Year: 2014

Britam: ‘Kenya has successfully entered the bond market’

Posted on by Ashton Wenborn

Kenya is leading its African neighbours by raising $2bn in the sovereign bond market. World Finance speaks to representatives from British American Insurance Co. Kenya, Stephen Wandera and Ambrose Dabani, to find out how this move is helping to boost investment products.

World Finance: Now, Kenya is rivalling its neighbours – we’re talking about Zambia, even South Africa – in terms of its investment prospects. Can you tell me what entering the bond market has meant?
Stephen Wandera: Kenya has successfully entered the global bond market. And this has increased foreign direct investment in the country. It has also reduced the crowding-out of the domestic borrowers’ market. And it also has resulted in the entry of Kenya into the top three bond markets in sub-Saharan Africa.

We’re looking at a bond market of $15bn, and this has increased liquidity tremendously. And of course, this means that opportunities for price discovery, and the stabilisation of the bond market, have increased very dramatically.

World Finance: Ambrose, tell me: how is this money being invested? Both locally and internationally.
Ambrose Dabani: Kenya’s embarked on a ‘Vision 2030,’ where we hope to place ourselves as a middle-income country. Therefore, it’s key that we are investing in our infrastructure.

We’re looking at a bond market of $15bn, and this has increased liquidity tremendously

Here I’m talking about road infrastructure, rail infrastructure; we’ll also need to invest a lot in the energy sector. And here we’re focusing on geothermal energy.

We’re also investing in food security and general security, because of the increased terrorism risk in the region.

World Finance: Very interesting; now we know that the information communication technology sector is expected to get a big boost from the entry into the bond market; tell me how this money is going to be spent?
Stephen Wandera: The ICT industry provides direct investment opportunities for investors. Apart from that of course, it has also resulted in business tapping opportunities for revolutionising the business, automating business. We have got fibre-optic cabling solutions all over the country; four options as a matter of fact, for anybody, at any time, to tap into.

World Finance: Now we’ve got the momentum that we just heard about, but there have been recent events that have impacted the industry. There’s been a temporary shadow in fact, following the terrorist attacks in Kenya. Tell me, how has that – or has that? – affected investor sentiment.
Ambrose Dabani: The recent events you’re referring to, the Westgate attack, and more recently the attacks that happened in the Lamu, one of the coastal towns in Kenya. Our take on that is, we haven’t seen the investor sentiments come down. In fact investors have been very bullish. Last year alone, Kenya still got $510m in terms of foreign direct investments.

I think the investor community realises that terrorism is a global menace. It is not restricted to Kenya. Even here in London, you also issues around terrorism. And the investor community is also very keen on what the government is doing. And I think they approve of the successes that we’re having in Somalia, in terms of downgrading Al-Shabaab capabilities there.

They also approve of the security measures that the country is taking. Part of the money that we raised is investment in security operators. And therefore we’re seeing the investor community approving those actions. They’re looking at us, and looking at the partnerships that we have now. d partnerships that are developing around terrorism. And therefore we believe that the market will learn to ignore terrorism as a factor when it comes to doing business with Kenya.

World Finance: Can you tell me a little bit about frontier markets, and what your long-term investors are looking to take advantage of?
Stephen Wandera: Our long-term investors are very bullish about Kenya at the moment. We’re looking at a GDP which has been in excess of five percent over the last three years. We’re looking at an IT platform which is available to the entire economy. We’re looking at a very, very capable human capital base, which has made a contribution in the West. We have got a very significant diaspora.

Investors really are looking for higher risk-adjusted returns

We’re looking at a market within the region of 160 million people.

Over and above that, we’re looking at natural resources, which are being discovered at this particular time. Some of them extremely exciting; particularly in the petroleum industry – oil, gas, and so on. Not just in Kenya, but throughout the entire region.

Over and above that, we’re looking at an internal market where we have devolved government. So there are lots of opportunities within the country itself.

So it is a very, very exciting story. Investors really are looking for higher risk-adjusted returns. And certainly these returns are available within Kenya and throughout the region.

World Finance: Given those lofty expectations, can you tell me where do your long-term expansion plans fall into the mix?
Stephen Wandera: We believe that our insights and our business – our insights of sub-Saharan Africa – give us an edge over our competitors, both within Africa, and outside.

Then we’re looking also at devolved government in our own country, which has resulted in absolutely amazing opportunities, including opportunities to penetrate the country, and to really take advantage of the catchment areas that have become more accessible as a result.

World Finance: Stephen, Ambrose, thank you so much for joining me today.
Both: Thank you very much.

BOCG Life on Hong Kong’s dynamic RMB insurance market

Posted on by Ashton Wenborn

The RMB insurance market in Hong Kong is best characterised by untapped potential, save for a select few institutions whose understanding of the sector has seen them rise above the rest and capitalise on what lucrative opportunities exist. World Finance spoke to Terry Lo, CEO, BOC Group Life Assurance about the market, and the many ways in which the company has capitalised on the still expanding RMB insurance business.

Tell us about the RMB insurance market and your firm’s role in it
Sales of RMB life insurance policies have more than doubled since 2010, according to the Office of the Commissioner of Insurance (OCI). Hong Kong policyholders spent $1.5bn on RMB life insurance policies last year, up from $52m in 2010, and OCI figures showed that more than 12.5 percent of new policies sold last year were for RMB insurance, up from seven percent in 2010.

The growth momentum in the local RMB insurance market continued in the first quarter of 2014. New business recorded year-on-year growth of 44 percent, reaching $5.5m and accounting for 16 percent of total premiums. As the market’s number one in business volume we were the first to launch a RMB insurance product, the first to roll out RMB universal life insurance product, and the provider of the most extensive range of RMB insurance products, BOCG Life specialises exceeding expectations. In the first quarter of 2014 alone, the company’s market-share in RMB insurance increased to 75 percent, reaffirming its leadership in this sector.

Hong Kong’s economy has gradually glued to that of China, as the majority of living staples and necessities are imported from there

BOCG Life is expanding its RMB business. How is this most noticeable?
At BOCG Life, we recognise the importance of meeting customer demands and creating awareness of our offerings through an effective marketing strategy. That’s why we decided to develop a RMB solution marketing campaign. 

The campaign began by capitalising on the knowledge and experience of its bancassurance channel, which covers more than 260 bank branches and serves more than 3.5 million customers under the Bank of China Group. Next, effective profiling of integrated data created a multi-dimensional view of customers’ and prospects’ motivations for buying life insurance.

Hong Kong’s economy has gradually glued to that of China, as the majority of living staples and necessities are imported from there. Many customers plan to spend their retirement in China, and make frequent pleasure and business trips. As a result, and to hedge against inflation and to keep abreast of the currency’s appreciation, customers are keen to preserve and grow their wealth in the RMB currency, and buying a RMB insurance product becomes an integral part of their wealth management.

Can you expand on your insurance products and how they differ from other firms?
Riding on competitive edges in RMB insurance, BOCG Life now enjoys a leading position in the RMB insurance market, both in terms of market share and product diversification. It currently offers 12 RMB insurance products, ranging from whole life, universal life and annuity, through to endowment, medical and health policies, and retirement planning. In 2013 and the first quarter of 2014, one of its best-selling products, the Income Growth Annuity Insurance Plan, accounted for more than 30 percent of new standard premiums in the RMB insurance market.

Drawing on a diverse range of multi-currency product services, BOCG Life’s offerings continue to evolve in parallel with customers’ changing needs. The issue age of most insurance products has been lowered to zero to encourage parents to plan and save for their children’s future. And whether a customer is seeking short-term income protection, annuity income streams for retirement, or a comprehensive package to achieve diverse financial goals, BOCG Life consistently delivers solutions that meet each individual’s needs. 

How has this past year been for BOCG Life?
In 2013, BOCG Life delivered another year of stellar results. Total premiums clocked in at $2.3bn, representing year-on-year growth of 51 percent, while new business rose to $80m, up 29 percent from the previous year. Its market ranking climbed from eighth place in 2008 to third in 2013 and to the top place in the first quarter of 2014 in terms of new business, and recorded a profit before taxation of $1.5m in 2013 and total assets of $10.2bn as of December 31 2013.

