Insurance and banking have always been partners, but at Millennium bcp Ageas, a joint venture for insurance between the Portuguese bank Millennium bcp and the European and Asian insurer Ageas, this partnership has taken a step further. The insurance holding includes four companies, to better explore each line of business: Ocidental Seguros for non-life, Ocidental Vida for life business, Médis for health insurance and Pensõesgere for pension funds.
Combining the knowledge brought from Ageas with the experience and know-how of the insurance sector in Portugal created an ambitious and innovative operation, with the aim of becoming the market leader in the near future.
At the end of the Q1 2011, Millennium bcp Ageas ranked second in overall insurance in Portugal, surpassed only by the state-owned insurer Caixa Seguros. With impressive key financial and economic indicators delivered at the end of 2010, such as €1.95bn in direct written premiums, mainly from the life business, €13.22bn in assets, 13.7 percent ROE and a solvency ratio of 183 percent, Millenniumbcp Ageas is clearly on the right path to achieving its goal.
The perfect match
In the 1980s, when Ocidental Seguros and Ocidental Vida were formed, the Portuguese insurance market was undeveloped and remained in the hands of insurance agents. Together with Millennium bcp – the first privately owned Portuguese bank, launched in 1985 – these companies introduced bancassurance to the Portuguese market, a concept that would definitively transform the sector (today five of the top six insurers operate by bancassurance).
Growing side-by-side with Millennium bcp over the years, organically and through acquisitions, the insurance operations developed solid know-how and experience. The insurance market went through a period of rapid development, and innovation was essential.
Millennium bcp Ageas was always a leader. For example, Médis, the health insurance company created in 1996, was the first to launch managed care in Portugal. By leading the market, Médis forced competitors to change and adapt.
Ageas, meanwhile, has 180 years of insurance experience, and is ranked among the top 20 insurance companies in Europe. Ageas has chosen to concentrate its business activities in Europe and Asia, which together make up the largest share of the global insurance market, with annual inflows of almost €18bn.
In 2005 the perfect match arose between Millennium bcp and Ageas when their joint venture was formed. Both are experts in bancassurance: Millennium bcp has domestic market knowledge and distribution capacity, while Ageas has insurance know-how, together with international size and relevance. The outcome is an innovative, solid, profitable and ambitious operation.
Global portfolio AND customer focus
The Portuguese insurance market is now mature, with customers fully aware of product offer and market conditions. This forces operators to continue their innovation in order to make a difference when it comes to guiding customer choice of their insurer. Some do it either through price, some focus on specific advantages, some on solidity, reputation, convenience or service excellence. At Millennium bcp Ageas its a mix, built around a strategy of focusing on the customers.
Being mainly a bancassurance operation, the insurance staff works daily with the bank. In fact, the commercial strategy, product offer and campaigns are developed jointly by the insurance and bank structures. This results in perfect strategic alignment, while also combining deep customer knowledge from the bank branches with tailored commercial approaches. It allows the bank’s commercial efforts to be more efficient, addressing each customer with the right solution.
Recognising and serving customers’ global needs concerning insurance is a strategic business requirement. Millennium bcp Ageas aims to cover all lines of business for individuals and companies (motor, property, health, life risk, savings, unit-linked, retirement saving plans, personal accident, workers’ compensation, liability and others) so that customers are able to resolve all of their insurance needs in a single place: the bank.
From a marketing perspective, efficiency is gained through a commercial approach that brings together all aspects of the purchase funnel. According to the customer relationship cycle with the company – from prospective client to acquirer, followed by loyalty and of course the retention phase – specific measures are taken and different solutions are offered.
Key indicators
The Portuguese insurance sector was naturally affected by the global economic environment, the pressure put upon the euro, the speculation against Portuguese sovereign debt, the sovereign ratings downgrade, and the political instability of early 2011 which precipitated the need for a bail-out, leading Portugal to implement an Economic Adjustment Programme agreed with the IMF/EU/ECB.
Despite the stagnation of economic activity that has taken place, the insurance sector in Portugal is based on a robust model, and is overcoming this challenging situation without financial support from the state, with no cases of insolvency. Indeed, the sector maintains a solvency ratio well above the 100 percent required by the regulator.
And the insurance industry is solid and profitable: in 2010 90 percent of the 82 companies presented positive results, recovering consistently after 2008’s market turmoil. The Portuguese insurance sector is by far the largest national institutional investor, with €62bn under management – 35 percent of GDP – of which €58bn are investments. Portfolios are diversified (67 percent is sovereign and corporate debt) and exposure to Portuguese sovereign debt is just 10 percent of total investments.
At Millennium bcp Ageas, the performance indicators in non-life outpace the markets by far. The company grew 6.8 percent in non-life direct written premiums in 2010 (while the market grew just 0.9 percent), and achieved a non-life net combined ratio of 94.8 percent (compared to 103.9 percent of the market).
Because more than 80 percent of direct written premiums come from the life business, mainly investment products, rigorous asset management is essential. The same applies to Millennium bcp Ageas’ obsession with the ROE high standards and solvency ratio.
Growth strategy – channels
Being at its core a bancassurance company, Millennium bcp Ageas’ objective is to increase the penetration rate for insurance products. With benchmark values in insurance sales associated to bank loans (97 percent in life risk consumer loans, 88 percent in life risk and 80 percent in property, both in mortgage), opportunities remain to explore active sales, especially in non-life. Bank customers’ insurance possession still has plenty of room to grow.
As the company aims to grow further, mainly in non-life, the strategy is focused on diversifying distribution channels. A new agents and brokers channel was developed to address customers in the small and medium-sized business segment. Private sector activity in Portugal is dominated by SMEs, which represent the major source of employment. There are more than a million active SMEs in Portugal, employing nearly 2.2m people. The majority are small and micro enterprises in the tertiary sector.
On the other hand, taking advantage of Médis’ unique value proposition (health insurance), another commercial channel was developed, also with high growth potential: distribution agreements with other insurers. Médis manages a portfolio of over 450,000 insured people, of which distribution agreements already represented 44,475 in December 2010, growing 30 percent by the end of June 2011.
Getting ready for the future
The financial figures are impressive, but focus is imperative to achieve Millennium bcp Ageas’ objective of continued growth and leadership. The economic crisis, market turmoil and banking sector deleveraging all carry huge challenges. Cancellation control has assumed a prime role, and additional customer retention measures are decisive for 2011. Millennium bcp Ageas’ management has already put this into action, with a marketing plan dubbed “The anti-cyclical recipe.”
