Note: Article was originally published May 2009
EASY MONEY>5 QUESTIONS
Q&A WITH RIEN HERMANS
CEO, AXA Philippines
1. AXA Philippines generation P1 billion in business sales last year, making you one of only two to have achieved that in a single year. To what do you attribute this performance?
It really was no easy feat to again reach the P1 billion mark in new business, especially in the context of last year’s financial crisis. Nevertheless, there are three key reasons why we were able to generate that much new business.
First, we listened to our customers. Given the turbulence in the market, we discovered that investors were looking for instruments that guarantee their capital. Nobody obviously wants to see the account value of their life savings dwindle to nothing. Therefore we developed “Locked & Loaded,” a variable insurance product that protects the principal investment, but allows an upside return in line with the stock market increase over a 5 years period.
On top of this, we also understand that the need to save for retirement and education for the children is understood by many Filipinos regardless of any market conditions. Hence we developed a new retirement offer, MyRetirementPlus, and increased marketing efforts to support our education product, CollegePlus. These products contributed significantly to achieving P1 billion new business sales, and all these actions were a response to what our customers wanted and needed.
Second, we have a strong distribution network with on one side the power of country’s largest bank, Metrobank, offering our products in partnership with our own specialized advisors and on the other side a network of entrepreneurs who have the trust of their, sometimes decennia long, relationship with clients. Despite the difficult market conditions around them, they remained steadfast and delivered by giving the proper and timely advice to our customers’ various financial needs.
Last, and definitely not the least, we were able to hit the P1 billion milestone in new business because of the trust that our customers have put on our brand, our company and our organization. AXA Philippines is a reliable partner in planning for your financial future and we are putting customers at the very center of everything we do. It is as simple as that.
2. AXA is the leader in variable unit-linked insurance in the Philippines. What have been the factors that contributed to this market position?
There are three main factors as to why we have been so successful with the variable insurance category: our products, our people, and our partnership.
Our products have been designed to be very competitive, with a very good range of flexibility such that you can use our unit-linked products either for protection, education, or retirement. Also, the performance of our investment-linked funds has been ahead of competition, testament to the abilities of our fund managers.
Next, our people, our distributor sales force, have been the key drivers in growing variable insurance. It takes a lot of special skills and knowledge to sell variable life insurance, reason why our distributors have to pass a special exam next to the normal Insurance license to advice and sell these products. Our people are knowledgeable, well-trained, highly-skilled financial professionals who are considered the best in the filed of variable life insurance.
The most important factor of our success is the partnership with Metrobank. With their extensive network of branches all over the country, Metrobank gives us the distribution reach and the potential to tap into a very extensive base of high net worth clients. More often than not, Metrobank clients are open to variable life insurance as they see the product to be a strong complement to their entire savings or investment portfolio with the bank.
3 How has the market volatility due to the financial crisis affect investors’ confidence in variable insurance products and AXA specifically?
The current financial crisis is of such a global scale that it has affected investor confidence in all forms of investment products, whether it are variable insurance products, mutual funds, or UITFs.
Unfortunately some investors, also in our products, have let panic and fear dictate their investment decisions the past few months. Our products however are constructed to optimize investment returns for the medium or longer term, let’s say between at least five to 20 years. Mostly they are used as building blocks for a retirement solution or education funding. In times of turbulent economic times our products offer the possibility to move the investments temporarily to a liquidity fund in order to guarantee the capital, while in more bullish times the investments can be redirected, either partly or in full, to investment solution with the potential of higher returns.
In fact savvy investors know that the best time to invest is during market depressions. As Warren Buffet himself has termed it, during times like this, everything is on “fire sale!” Imagine, when will one ever get the opportunity again to purchase blue-chip stocks for 30%-40% of its previous price? For as long as one thinks of their investments for the long-term, everyone knows that the market will always rebound which allows far better returns.
AXA as a global company is far less affected by the economic crisis because it has strategically focused on its core business of insurance, unlike some its competitors who have ventured into other higher-risk financial services such as investment banking, futures, and securities.
Apart from that, AXA has a strong balance sheet and is very solvent. It has a solvency ratio of 127%, which is much higher than what is required by government regulators. What this means is that AXA has a far more than adequate capitalization to meet and protect the promises it has made to its customers. Because that’s what reliable companies do.
4. You’re not a stranger to the Asian market obviously, and you’ve handled ING’s business in the Philippines several years ago. How has the local market changed since then and what opportunities do you see now?
There are two big changes from the period between 1999 and 2002, when I was assigned here before.
First of all, the products have changed as during my first stay there where only traditional insurance products and the market was dominated by 20-year endowments and whole life policies. Changing market demands steered a shift into more investment linked products, where the customer has a chance on better returns, but also has the investment risk. Another change in the product offer is the shift towards much shorter paying periods, with as major proof the high volumes in single premium products in 2006 and 2007.
Secondly there is a change in the distribution landscape as during my first stay in the Philippines there was barely any bancassurance business except from the mortgage redemption products and the credit card related products.
The last change is of course the strong emerging of AXA Philippines in the market, as the organization was very well able to use both developments and became the undisputed leader in single premium unit linked products sold through the strong and extensive Metrobank network.
What didn’t really change is the total penetration of life insurance in the market and the total assets under control of the life insurance companies. In many countries life insurance is advantaged by special tax treatments for individuals. Governments have two reasons to do this: life insurance creates long term funds which are indirectly invested into long term infrastructural enhancements, and the government wants to support people who take care of securing an income after their retirement.
I hope the PERA bill will in this respect bring some new impulses to our industry and proof the economic value of the life insurance industry.
5. On a personal note, are you glad you’re back in the Philippines? What do you enjoy most about your stay here?
I’m very happy to be back in the Philippines as I have always felt welcome and at home here. You might think it is strange, but for me the Philippines felt closer to home than any other country I have been stationed. Maybe it is because of the language, maybe because of the religion, or maybe it is just because of the people who make you feel at home. So in that sense I’m actually a balikbayan.
Apart from that I had a very good experience here in building up a business with a team of Filipino managers, who had a high level of professionalism, drive and passion for making our ambition reality. I’m confident that I can achieve the same in AXA Philippines and get the satisfaction of bringing the company to new heights.