BOCG Life’s strategic focus on RMB insurance products continued to drive immense business growth in 2013. This momentum was sustained into the first quarter of 2014 when the market share in RMB new standard premium rose from 68 percent in 2013 to 75 percent, which again reinforced the company’s leadership in the market. BOCG Life has been granted a financial strength rating of ‘A’ and an issuer credit rating of ‘A’ by the international rating agency AM Best, in addition to a rating of ‘A2’ by Moody’s Investors Service in recognition of its strong financial position.

What factors have affected your business and to what extent?
Currency appreciation and the possibility of appreciation over the longer term continue to stimulate the demand for RMB insurance policies, giving BOCG Life the opportunity to lead in this market space. One of its best-selling products, the income growth annuity insurance plan, accounted for more than 30 percent of the new standard premium of RMB insurance in the market last year and in the first quarter of 2014.

What key developments has the firm seen in the past year?
Responding to market growth, BOCG Life has diversified its distribution channels aiming to offer all-round, wealth management services. It has developed an agency channel to serve non-bank clients while expanding into the broker channel to target on high net worth clients.

What has been the motivation for these developments?
Our service pledge aims to provide customers with convenient and reliable services. BOCG Life continues to evolve in parallel with customer’s ever-changing needs. With a network of over 260 bank branches and more than three million customers, the company is well positioned to harness customer insight and understand what kind of insurance products people in Hong Kong might need. We’re committed to helping customers with their life protection and financial planning needs, becoming their lifelong partner of choice, and working hard to provide them with best-fit insurance solutions.

How are your customer numbers and what is your current customer strategy?
Currently the types of BOCG Life’s customers range from wealth management and retirement planning, through to life and medical insurance protection. The company has a customer centric culture and is passionate about creating superior experience for them. The sheer range of tailor-made life insurance plans and multiple distribution channels represent only a select few examples of how it puts customer first. BOCG Life is also the first and only insurance company that makes its service pledge public, showing a strong commitment in the service standards delivered by its people.

How is this strategy reflected in your customer service and overall customer satisfaction?
BOCG Life prides itself on maintaining an exceptional service turnaround time in every aspect of its back-office operations. According to a satisfaction survey conducted in 2013, BOCG Life achieved promising results with customer services perceived to be superior to key competitors. More than 55 percent of customers rated its services as very good or good. It also achieved a perfect score on claims, which was significantly higher than the industry benchmark of 70.

How does your firm develop sales across channels at the moment, and how does this benefit the group?
To really be all-inclusive, BOCG Life has expanded into the broker and agency channels that focus on segments like high net worth, mainlander and mobile customers. Not only products but also service models and business support services are specifically designed to help the company acquire, grow and retain customers from different channels.

Another major initiative for BOCG Life this year is the launch of an e-channel platform. It will enable interested buyers from any segment in the community to take out life insurance instantly online, giving them a brand new experience in getting the protection they want. 

What is your focus for the coming years and how do you expect your firm to develop?
In the years to come, it is high on BOCG Life’s agenda to maintain a leading position in the market. By enhancing our distribution capability and product offering, we expect to further capitalise on our extensive experience in RMB business as a key differentiator to win more customers.

CorpVida helps to solidify Chile as a life insurance leader

Posted on by Ashton Wenborn

Over the past few years Chile’s insurance market has grown faster than that of any other country in Latin America, and it’s current growth rate is almost double that of its GDP – that’s predicted to increase further in the future as its population ages and attitudes continue to evolve. With those changes come challenges, however, and that’s something the country’s financial companies have to recognise and adapt to.

One of the country’s leading life insurance firms CorpVida has been privy to that growth, developing significantly since its founding over 20 years ago through community involvement, corporate responsibility and a customer-focused vision. CorpVida’s General Manager Christian Abello spoke to World Finance about Chile’s life insurance market and how the company is stepping up to the challenges while helping the wider community.

How has the life insurance market in Chile grown over the last few years?
The life insurance industry has been growing at a much faster rate than the country’s economy in recent years. We believe this will continue over the next five to 10 years given that incomes have now increased and people are becoming more aware of the need to protect incomes and secure a successful retirement.

Chile has the highest penetration of insurance premiums in the region (4.2 percent, compared with a Latin American average of 2.8 percent). It has a per capita premium of almost $700 – significantly higher than the regional average of $300. We believe there is still space for further development however, given that premium levels per capita in Europe and the US are between three and eight times higher than here. Chile’s large number of insurance companies suggests a promising future.

40%

Growth in CorpVida market share in five years

Has CorpVida’s performance been in line with that of the market or exceeded it?
Our performance has been in line with what has happened in the market. In recent years we’ve had consistent growth in life insurance, traditional products and retirement funds. We have achieved almost 40 percent growth in our market share over the last five years.

In terms of retirement annuities we continue to occupy a leading position, with a market share of almost 15 percent, which puts us among the three biggest companies in the country for that sector. We are the largest firm in terms of pensions paid, serving more than 90,000 people.

With around 270,000 customers and branches throughout Chile, our main mission has been to ensure a secure future for people – we’re achieving that promise through commitment, professionalism and a highly qualified and motivated workforce which delivers excellence in providing advice, services and solutions to customers.

What opportunities are there in Chile for the insurance market?
We hope to expand the market in Chile and to reach different segments of the population through affordable insurance plans. It’s also important to introduce new incentives to encourage people to save in preparation for their retirement, for example by creating group saving plans for employers.

How much further development does Chile require in order to catch up with developed markets?
We have encouraged regulatory changes to modernise and further strengthen CorpVida. We are actively involved with the risk-based capital (CBR) approach, which allows asset and insurance risks to be managed effectively – providing reassurance to shareholders, policyholders, regulatory authorities and the community.

The insurance industry accounts for the second largest institutional investor in Chile’s financial sector, so as a country and industry we are constantly developing solutions to leverage financial instruments. Local rules and regulations help us to do that.

What challenges does the industry face in the coming years?
The first challenge is the consumer; there has been a significant change in consumer behaviour and education, meaning they now demand better insurance services and more transparency. Insurers need to innovate in order to manage consumers’ financial risks and protect their quality of life. We believe technology will play a big role in the future with internet usage increasing, so we need to embrace that in order to improve our customer offering.

The second is regulation; Chile joined the OECD, which means increased regulation for the country’s financial sector – that’s had a strong impact on the insurance industry, and it’s likely to continue to have an effect in the future. A new trade act was introduced to provide consumers with more rights and to protect policyholders.

One of the biggest challenges the new regulatory environment entails is the need to monitor risk-based capital, which our head of securities and insurance is overseeing. We will follow international best practice guidelines to streamline our processes.

What impact will higher life expectancy have on the industry?
Our industry is heavily influenced by global economic trends. But there is another important factor influencing us, and that’s the country’s ageing population as life expectancy increases (see Fig. 1).

According to the Association of Insurers, there are currently 1.8 million people over the age of 60 living in Chile, and that’s expected to double by 2020, before reaching six million in 2050. The Annuities products we offer are therefore becoming increasingly appealing as they have a currency-indexed fixed income and therefore don’t entail the risks that pension funds do. We are committed to improving quality of life for those retired by helping people make informed decisions in preparation for their retirement.

How has CorpVida developed its culture of ethical responsibility over the past few years?
We’ve designed a vision of corporate sustainability and corporate social responsibility to strengthen the economic value of the business and contribute to social development. In so doing we aim to meet the expectations of shareholders, customers, employees and the local community.

Chile has the highest penetration of insurance premiums in the region

In the past three years we have worked on strengthening our corporate culture, focusing on transparency, commitment and accountability by establishing a set of values ​​that are now recognised as being among the most important assets of the organisation. We have developed our training programmes at all levels of the business to secure a skilled team of ambassadors.

We are focused on developing people and their families by offering protection and savings solutions, and we do it in an ethical and transparent way. We have been involved with various outreach programmes, such as helping people with disabilities get into employment in the industry. We believe building policies around equality and diversity is incredibly important for the development of the country.

How is the company’s strategy helping the wider Chilean economy?
The insurance market relies heavily on the trust customers place in its long-term plans – acting ethically and responsibly is thereby of the utmost importance to us and we are committed to improving quality of life, not only for our customers but also for our employees and the community in general.

Our company is strongly committed to the creation of sustainable and long-term value for its stakeholders. For our shareholders we obtain financial value, strictly monitoring risks and maintaining our solvency and reputation to increase that value over time. For our customers we offer support at all stages of their lives, providing appropriate and timely advice and offering the highest standards in service. We take care of our staff and their development and contribute to the growth of the community.

