Portugal’s economy has shown signs of real progress lately, having overcome a series of obstacles, and in doing so has handed a boost to its insurance sector. The country’s gathering recovery has instilled a heightened awareness in the public about the importance of financial planning, which has brought with it new opportunities, particularly for the life insurance segment.

The life insurance market last year posted its second consecutive year of growth, up 12.9 percent on 2013, due mostly to increased demand for savings and retirement products. Demand for the latter was up 57 percent last year, revealing customers’ appeal for these solutions, as a ‘safe harbour’ for their long-term savings needs in a context of the still unconsolidated recovery of the financial sector.

“It is a mature insurance market, where life insurance premiums represent six percent of GDP, and that in recent past has been submitted to several consolidation movements, involving major players”, Manuel Lupi Bello, an Executive Committee member at Ocidental, one of Portugal’s leading lights in the Portuguese insurance market, told World Finance.

Ocidental Vida is a joint venture between Ageas – an international insurance group, ranked among the top 20 in Europe – and Millennium bcp – the largest private bank in Portugal. The group is also the country’s market leader, with €9.7bn ($10.91bn) in mathematical provisions, and has kept a tight hold on this position in each of the last 10 years, boasting a 22.5 percent market share in 2014. The continued solidity of the joint venture is one of the group’s key pillars of success and by utilising this amalgamation of expertise across a wide array of areas Ocidental is seen as one of the region’s leading insurers.

A winning partnership
“It’s a winning partnership. Bancassurance is the highest growing channel in life insurance and our lifetime distributor partner is none other than Millennium bcp, the leading private bank”, said Bello.

“We act by the principle that each customer is unique. Operating in a mature and demanding market, where customer behaviour is increasingly veering towards personalisation, is a constant challenge for both entities. The bank has a deep knowledge of customer profiles and their needs, so it manages to meet these high expectations. At the same time, we are able to incorporate this expertise in our product development, and this flexibility and quality allows us to match our products to often very different customer profiles. By matching and fine-tuning these two realities, we have been able to build one of the most successful bancassurance operations in Europe and even worldwide.”

The market is not without its challenges, and there are a number of issues for firms such as Ocidental to first consider if they’re to make good on the country’s rapidly evolving insurance space. “I would put the emphasis on three different levels”, said Bello. Speaking first on the regulatory landscape, the Solvency II directive will change a great deal for customers and insurers alike. There are also issues to consider with regards to market consolidation and the consequences here for some of the major insurance players’ shareholders structure. Third, there is a growing awareness of the protection needs for retirement, as well as savings reinforcement, which is already visible in the growth of these lines of business.

“As a major challenge I would highlight the capacity to stay agile and innovative in order to provide the appropriate response to customer needs in ever-changing market conditions”, said Bello. “At the same time, trust and credibility are key, for in the long run the winners will be those who most adequately stick to these principles.”

Ocidental’s market leadership is underpinned by a customer-centric approach and supported by a broad portfolio, covering everything from investments, to savings, retirement and risk, which each have to be aligned with market reality and demands. This allows the company to provide the right answers in meeting customer expectations.

The ultimate goal
“Following our four year strategic agenda, entitled Vision 2015, we have successfully balanced our product mix and fully renewed our offer, and have been able to grab growing opportunities and quickly adapt to market conditions”, said Bello. “The ultimate goal is to bring more interesting returns for customers and protect our portfolio profitability at the same time. For instance, in savings we made a decisive shift from long-term guaranteed rates to pre-announced yearly rates, while achieving a 75 percent growth in 2014 and currently (July 2015) we keep growing and outperforming the market. On unit-linked (UL) products, we strengthened the weight of open ULs in our total UL portfolio, up from 21 percent in 2013 to 58 percent in 2014. As such, we benefit from a more balanced business mix, and we’ve achieved a major transformation in a record time.” The company’s open UL inflow evolution has also proved impressive (see Fig. 1).

Speaking on how the company has adapted to the new regulatory landscape, Bello said: “As life-market leaders, and as part of the Ageas Group, we started our preparation for Solvency II back in 2007.” Having achieved excellent Solvency I ratios, Ocidental has been implementing a broad set of initiatives spanning the entirety of the company, “which in due time prepared us for the coming regime”, he continued. “The transformation of our aforementioned life offer is part of it. Since we’ve done our homework properly we have outperformed the market on EIOPA stress tests in 2014 and are fully prepared for Solvency II.”

A key part of the group’s success in forging strong relationships with customers lies in its ability to tailor solutions accordingly, while also securing the best possible return. The basis for this success rests with the pursuit of rigorous and careful asset management, created in order to safely provide the best returns. “Full transparency and adequately managing expectations are crucial”, said Bello. “For example, our investment and retirement products are structured in different risk strategies and expected returns, according to our customers’ needs. We operate in bancassurance, which means we have to find an adequate response to segments, ranging from private banking to mass market with added value. It is a constant challenge.”

One notable example of this diversity in action is Seguro Investidor Global, which is an investment product with five different investment strategies. Each is tooled according to a specific customer profile and the product has delivered impressive returns to customers utilising an assertive asset management strategy. Transparency together with an ability to make good on new market opportunities and a legacy of impressive achievements allows Ocidental to maintain its customers’ trust, which is a key differentiator when it comes to discussing medium to long term products such as retirement.

Strong relationships
Speaking on how Ocidental has been able to forge strong relationships with its customers, Bello said: “It is the outcome of several working years and a daily commitment to customer centricity, which allows us to capture significant volumes in maturities. Customers know we deliver and value our full commitment to providing an excelling service. Our high customer loyalty index is supported by our strong performance, ability to innovate and develop adequate solutions. It’s one of the best indicators of our success.” The integrated bank /insurance model also allows the group to leverage customer loyalty with benefits for all entities involved, whether they be customer, bank or insurer.

In what remains a relatively mature and well-developed insurance market, Ocidental’s agility and efficiency has set it apart from the crowd. Having always invested in streamlining processes and, in doing so, created an agile organisation, the group has made sure that the benefits span the entirety of the value chain. “Our products are subscribed to on the spot and in bank branches in real-time, even in life risk (unless the amount of capital requires medical exams). And even then the process is quick and agile, always accompanied by the point of sale. Another example is that for years our products have been available online, and so too have our servicing features.”

Continuous investment on agility and efficiency goes hand in hand with incorporating the latest innovations, and means that the group can develop products and services distinct from any other in the market. Looking to the future, Ocidental is finalising a new strategic agenda, entitled Vision 2020 and comprising a programme for the next five years. “Two pillars stand out: that we continue to be truthful to our core DNA as a solid and profitable company on which customers can rely; and that we continue to invest on a truly agile organisation which assimilates innovation and takes advantage of our knowledge to engage with and enchant customers”, said Bello. “We aim to serve our customers in the best possible way, in order to renew their trust and be worthy of their recommendation every day.