Prudential executive: Insurance sector can be six times bigger

Please use three words to describe China's changes in the past 40 years.

Progressive, wise and well thought-through.

What are the biggest achievements in China since the introduction of reform and opening-up policy 40 years ago?

Opening up the market to attract foreign capital is a huge game changer for China. If you combine the openness with the population that is increasingly better educated, then you have the ingredients to effectively reap the success that China is enjoying today. I think the other key thing is being prepared to evolve as the country goes through different stages, and to plan with a very long horizon as opposed to a narrower and shorter horizon. It means that a lot of the policies and steps that have been taken by the authorities have been well thought-through.

How do you see the growth potential of China's insurance and asset management industries?

For life insurance and asset management business, the market is still underpenetrated in China. On the asset management side, the whole market is about $1.8 trillion, which is roughly equivalent to 15 percent of the GDP. When we compare it with the US or EU, which have an asset management sector with a size equivalent to 75 percent of GDP, it means that the Chinese market very soon will have the potential to be six times bigger than it is today.

On the side of life insurance, there are only about 115 million Chinese people that have a life insurance or a saving-type contract. When you compare that to the population of 1.4 billion or to the size of the middle class, which is around 400 million, it gives you a sense of the growth potential of the Chinese market.

In China, we operate through two joint ventures with CITIC Group, a very important partner and a very well-established State-owned enterprise. We are pleased to be in joint venture with such a strategic partner because as a Western company, we need to work with people who understand China from the cultural perspective and know how to navigate some of the complexities in the country.

The Chinese regulators have indicated their intention of allowing foreign investors to own a controlling stake in their China JVs. Do you have any plan to increase investment in China and boost the stake in your JV?

We'd like to invest organically — to hire more people, invest in more technology and build new offices and new branches as we expand in China. We would like to boost our stake holding in the JVs to 51 percent or more. But at present, we do not intend to own 100 percent because I think in China it is important to work with an influential partner.

Our strategy is to cover as much of China as possible. We are looking to add more provinces as we go more toward central and western China. We distribute our products in two ways. One is through agents, the number of which is growing at a very fast rate. We had 44,000 sales agents in the country by the end of 2017, doubling the size we had two years ago. At the same time, we have access to about 4,500 bank branches today, through which we can distribute our products. There are huge opportunities to go after. China is now the second largest contributor to our new sales and fourth largest contributor to our profit. The country will be the fastest growing market for us for many years to come given the size of the opportunity.

What does Prudential's recent plan to separate its UK and European business and the US, Asia-Pacific and African operations mean for the firm?

We do this from a position of strength. By separating the two businesses, we think it will give them greater flexibility to pursue the opportunities in their respective target markets, and in doing so it will maximize the value for our stakeholders. The UK business component will be freer to compete with its peers in Europe rather than against other parts of Prudential. And the international component will be able to exclusively focus on three great opportunities in our sector, one is in the US, which is the world's biggest and most valuable market; Asia, which has some of the fastest growing markets in the world given the economic development and the rise of the middle class; and Africa, which is the world's most underpenetrated market in insurance.

For Asia, this (the split) will allow us to accelerate the rate at which we are investing and growing in the markets which is already strong in China. For example, we grew our sales by 43 percent in the country last year. We will be able to do so even faster with a greater focus. We will also be in a position to attract new investors into Prudential Plc that have a growth-centric orientation and those that want to invest in businesses that are growing and are happy to see the profits that we generate each year to be reinvested back into the business. By separating the businesses we will give the opportunities to the investors to decide whether they want to have more exposure to the growth-centric international business as opposed to more cash-centric UK business.

Mobile and internet finance has been developing rapidly in China. What's Prudential's digital plan and how will you integrate technology into your business model? 


We are increasing spending across Asia to around $422 million into new technological advancements. We invest in technology to support our agents and for the staff working in bank branches. The sales process can take place on a tablet and a policy can be issued in 30 minutes. That's how efficient it is. In claims, we have been investing in technology that helps reduce the amount of time for customers to wait to be paid from 15 days to just one day. We do that by allowing people to effectively file their claims through WeChat, through which they can track the progress of their claims.

We are now looking to cooperate with a number of online platforms in China so that we can sell products on the platforms and they can be directly accessed by customers. The nature of what we are doing does require professional advice though. If you want to buy some form of protection or health insurance, you would want to interact with a specialist for advice and to ask questions. We don't think it would be in the interest of our customers to simply go on a menu and buy them. People don't mind going online to do research. But when it comes to making a decision for a life insurance product or a long-term educational saving plan, they want to talk to a human. I think in the future, it is about the combination of both online and offline access for our customers.

What is most important principle of operating an insurance company?

I think the most critical thing is risk management. Quality business is about selling a product that a customer needs and wants and is sold in a way that doesn't create any systemic risk. We have not sold any short-term guarantee products and we will not make unrealistic promises about achieving a certain return. The critical thing for risk management starts with what needs you are fulfilling, what products you are selling to fulfill the needs and what promises you make to your customers.

What is the most unforgettable experience you have had in China?

I love history and visiting the terracotta warriors in Xi'an, Shaanxi province, has always been a dream of mine ever since I was a young boy. I took the first holiday in September after I was appointed chief executive of Prudential Corporation Asia to celebrate my 25th wedding anniversary. My wife and I spent a week in China. We went on the bullet train from Shanghai to Xi'an and went into the exhibit of terracotta warriors. It was like a dream come true.