Source: The World Factbook
Source: The World Factbook

We are focusing on international best practices through the aforementioned CBR. We believe the improved regulatory framework will help us and other key market players, reinforcing transparency and accountability in the industry as a whole and creating a sustainable balance between economic value and social value for our country.

What does the future hold for the firm?
We aim to continue to set the benchmark for the industry while remaining one of the country’s leading life insurance companies, offering innovative products and cultivating long-term, responsible relationships with our customers.

By focusing on creating a sustainable relationship with our customers and producing shared value we will continue to strengthen our sales and service models. Our new practices will continue to ensure we deliver professional advice based on real needs, offering solutions consistent with our promises – in so doing we aim to cultivate even stronger customer loyalty. We believe that embracing technology by offering online services will help us to increase customer satisfaction.

Our vision is not only to offer the best products, services and advice to clients, but also to ensure that our business model generates and adds value; value we share with our stakeholders. That for us defines sustainability in both the short and the long term, as we continue to work in harmony with the environment and with current and future generations.

Fubon: ‘the Taiwan insurance market has grown very fast in the past few years’

Posted on by Ashton Wenborn

Taiwan is the second largest market in the Asia Pacific region after in Japan, in terms if insurance penetration. World Finance speaks to Executive Vice President of Fubon Life Insurance, Tsai-Ling Chao, to find out how the industry is developing.

World Finance: Well Tsai-Ling the Taiwan Insurance industry – how has it developed in recent years?
Tsai-Ling Chao: The Taiwan insurance market has grown very fast in the past few years, due to a few reasons. Number one is that Taiwan is facing an ageing population problem, which creates a very high demand for retirement planning products.

The low interest rate also makes insurance products attractive – especially the single premium endowment products that make the bancassurance channel grow very fast in the past few years.

The ageing population also creates a high demand for long-term care products.

The ageing population also creates a high demand for long-term care products.

World Finance: Well Taiwan’s government has recently unveiled measures to enhance the insurance industry’s competitive edge, in light of increasing liberalisation and vibrant growth in Asia. What’s been the knock on effect from this?
Tsai-Ling Chao: The insurance companies have varying capacity for these changes. The most popular one is that the government allowed the insurance companies to invest in international bonds issued in Taiwan, and therefore allowing the insurance companies to exclude those from the oversees investment remit.

The second one allows each company to convert insurance policies to long-term care or annuities for aged policy holders. And those policies are usually guaranteed at a very high interest rate, which will allow insurance companies to reduce the net interest spread. The government also encouraged the insurance companies to spend oversees. Taiwan is a very mature market and older insurance companies have lots of capacity, so we hope to take the opportunity to expand oversees.

World Finance: The government has also proposed plans to introduce offshore insurance units (OIU) to develop Taiwan into an international wealth management centre. Now this would create opportunities for domestic insurers to offer policies to foreign nationals, while foreign couriers can also offer products to the Taiwan market. How prepared is the industry for the competition?
Tsai-Ling Chao: The Taiwan Insurance market has a lot of experience servicing high net worth policy holders in the past few years. We can take advantage of OIU to serve high net worth policy holders better. And we can also develop insurance products to combine with good medical services in Taiwan. So we think insurance companies are ready for the OIU.

The Taiwan Insurance market has a lot of experience servicing high net worth policy holders in the past few years

World Finance: And what are Fubon Life Insurances top three priorities for the coming years?
Tsai-Ling Chao: We will continue to build up our agency force. Right now we have about 16,000 agents but most of them are gathered in the North and metropolitan areas. We will try to build more of a force in the South side.

Secondly, we will strengthen the use of technology and make sales and services more efficient.

We will look for oversees investment opportunities. We will apply for a license in Hong Kong next year, and we will look for new investment opportunities – especially in China and Asia.

World Finance: Finally, what trends do you see impacting the industry in the future?
Tsai-Ling Chao: The high net worth population will continue to grow, that will create new opportunities for insurance companies. So insurance companies will design special products and as result serve those sectors better. The insurance companies will look for oversees opportunities. The life sector will use more technology, especially focusing on online sales.

World Finance: Tsai-Ling Chao, thank you.
Tsai-Ling Chao: You’re welcome.

Rousseff’s $11.7bn handout prompts criticism

Posted on by Ashton Wenborn

Ever since she scraped re-election in October, all eyes have been on Dilma Rousseff’s next move in anticipation of drastic fiscal reforms that would revive the nation’s economy. But it’s mixed messages all round from the Brazilian president, who has approved an $11.7bn loan to a state bank in the same breath as promising investors that tightening the government’s purse strings is her top priority.

Her critics were quick to voice their condemnation of the move

Rousseff has been widely criticised for her part in the deterioration of the Brazilian economy, which risks ending 2014 with its first annual primary deficit for two decades. Having recently appointed renowned fiscal hawk Joaquim Levy as finance minister, she pledged in a letter to investors: “Our new economic team will work to gradually but structurally lift our primary surplus so we can stabilise and reduce the public sector’s gross debt in relation to GDP.” She also said that the adoption of more market-friendly policies, and the implementation of measures to expand long-term credit from private sector banks – most notably to fund necessary infrastructure projects – are next on the agenda.

In spite of this, the transfer of 30bn reals ($11.7bn) to state development bank BNDES was approved by her government the following day. Naturally, her critics were quick to voice their condemnation of the move, claiming the loans have contributed to the country’s gross debt without stimulating the economy.

Brazil’s central bank has been unable to contain annual inflation within its target of 6.5 percent for the past two months, and it’s not showing any signs of slowing down. Growth predictions for 2015 are not much more promising than 2014, which is, at present, dangerously close to ending on zero.

Intelligent city Cyberjaya rises to become the ‘Silicon Valley of Malaysia’

Posted on by Ashton Wenborn

Launched in 1997 by Malaysia’s fourth Prime Minister, Tun Dr Mahathir Mohamad, Cyberjaya is a well-planned, intelligent city, located midway between Kuala Lumpur city centre and Kuala Lumpur International Airport (KLIA). Hailed as the ‘Silicon Valley of Malaysia’, Cyberjaya is the first hub of the Multimedia Super Corridor (MSC-Malaysia) – the area the government has identified as the new growth engine for the IT industry in the country.

Today, the city has become the destination of choice for more than 500 multinational companies. It possesses cutting-edge amenities and facilities and is easily accessible via major highways. With a total land area of 7,000 acres, Cyberjaya will be developed into a self-sustainable township with world-class ICT infrastructure, low-density urban enterprise and state-of-the-art commercial, residential and institutional developments.

More than 24 developers are currently involved in transforming Cyberjaya into a more complete future city to live, study, work and play. Important players include, OSK Property Holdings, SP Setia, Mah Sing, UEM Sunrise, MCT, Emkay Group and Paramount Properties.

Across the 7,000 acres of land in Cyberjaya, 48 percent will be reserved for public amenities and greenery, such as public parks, lakes and the beautiful rainforest in Malaysia (see Fig. 1). Looking into this, developers took heed in planning and developing a master plan to meet the Green Building Index standard. Developers are leaving ample space for green facilities and landscape in their developments, offering residents the nature-inspired lifestyle that they have always desired.

Land use in Cyberjaya graph
Source: Setia Haruman

Mirage by the lake at Cyberjaya is built with this green concept in mind. The project consists of a mix of luxurious villas and condominiums, with natural water corridors and lush greenery forming a truly environmental landscape. Complemented by 3.5 acres of land for landscaping, the 12.14-acre development’s unique circular layout is designed around three central lakes, affording prime water frontages and picturesque views to each home.

A global hub
Cyberjaya, has an excellent fibre optic network infrastructure, to be fully wired with high-speed broadband at 100mb per second. This is in line with Malaysia’s aspiration to become a hub for data services and is expcted to contribute MYR2.4bn to the country’s revenue by 2020. According to the New Straits Times, Cyberjaya’s unique and independent high-speed carrier network has influenced many prominent ICT industry players to base their operations in the city.

Its competitiveness as a global ICT hub has made Cyberjaya one of the top destinations for business support services and outsourcing in the world. It is home to more than 38 multinational corporations (MNCs) including HSBC, DHL, Shell, Motorola, OCBC, IBM, Ericsson, BMW and Fujitsu, as well as another 800 technology-oriented companies.

