Group best
practices
Strong Local Partnerships are Vital for Success
China
Korea
(CPIC)
Taiwan
India
PLUS! Strong bancassurance partners:
China: Bank of Beijing
India: Bharat Overseas Bank
Thailand: Citibank (telemarketing)
Malaysia: Citibank, Scotia, RHB
Japan: 23 banks and 6 securities brokers
Korea: HSBC
Hong Kong: Bank of Communications, AEON, ABN Amro
Taiwan: 9 banks
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Aus & NZ
Example: Strategic options in China – “Broadening the core”
New Clients
Growth into New Regions
Corporates
more
Zhejiang
Beijing√
High net worth
SME √
Expand
Bank
Direct Channels
Middle income √
Mass√
Financial Advisor Agent√
√
Life plus
“ products
”
√
Health “plus products
”
Asset management:
various Funds √
Group business √
Guangzhou√
Shenzhen√
Dalian √
Shanghai√
Insurance√
Asset management√
Health√
Corporate annuity
Pension
Pension
Mortgages
New Products
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New Businesses
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Conclusion •
There are a number of attractive opportunities
•
Each company will have its own unique and optimal solution. Your solution
will depend on your evaluation of trends and opportunities
• Trends: shift in economic power from West to East
• Opportunities: high growth, pensions, deregulation
•
ING has made its choices
•
leverage early entry/strong position
•
more and stronger partnerships
•
total bancassurance concept
•
build the pensions business
•
excellence in local execution
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