With well-designed residential projects in place, it is definitely an area that will grow in years to come

Cyberjaya is not only fast becoming the destination of choice for MNCs, but it also has the ambition to be among the top 20 most liveable cities in the world by 2020. Many call the city home, with popular residential developments such as Perdana Lakeview West, Perdana Lakeview East and Persiaran Bestari proving popular, and offering an array of accomodation.

Pan’gaea is a 16-acre project, which houses retail offices, residences, a shopping mall and a hotel. Drawing from the inspiration the ancient Pangaea, the development envisions a ‘world in one place’ concept where the diversities of modern living are brought together under one common freehold address. The aims of the project are to establish the Pan’gaea as a landmark within the city, and to create a unique and vibrant public forum for entertainment, retail and entrepreneurial activities, while creating and maintaining it as a highly desirable place to live.

With well-designed residential projects in place, it is definitely an area that will grow in years to come. This will further create job opportunities due to the vast stretches of land available for high-impact companies to expand their business in the city. In the next five years, most of the major developments will be complemented by recreational parks, entertainment centres and other amenities in anticipation of increasing population. According to the master developer of Cyberjaya, the population for this township is predicted to reach 100,000 by 2016, from the current 70,000.

Cyberjaya Villa interior
Inside a villa. Cyberjaya aims to be among the top 20 most liveable cities in the world by 2020

State-of-the-art security
Cyberjaya is eminent for its gateless community. The development and architecture in the city blends into the western style of living, which many locals and foreign professionals have affirmed as their preference. These residences have strict security enforcement to ensure a safe and guarded community under the watchful eyes of the security team.

In addition, Cyberjaya has a natural secure surrounding due to its peaceful environment. Compared to the crime rates in Klang Valley, Cyberjaya is enjoying increasing security, and the township is more than halfway towards achieving its target of being a safe city with a crime rate of zero.

This is largely due to the fully integrated Malaysian Emergency Response System (MERS) 999 CCTV system. Launched in 2009, Cyberjaya’s CCTV system is the only system in the country that has been linked to the MYR10m MERS 999. The system is designed to be able to operate round the clock, in all types of weather conditions and capture quality daytime and night-time images, utilising Cyberjaya’s fibreoptic backbone system. The CCTV operation, part of the Cyberjaya Citywide Surveillance System, boasts 30 cameras across the city, with a high traffic volume and large population.

[T]he township is more than halfway towards achieving its target of being a safe city with a crime rate of zero

According to Cyberview, six parties were involved in the planning and design of the MERS 999 CCTV system in Cyberjaya – Cyberview itself, Telekom Malaysia, the Royal Malaysian Police, Sepang Municipal Council, Tenaga Nasional Berhad and Multimedia Development Corporation.

The objectives of the installation of the system continue to be to ensure the safety of the community at large, which consists of locals and many foreigners, as well as to enhance the township management services of the Cyberjaya Flagship Zone.

In recent years, the steady growth of the student population has been led by top local and international learning institutions. These include international-standard universities such as Multimedia University (MMU), Limkokwing University of Creative Technology (LUCT), University Malaysia of Computer Science and Engineering, Cyberjaya University College of Medical Science, Cyberjaya Putra College and Kirkby International College. The presence of international universities and multinational corporations encourage good tenants and foreign purchasers for properties in Cyberjaya.

The current universities, colleges and schools in Cyberjaya attracted a large number of foreign students, which created an international environment, allowing for more exposure and growth. The latest statistics show that the student population has reached 25,000 in the city and is on the rise. Of these students, 40 percent are foreign students from 80 countries worldwide.

Cyberjaya bedroom
In the next five years, most of the major developments will be complemented by recreational parks, entertainment centres and other amenities in anticipation of increasing population

Ease of accessibility
Cyberjaya is an ideal investment location with excellent accessibility and connectivity. It is well served by major access roads and a series of well-developed public transportation systems. Even for professionals working outside Cyberjaya, it is possible to get to work on time with highways such as the Maju Expressway (MEX), B15 Expressway and the North-South Expresswway Central Link (ELITE Highway) enabling you to reach key points like the Kuala Lumpar city centre in 20 minutes. Frequent flyers would also be happy to hear that it takes no time at all to reach KLIA and KLIA 2, which are only a mere 28km away. If your schedule is packed with business trips and you would like a place to unwind, rest your head and be assured you won’t miss that important flight, then this is the place to do just that.

Cyberjaya is an ideal investment location with excellent accessibility and connectivity

Cyberjaya is surrounded by highly populated areas such as Putrajaya (Federal Administrative Centre of Malaysia), Puchong, Kajaang, Bangi and the whole southern corridor of Klang Valley. The increased offerings of activities, amenities and accessibility are expected to attract crowds from most of the neighbouring areas. Project such as Pan’gaea are located in the heart of Cyberjaya. Gearing to become one of the biggest mixed developments in Cyberjaya, Pan’gaea offers home owners and businessmen the chance to park themselves at a premium address. A fancy, modern and stylish living lifestyle is something that comes naturally.

With the world-class IT infrastructure, low-density urban enterprise, as well as the future plans of many state-of-the-art residential, commercial, business and institutional developments, it will continue to add value to the townhsip as an ideal place to live, study, work and play.

Italy’s insurance market as strong as ever, says Reale Mutua

Posted on by Ashton Wenborn

The outlook in Italy’s insurance market is beginning to change. This has been reflected by ratings agency Fitch, which has revised its projections from negative to stable, with expectations that insurers profit and capital adequacy will be able to bear the brunt of the country’s economic shortcomings. It also suggests that the Italian insurance market has managed to reduce its overall credit risk, which is impressive, considering that Italian insurers’ ratings are so closely linked to national debt, as a result of their large holdings in Italian Government debt.

One of the big players responsible for the market’s success is Società Reale Mutua di Assicurazioni (Reale Mutua). Year-on-year the company has managed to reduce premiums for non-life policies, while offering higher returns on life plans, and, as of this year, it has begun providing dedicated product packages. Due to the nature of mutual insurance, the importance of building a dialogue with policyholders is amplified. Furthermore, by facilitating discussion, the process of creating and implementing new platforms, which satisfy the needs of policyholders, helps improve their effectiveness.

The success of online banking apps, which provide greater speed and accessibility to their customers, is something that the company has adapted and refined to suit the needs of its members. By developing these systems in partnership with its members, the company created a restricted area on their website, where policyholders can access their entire insurance history, as well as producing a dedicated app for checking policies, handling claims and managing the main due dates for car insurance policies. They even provide a loyalty scheme, which they launched in 2011, for long-standing customers.

Customer loyalty
Luca Filippone, Vice Director of Reale Mutua, told World Finance how the scheme aims to reward loyal members with exclusive services and offers. “More importantly and strategically, Reale Mutua is developing a multi-channel and multi-access CRM [customer relationship management] platform that will make it possible to differentiate workflows and SLAs [Service Level Agreements] to accommodate the needs of customers and their life cycle,” says Filippone. “This will be used by all corporate functions that directly or indirectly communicate with insured members on a day-to-day basis.”

How technology is utilised determines whether it is a successful tool or a wasteful investment. In insurance, a recent innovation has been the use of black boxes, also known as telematics car insurance. These little boxes provide insurers with sophisticated methods for monitoring motorists driving behaviours, allowing underwriters to assess policyholders, rewarding careful drivers with lower premiums. There has been an uptake in the use of telematics technology, as it has cut prices by nearly 25 percent. Unsurprisingly, young drivers in particular have jumped on board with the new money-saving device. Italy is the market leader for black boxes associated with motor insurance policies according to a study published by the Italian Association of Insurance Companies (ANIA).

“With the introduction of these devices, we have succeeded in turning some problem areas typical of this sector into an opportunity, differentiating our offering and making important progress towards tailoring tariffs,” says Filippone. “Looking to the future, the integration of systems that use home automation and biological parameter monitoring technology, which are increasingly being employed, might open up new opportunities for growth.

“Technology will also enable us to improve relations with our customers, through new multi-access platforms that will allow us to manage all aspects of interaction and use all the devices currently available on the market,” says Filippone.

Filling the void
Italians, as a whole, are under-insured by comparison to their European counterparts. Roughly, only five percent of the population has supplemental health insurance, compared to almost 90 percent in France; and just 20 percent of Italian households have taken out home insurance, while in the UK and the Netherlands, 75 percent of homeowners have opted in.

In order to fill the insurance void, Reale Mutua has embarked on a strategic plan: focusing on developing multichannel business models in order to take advantage of its retail networks; innovating its market approach, concentrating on developing welfare products in a bid to counteract the harmful effects of Italy’s economic outlook; investing in new technologies, allowing for the digitilisation of their existing processes; and looking for acquisitions in both the domestic and European markets to increase economy of scales and their market share.

If Fitch’s outlook is anything to go by, the Italian insurance market will be one that will continue to grow in the new year, even if the rest of its economy continues to struggle.

Interamerican leads innovation in the Greek insurance industry

Posted on by Ashton Wenborn

Digital technology has transformed the way insurers do business recently. Along with meeting the growing demand for easily accessible financial services, technological innovation contributes to growth and business development. It creates new trends, opportunities for growth in new and existing business, as well as improving efficiency and customer satisfaction. Consequently, the insurance market is currently in a key dynamic phase with business models changing drastically, along with consumer behaviour.

In Greece the majority of insurers use digital technology at a basic level to support customer experience. As competition is strong and consumers have become more demanding and less loyal regarding non-life products, firms are now putting particular emphasis on client retention. To this end, Interamerican has been one of Greece’s leading insurance companies as it continues to reshape its business in accordance with a new digital era.

[Interamerican’s] strategy focuses on simplicity by standardising processes, as well as creating simple and transparent systems

Clear cut goals
Having succeeded in its differentiation in the Greek insurance market, thanks to key investments in innovation and technology, Interamerican has an emphasis on internal process improvement, as well as to high quality customer service, by enhancing customers and producers’ experiences. “Interamerican’s brand ideal and shared goal is to improve peoples’ lives, making them feel safe at every moment in their life journey. This is our guide to the way we recruit, unite, build and inspire all the people that we touch with our business, from employees, to sales networks and customers,” said Chief Operations Officer G. Mavrelis.

As such, the company’s strategy focuses on simplicity by standardising processes, as well as creating simple and transparent systems, moving procedures from back to front office, creating a lean business through monitoring and capitalising on technological developments in order to reduce cost and create a customer driven culture throughout the organisation.

Additionally, the company develops advanced front-end portals for customers providing unique functionality for personalisation, a/b testing and supporting advanced digital marketing actions. There is also focus on data driven decisions and rapid execution, using advanced digital analytics, reporting and attribution modelling.

The launch and development of the direct-online insurance brand ‘Anytime’ is Interamerican’s most impressive success story and a major catalyst in its transformational process. The Anytime brand and concept of direct insurance was launched in 2006, during very premature market conditions. In 2008, its car insurance customer base was 2,000 policies and has recently surpassed 200,000.

In this respect, the product has revolutionised the way Greeks buy their insurance by offering simple, standardised, high value products and services, focusing on auto, health and home insurance. On the other hand, the creation of a loyalty club – offering special services and benefits to Anytime’s customers – has enhanced customer satisfaction and loyalty.

Amplifying the brand
Following this, Interamerican has established Assistance services, successfully handling more than 285,000 incidents per year and delivering a unique level of care at crucial times for the customer. Interamerican Assistance holds the first position overall in the Greek insurance market, contributing to the creation of a strong brand image, unique brand awareness and high levels of customer satisfaction. This particularly comes down to a unique infrastructure providing a differentiated value proposition to the market, while at the same time controlling claims and operational costs.

The more people operate in a digital world the faster it is needed to consider about handling big data for uncovering hidden patterns

Along these lines, the firm has also endeavoured to streamline its business through one integrated information system (OnE), which has simplified, standardised and unified products and processes across its business units. The automated process workflow has clear underwriting authorisation rules, a user-friendly web interface for policy issuing and portfolio administration, as well as better control of claims handling and reinsurance. This has improved efficiency across sell and upsell, increased sales, reduced cost and simplified procedures.

Close collaboration between business and IT in the implementation of various digital projects – such as CRM, e-mobile, use of social media as a service point, adopting cutting edge technology like telematics and virtual electronic office system ‘ask me’ – is helping to transform the company into a ‘new generation insurer’, aiming for operational excellence, through state of the art digital services to customers.

Needless to note that, the more people operate in a digital world, the more urgent the need is to consider how to handle big data for uncovering hidden patterns, unknown correlations and other useful information for decision making.

‘Genius’ is the first electronic underwriting system in Greece, which automates the process of risk assessment and policy issuance in life and health business. The use of Genius drastically reduces the productive time required of associates and simplifying – as well as accelerating – customer service. The system was designed in cooperation with major reinsurance organisations and, for the first time, is now available to sales associate networks worldwide.

In this respect, it is considered an innovation for the Greek and international insurance market, offering competitive advantages to both intermediaries and customers. This is essentially why Interamerican is considered an insurance leader at the forefront of the Greek industry.

Philippine non-life insurance sector sees ‘excellent growth’

Posted on by Ashton Wenborn

The Philippine non-life insurance sector has seen a compound annual growth rate of 15.7 percent. One organisation at the forefront of innovation in the sector is Standard Insurance Company. World Finance speaks to its President and CEO, Patricia Echauz Chilip, to find out more.

World Finance: Patricia, the local non-life insurance sector is expected to continue to grow, but what is likely to impact its development?
Patricia Echauz Chilip: Well as you said, we’ve had excellent growth through the last couple of years; some very strong economic growth.

In terms of the non-life insurance industry, we’re seeing a lot of regulatory requirements. One of them is the increasing capitalisation.

In 2013 your capital as an insurance company – as a non-life insurance company – had to be at PEP 215m; and by 2022 it has to be at PEP 1.3bn. Every few years they increase the capitalisation requirement, and we’ve seen insurance industry players for non-life shrink from 107 players, to 87 players, now we’re at 64 players. And we see further consolidation.

[W]e’ve had excellent growth through the last couple of years; some very strong economic growth

Right now our tax rates are at 12 percent VAT and 12.5 percent for DST. Because of this it’s a little bit pricey for consumers to have non-life insurance: their car insurance, their home insurance. We’re hoping that we’ll be able to lower this. We’ve already tried to pass a bill in congress, and we’re hoping it does well for our industry.

The life insurance industry was successful in lowering their tax rates and their growth rate has been amazing, so we hope to follow suit.

World Finance: Now, the growing automobile sector over there is one of the real driving forces behind the non-life insurance industry. How have you been capitalising on this?
Patricia Echauz Chilip: Just today’s paper said that the automobile industry here has reached a 29.6 percent growth rate compared to last year. We’ve sold 250,000 units in the Philippines year to date, and next year they expect to hit 300,000. So, we have a lot more cars than we do road! But it’s been very good for us. Especially for Standard Insurance, as we are the leader in automobile insurance in our country.

World Finance: Now you were talking earlier about the consolidation you were expecting to see; it’s always been a very competitive market over there, so how has Standard Insurance been staying ahead of the game?
Patricia Echauz Chilip: Well, we’ve been consistent in our strategy, and we call our strategy ‘STAND’.

S is for Speedy claim service, which, as you know in our country we have a lot of catastrophes. So speedy claim service is very important.

We have a Trusted and knowledgeable salesforce, and they’ve been around for years. They, I think, are one of our strongest factors in keeping our clients comfortable.

We’re also Accessible through many distribution channels. We’re online, we sell through dealers, we have a multitude of agents. And so you’re able to buy our insurance in very many ways.

We also love New thinking; innovation. And that’s been amazing in keeping our costs lower, in keeping us efficient.

And then at the end of the day, Disciplined underwriting. It keeps our portfolios safe, and keeps us sustainable.

World Finance: So, what are your latest innovations?
Patricia Echauz Chilip: Recently we have our online client management portal. You can manage your policy online, we send you renewals so that you never miss or expire policy. We send any update on your claims online. So it’ll really help our clients manage their policies and coverage better.

Another thing we have is Emergency Protect. That is a new feature we give for free to all of our motorcar insurance clients. When you are in an accident, we’ll give you free ambulance cover, so, we’ll take you to the hospital whether you’re here in the Philippines or anywhere in the world.

Well, the beauty of the non-life insurance sector in the country, hopefully, is that it’s really growing at a rapid rate

 

It’s consistent with our strategy of being there when you need us the most. So we don’t only take care of your car; we also take care of you.

We’ve also launched this year a large facility in the south wherein we study a lot of repair costs, we study claims; to further reduce our costs and make it easier for customers to buy our insurance.

World Finance: Now of course the Philippines is plagued by extreme weather conditions, so having a very good catastrophe response must be very important for you.
Patricia Echauz Chilip: It is; we have a very large manpower complement at 900 people. Of which 250 people are claims and technical people. We’re able to send right away a contingent down there to check not only on their cars, but of course on our clients.

It’s very important to be there on the ground, sort of hold their hand through all of it, when things like that hit.

I mean I think in Haiyan we had 900 motorcar claims. And we were able to adjust those right away. But more importantly we were able to show support to our customers.

The government’s doing it best to rehabilitate these disaster-hit areas, but for us in the insurance industry we fortified our manpower complement in some of these areas so that we’re sure to respond quickly in a disaster.

So for a nation, we’re just helping each other get through these disasters.

World Finance: Finally, what do you see as the key trends and opportunities in the non-life insurance sector moving forward?
Patricia Echauz Chilip: Well, the beauty of the non-life insurance sector in the country, hopefully, is that it’s really growing at a rapid rate.

If we’re able to make it more affordable for customers then we will be able to make the insurance penetration rate better in our country. And I think it’s good for the consumer overall.

The insurance sector is bound to grow, as it does for any growing economy. There’s no question of awareness; every so often you have a typhoon, and it makes you aware that you need to protect all your assets, as well as the future of your family. So it bodes well for the insurance industry here in the Philippines.

Tranquilidade becomes first choice for Portuguese insurance

Posted on by Ashton Wenborn

Portugal is located in the southwest corner of Europe, and in the 15th and 16th centuries it expanded a Western influence, establishing the first global empire. The country reigned as one of the world’s first major economic centres, with a strong political and military presence.

Known for its rich history, the country has also demonstrated a strong ability and will to overcome challenges and hurdles. This has been the case for several centuries now, and looks set to continue. Since 2008, the Portuguese economy has experienced immense challenges, with the emergence of the financial crisis hitting the international markets, creating internal turmoil. In 2013, the economy continued to be significantly conditioned by the external de-leveraging and fiscal consolidation process required by the Troika agreement. GDP fell by 1.4 percent during 2013. Investment and private consumption fell once again, and unemployment remained high.

Exports continued to perform well, but were insufficient to compensate for the downturn in domestic demand. Although the three last quarters showed a positive performance in terms of GDP, the remainder of 2014 and the coming years will continue to be very challenging.

It is critical to be the first go-to provider of the agents when a client wants an insurance

Falling figures
In 2013, the Portuguese market of non-life insurance amounted to $4.92m, and has been falling since 2011. In 2013, with the exception of health, all major product lines decreased. The mandatory insurances, workmen’s compensation and motor product lines were the most affected. Workmen’s compensation decreased eight percent (down 31 percent) due to an increase in the unemployed and the increasing competition between insurers. Motor insurance fell 5.8 percent (down 18 percent compared to 2008) due to the economic environment and, again, due to an aggressive price-based competition between insurers. Consequently, the market’s non-life insurance combined ratio (104 percent) continued to be problematic.

The Portuguese insurance market needs to invert the existing strong pressure on price, in order to recover adequate levels of solvency, since this sector has been operating with a combined ratio exceeding 100 percent for many years. A sustainable development of the sector requires a proper adjustment of prices to risk, but also focus on factors such as product innovation, service excellence, operational efficiency, or commercial effectiveness.

Tranquilidade was founded in 1871 and is the second largest non-life Portuguese insurer. It is an ‘agent company’ with a wide and diversified national distribution network of more than 1,800 professional points of sale. The network of Tranquilidade has 80 brokers, 1,400 multi-brand agents and 400 tied partners, covering the entire national territory.

Tranquilidade provides the full range of non-life products with customised solutions for all customer segments: individuals and families, SMEs and large corporations. Through its life insurer, T-Vida, it also offers life, retirement and financial products. Even in the difficult environment in Portugal, Tranquilidade gained 0.8 percentage point market shares to 8.4 percent, while improving its claims ratio over the last five years. The fact that Tranquilidade has a clear vision and strategy drives very consistent initiatives, and allows the organisation to face the future with confidence.

The company grows organically and selectively, continuing to rebalance profitability and focus on service quality and efficiency, ensuring that the entire organisation is fully aligned and motivated around the vision of being the best choice for customers and distribution partners. The distribution of non-life insurance in Portugal relies heavily on the agents and brokers channels, which represent about 73 percent of sales. This is essentially a multi-brand market, since tied agents represent just over 10 percent.

The Tranquilidade network

>1,800

professional points of sale

80

brokers

1,400

multi-brand agents

400

tied partners

Face-to-face business
For customer facing services, the insurance agent is the main port of call. This person assumes the role of insurance consultant, ensuring a personalised relationship and after sales service. They are critical players in this sector, even more than in other retail industries, since they tend to direct the relationship with the clients. For them, the insurance companies are product suppliers. This is especially the case for multi-brand agents, as they’re the ones that drive the clients’ choice of insurance company.

The multi-brand agents decide which suppliers to propose to their clients based on criteria as diverse as the price, the quality of the product and the service offered to their clients and to themselves, the level of commissions and incentives, the reputation of the insurer, among others. Given the importance of this channel, the investment of insurance companies in the growth and consolidation of partnerships within its network is essential.

The value proposition offered to them must be distinctive and dynamic, which is the key to obtaining success. Whether Tranquilidade is the first-choice provider of an agent or not makes all the difference in business development. It is critical to be the first go-to provider of the agents when a client wants an insurance.

In its aspiration to be the ‘best choice’ of professional agents, Tranquilidade is focused on four operational priorities. To offer competitive products with price discipline, innovation and diversification in business, guarantee exceptional quality of service, and reinforce proximity to its distribution network. It does not compete only based on price, as many of its competitors do. In a very competitive market such as insurance, this is only possible in cooperation with the distribution partners, ensuring that all other operational levers are at their best.

There is a culture of innovation in products and services at Tranquilidade. It faces innovation as a way to avoid the price trap. The company continuously and systematically seeks new business opportunities and improvements to the current product portfolio, and also invests significantly in tools to simplify the agents’ sale process, its customer retention and cross sell.

The quality of service offered to clients and agents is embraced in an almost manic way. In fact, regular surveys of customer satisfaction are conducted at different touch points to ensure that all operations are performing as best practices. The results show high levels of satisfaction, with 85 percent of customers recommending the company. Another important indicator is the number of complaints submitted by clients, which is less than 0.25 percent of serviced clients, and has been falling for five years consecutively, in counter cycle with the global figures of the market.

The quality of service offered to clients and agents is embraced in an almost manic way

Finally, the proximity to the agents network has to be comprehensive. It begins with having a deep individual knowledge and understanding of all the distribution players in the market. This competitive advantage is difficult to replicate as it currently stands.

This proximity to distribution networks involves not only commercial teams on a daily basis, but also the central departments and even the board, who has regular brainstorming sessions with key agents. The focus is on their concerns and suggestions of improvements that are evaluated and fed back to operational plans for implementation.

This culture and commitment at Tranquilidade has allowed the company to become a reference in the market. According to several independent institutions, it is setting the standards, with recognition and acknowledgement of several consecutive distinctions.

Earlier this year the company again received the awards it had won in the previous two years: insurer with the best reputation in Portugal (and second in the Iberian Peninsula) by the Reputation Institute; ‘Consumer’s choice’ in the insurance category from the Consumers’ Choice Awards; ‘Seal of Excellence’ by Superbrands; and ‘Best Call Centre in the insurance industry’ by the Portuguese Association of Call Centres.

Moody’s downgrades Japan’s credit rating

Posted on by Ashton Wenborn

Moody’s has cut Japan’s credit forecast from A1 to Aa3 – in line with Fitch and one notch below Standard and Poor’s respective ratings.

Explaining its decision, Moody’s cited uncertainty over whether the country could achieve its ‘fiscal deficit reduction goals’ and ‘the timing and effectiveness of growth enhancing policy measures’.

Once hailed a saviour for the Japanese economy, Abe has sinced faced intense criticism for his economic policies

Specifically, one Moody’s representative linked the downgrade to Prime Minister Shinzo’s Abe’s delay to raise sales tax due in 2015. The increase was postponed after an initial sales hike reduced consumer spending, throwing the country into a recession. But some argue Japan should have stuck to its guns, as this lag could compromise its ability to cut its budget deficit by 2020.

The rating has come at an inconvenient time for Abe, due a snap election in two weeks’ time. Once hailed a saviour for the Japanese economy, Abe has sinced faced intense criticism for his economic policies – deemed ‘Abenomics’ – which include large government spending and making financial credit more easily available. With a public debt that’s twice the size of its economy, and the yen hitting a seven-year low against the dollar on Monday, all indications are that Japan has a long way to go to compete with other major economies.

Still, Abe has remained confident in his policies, which he described as “the only way to end deflation and revive the economy”.

Japan’s current credit rating is now one level lower than South Korea and China’s, four lower than the US and Germany, with a “stable” outlook.

Danske Bank embraces digital future with omni-channel business model

Posted on by Ashton Wenborn

The digital world is moving faster than ever, driven by technological breakthroughs, demographic changes and new consumer demands. Consumers have fully embraced the opportunities the internet has to offer – from everyday shopping for books, clothing and groceries, to finding their next home and saving for retirement. At the same time, consumers expect the full attention and service of the seller or service provider, no matter whether interaction is digital or face-to-face.

The banking industry is no exception to consumer demands: our customers want banking to be easy, convenient and relevant. This is both an opportunity and a challenge for us as retail banks. It is a unique opportunity to be present in the daily lives of our customers and play a proactive role as their financial adviser. But at the same time, we need to make sure that whatever channel our customers prefer, it will be a positive experience for them every time we are in touch – anywhere, anyhow and anytime.

Customer behaviour has changed significantly over the past 10 years, and we need to acknowledge that we as banks need to design our products and processes to fit our customers’ true needs rather than to force customer needs to fit our products and processes. So instead of the conventional product-driven customer approach, we need to fully support the entire journey of our customers in all life events.

Creating a customer-centric omni-channel business model takes strong commitment and proactive understanding of customers’ needs, dreams and challenges. Only that way can we as banks achieve the trust of our customers and make them ambassadors of our businesses.

The banking industry is no exception to consumer demands: our customers want banking to be easy, convenient and relevant

At Danske Bank, we have worked intensively with further strengthening the way we serve our retail customers in all channels. Over the past years, we have identified a number of key drivers to boost customer satisfaction. We have launched a number of game-changing initiatives to create a unique value proposition based on the ambition to make banking and financial decisions easy and coherent for our customers.

We believe that the fundamental requirement of all customers is that they have a fair deal with their bank. With our Customer Programme, launched in 2013, we wanted to introduce a programme that systematically rewards customers for the business they trust us with. Basically, the programme is offering customers favourable prices and benefits based on their business volume with us. The more business (loans, investment and savings), the more benefits and favourable interest rates and prices we offer, and in terms of primary touch points, our service model ranges from personal advisers to contact-centre advisory service. Now, 18 months later, more than one million of our customers in Denmark (a country with some five million inhabitants) have signed up, and we have successfully launched a similar programme in Finland.

Strong online presence
Customers want banking to be easy and convenient, and we consider presence on all digital platforms crucial for maintaining a strong relationship with customers and acting proactively. Danske Bank has been first mover in the Nordic region with our award-winning eBanking, mobile and tablet solutions and our P2P app, MobilePay.

Over the past year, we have expanded our online offering with an easy eBanking solution, primarily for elderly customers who find the digital world challenging; introduced online meetings as an alternative to advisory meetings at the branch and, most recently, established the Danske Guide feature in our eBanking and mobile solutions that proactively gives customers targeted recommendations on their financial opportunities.

Consumers shop at conventional shops, pop-up shops and flea markets, as well as at online shops through their laptops and mobile phones. Consequently, our customers demand easy, secure and fast payment solutions that match their shopping preferences at any time. This demand has attracted a number of new market players, like Google and Amazon, which have the ability to create digital eco-systems which include payment services.

At Danske Bank, we want to meet customers’ expectations and make sure that all our customers have convenient payment solutions at their disposal – regardless of whether they are online savvy or find it difficult to navigate in the digital world.

Therefore, we offer a range of products tailored to customers’ individual preferences:
• With the MobilePay app (our P2P app) we have made smartphones a new channel for easy and quick payment between mobile users and between mobile users and businesses. The app is market leading in Denmark and the most flexible and user-friendly solution for both customers and non-customers.
• With contactless and combo MasterCards, paying with a card at shops becomes even faster and customers can decide whether to pay now or at a later time.
• With our cash card we offer customers an alternative to cash. It can be used in shops and ATMs in Denmark. The card is especially helpful to customers who are not comfortable with PINs and passwords or who sometimes have other persons do their shopping.

Danske Bank’s customer-centric omni-channel business model is designed to travel across borders

Customer-centric culture
As retail banks, we need to be extremely aware of the fact that customers want more options – but with less complexity. Conventional online banking and payment solutions will not be enough in the future, we have to think about how we use our substantial knowledge about customers to build and further strengthen their relationship with us. To me, there is no doubt that we have to act proactively and build strong eco-systems that generate additional value for our customers and a new profit pool for us.

At Danske Bank, our next step in strengthening our digital offering to make everyday life easier is developing customer-friendly digital solutions to cover all events in a customer’s life. The first area we will work on is home purchases – from the customer’s interest in a property to the signing of the loan agreement and handing-over of the keys.

No matter how many digital banking solutions we introduce, no bank will survive without a highly-skilled and motivated front-line staff to advise customers. Whether our advisers meet with customers at face-to-face or online meetings, they are key to ensuring that customers feel welcome, confident and acknowledged, and to making sure that customers experience easy-to-understand, competent and proactive advice that creates value for them in the long term. Only that way can we as banks achieve the trust of our customers and make them ambassadors of our businesses.

At Danske Bank, we believe that developing and preserving a customer-centric culture requires that advisers have sufficient time for their customers. Consequently, we focus on reducing the administrative workload and delegating decision-making authority to give advisers time and room to serve customers. Through an idea bank, we received more than 600 suggestions from employees on how we can simplify procedures to create more time for customers and we have seen proactivity increase 25% in just one year.

New business opportunities
Danske Bank’s customer-centric omni-channel business model is designed to travel across borders, giving us a competitive edge in new markets because of synergies and a strong, agile organisation. While Danske Bank is market leader in Denmark, Finland and Northern Ireland, we hold a challenger position with much potential in Norway and Sweden. We want to realise this potential and grow our market position, and we believe that our business model and attractive value proposition provide a strong foundation for further expanding our business in these markets.

There is no doubt that the years ahead will be challenging for the banking industry worldwide and that competition will be fierce. Disruption from new digital entrants will be profound and what we have seen so far is just the beginning. Consumer behaviour and preferences will continue to develop and we must be ready to respond to them. But the future also holds much potential if we can develop simple and easy-to-use solutions to the complex requirements that our customers have and seize new market opportunities while keeping a strong focus on customer satisfaction.

Black Friday fails to satisfy retailers’ expectations

Posted on by Ashton Wenborn

US retailers may have shot themselves in the foot this Black Friday by offering deals and special offers consistently throughout the year, suggests a National Retail Federation (NRF) report. On average, consumers in the US spent $380.95 per person, down 6.4 percent from 2013, and overall sales fell by 11 percent.

The disappointing result of the so-called Superbowl of shopping is down to a shift in consumer spending habits

The disappointing result of the so-called Superbowl of shopping is down to a shift in consumer spending habits, particularly a steady growth in online shopping, the report claims. 42 percent of shoppers did so online, spending an average of $159.55 – down 10.2 percent from last year, when the average was $177.67.

“A strengthening economy that changes consumers’ reliance on deep discounts, a highly competitive environment, early promotions and the ability to shop 24/7 online all contributed to the shift this weekend,” said NRF President and CEO Matthew Shay, adding that this is a trend expected to continue for years to come. The lower-than-expected sales surprised many, who saw positive economic data as a sign of a stronger holiday period, but consumers are now more confident that they can expect further deals throughout the holiday season.

Discounted high-end clothing, televisions and toys were the hottest items flying off the shelves, with traffic driven largely by millennials – those aged between 18-34. Surprisingly, 35 percent of those who responded to the NRF’s survey said they utilised email circulars from retailers to keep track of deals over the weekend.

The Black Friday phenomenon is yet another US import to find its way across the Atlantic in recent years. Shops across the UK descended into chaos as customers jostled and fought over televisions and coffee machines, resulting in temporary store closures, countless injuries and several arrests being made.

Rouble suffers biggest single day decline since 1998

Posted on by Ashton Wenborn

Collapsing oil prices have seen the rouble hit a new low against the dollar in late November, and steep declines in the days since have left the already ailing economy vulnerable to further damages. As the country’s primary source of foreign-currency revenue, an almost 40 percent fall in oil prices has prompted central bank intervention to avert an approaching catastrophe.

The central bank announced in November that it would allow the rouble to float freely and intervene only if further currency losses posed a real threat to its economic stability. The banks’ intervention, therefore, shows just how significant the situation is, and marks yet another backwards step for what was until recently the world’s eighth biggest economy.

The banks’ intervention, therefore, shows just how significant the situation is

At its worst, the currency sunk nine percent in early morning trading, though recovered swiftly after reports emerged that the central bank would soon step up its efforts to stave off the damage. At its worst, on the last Friday of November, the rouble was trading at a low of little over 50 against the dollar, though the first day of December brought further damages, as the central bank mobilised to stop the rot, and, in doing so, halved the losses to only four percent.

However, even after the measures were introduced, the daily drop clocked in at four percent, the worst since the 1998 default crisis, and investor sentiment was little changed from the week previous with the currency having suffered a 15 percent decline.

To compound the country’s woes, conflict in eastern Ukraine continues to drag down Russia’s reputation, with sanctions imposed by western economies damaging long existing trade relations, most notably in Europe. The oil and gas sector accounts for two thirds of the country’s exports, and without sustaining the same numbers it has done in years passed, Russia’s economy will worsen further still, and the oil dependent superpower will struggle to keep its currency afloat.

CIBC sees US and Canada’s oil sectors go from strength to strength

Posted on by Ashton Wenborn

What do you get when you take the oil production capacity of Saudi Arabia and put it in the middle of the US, the world’s largest economy? An economic engine that will drive domestic growth in the US and Canada for years to come.

The situation is, in fact, already a reality: the US overtook Saudi Arabia and Russia as the world’s largest producer of oil and natural gas this past year (see Fig. 1). When Canada’s oil and natural gas production is added to that of the US, North America is by far the clear global leader in energy production.

The US produced the equivalent of about 12.3 million barrels a day of oil, natural gas liquids and related fuels at the end of 2013, compared to a daily output of 11.6 million barrels and 10.5 million barrels from Saudi Arabia and Russia respectively, according to the US Energy Information Administration. Canada is the world’s fifth-largest producer, with a daily output of 4.1 million barrels.

US oil production had been in decline for more than 20 years until 2006, when new technologies, such as horizontal multi-frac drilling, unlocked the latent potential of tight shale oil and gas trapped within its sandy deposits.

The last time North American oil flowed to such an extent, crude sold for $28 a barrel, Reagan was still president, and Back to the Future had just
been released

Since that trough, total US oil and liquids production has increased by five million barrels per day to the aforementioned 12.3 million barrels per day at the end of 2013. This is primarily due to three major resource formations being unlocked: Eagle Ford in Texas, the Permian Basin in New Mexico and Texas, and the Bakken Formation in North Dakota and Montana. Canada is also producing much more oil, – 4.1 million barrels per day today – mainly from Alberta’s oil sands and the Bakken Formation in Manitoba and Saskatchewan. The last time North American oil flowed to such a great extent, crude sold for $28 per barrel, Ronald Reagan was still the US President, and the first Back to the Future movie had just been released. In 2006, prior to the unlocking of Eagle Ford, Permian and Bakken, the average price for West Texas Crude Oil was $66 per barrel. In 2014, the price of an equivalent barrel has risen to a range of $80 to $107.

The US’ ascent is starting to create tectonic shifts in terms of trade, money flows and economic growth. Indeed, this remarkable shift in the world’s energy production is translating into a major economic windfall for the US and Canadian economies, and we believe it will continue to do so for many years.

Economic impact
The magnitude of the economic boon from this rise is staggering. Assuming oil prices at $100 per barrel, the increased production in Canada and the US means that as much as $212bn per year, that would otherwise be used to purchase OPEC oil, is now staying in North America and being put to use here.

The gains are, in fact, much larger when we include the virtuous cycle of new high-paying jobs supporting energy transportation and services, and the associated manufacturing renaissance that comes with a highly skilled, well-educated labour force and stable energy prices.

According to the US Bureau of Labor Statistics, 264,000 new jobs have already been created in oil and gas extraction and related industries since 2006. The average salary for these jobs is over $76,000 per year, or an aggregate of $20bn per year. If we assume a simple 2.5 multiplier effect (see Fig. 2), based on a conservative estimate of 60 percent marginal propensity to consume, the energy boom translates into approximately $500bn per year. That’s equivalent to nearly three percent of US GDP. It is clear that North America’s energy sector is partially fuelling the current economic recovery.

We believe this economic windfall is sustainable and that our estimates may be conservative. Indeed, more than $100bn worth of announced or approved infrastructure-related facilities projects in downstream gas, liquefied natural gas (LNG) and chemical plants will be developed in North America over the next five years, according to CIBC Asset Management’s Utilities and Power Senior Sector Specialist Dominique Barker. The economic stimulus from our largest trading partner is good news for Canada in terms of trade, tourism, energy security and growth.

Crude oil production

A sustainable outlook
In order to ensure the sustainability of this growth, a responsible approach to the environmental and social impact needs to be adopted by the industry. Carbon footprints, water quality and land use all need to be appropriately balanced with overall economic benefits. Additionally, the quandary of access to market is a concern for Canadian energy producers, as trucking, rail and barging are neither the safest nor most efficient modes of transportation. The latest technologies utilised in pipeline construction and monitoring, such as acoustic detection systems, internal pressure wave based tools, and external cable and optical fibre systems, ensure that pipelines remain the safest and most reliable mode of transporting crude oil. As such, delays in cross border approvals for projects like TransCanada’s Keystone XL pipeline not only negatively impact the economics of crude transportation for Canadian producers, but also raise the risk of accidents and spills along already congested rail networks.

The US Energy Information Agency is calling for Americans to consume roughly 19 million barrels a day of oil in 2015. So, despite the US’ rapid growth in energy production, there are still no forecasts that predict complete energy self-sufficiency in the foreseeable future. We believe that, in the long run, energy self-sufficiency will become more viable in North America, but only if Canada’s oil sands and unconventional resources are exploited. Growing North American production is displacing foreign barrels; however, it is extremely unlikely that all sea-borne foreign barrels will entirely be displaced, due to the benefits of diversity of supply as well as foreign ownership of North American refineries.

Source: CIBC
Source: CIBC

Luckily for Canada, the US spent the better part of the past decade pouring billions of dollars and resources into reconfiguring its vast network of refineries on the Gulf Coast to accept the heavier type of crude produced from Canadian oil sands. These refineries convert crude oil into different types of fuel or end products such as motor fuel, aircraft fuel, heating oil, asphalt and petroleum coke. The majority of this monumental spending occurred between 2006 and 2011, prior to the recognition of the abundance of light oil coming from new US shale formations. As such, there remains a great deal of demand for heavy Canadian crude by US refiners, especially as heavy oil supply from Mexico and Venezuela is falling due to natural declines in those fields.

Today, the make-up of Canada’s crude oil production is almost evenly split between light oil and heavy oil. However, over the next decade, the vast majority of Canadian production growth is predicted to come from heavy oil regions like the oil sands. According to forecasts compiled by CIBC Global Asset Management’s Energy Specialist Brian See, by 2020 as much as two thirds of Canada’s production will consist of heavier crude slates, and thus the need to ensure end market customers is imperative for Canadian producers’ economic success.

Canada’s stable political climate is analogous to its highly predictable oil sands assets found in the foothills of Alberta. Unlike a well drilled in one of the US shale formations, which would have a natural decline rate of 30-40 percent, the decline rates of an oil sands mine can be drawn out over many decades without the need for capital being spent to replenish the lost production.

Simply put, there are no other large-scale untapped reservoirs that are located in politically stable countries that are open for trade and commerce, with such a well-educated and highly-skilled labour force. For the US to obtain self-sufficiency, it needs Canada. That’s why we believe Canada’s energy sector has a very bright future indeed.