Sun Life expects Asian earnings to double
Investment-backed policies point the way as big Canadian pushes into region
Canadian insurer Sun Life Financial, which bought Hong Kong's CMG Asia last year, expects its Asian profits to double this year thanks to its aggressive expansion in China and India.
Undeterred by an ongoing price war on premiums led by local firms, the insurer says it will go flat out in opening branches in China, and expect sales there to double.
Senior company executives remain optimistic on the Asian outlook despite profits from the region having dropped 6.6 per cent to C$42 million ($284 million) last year.
They believe that regional expansion and the $3.5 billion CMG takeover will bear fruit.
The key weapon for Sun Life in Asia is investment-linked (or unit-linked) insurance policies, according to group chief executive Donald Stewart.
Mr Stewart, who was in Hong Kong last week, said investment-linked insurance, considered as a non-traditional insurance product, would prevail in Asia as the region had made great progress in democracy and there had been a significant increase in the proportion of the young in the population.
'A unit-linked [policy] would give you a tracking of the different pieces of your premium at least annually,' he said, adding that many major competitors were still selling 'old-fashioned' pure life policies.
James Prieur, president and chief operating officer, said: 'Ten years ago, you would have found very few unit-linked sales in Hong Kong. Today, you will find more than half of the products sold will be unit-linked.'
The company expects the Asian contribution to total group turnover to jump from last year's 3 per cent to 10 per cent in five years.
Mr Prieur, who is overseeing Sun Life's mainland expansion, expects revenue from China this year to double from last year's 256.7 million yuan, driven by corporate insurance and unit-linked packages.
He said unit-linked insurance was the company's most popular product in China, with part of the reason being that the Chinese stock market was experiencing a boom.
He said Sun Life aimed to have a presence in more than 24 mainland cities by the end of next year, up from the present five cities - Beijing, Tianjin, Hangzhou, Wenzhou and Taizhou.
The joint venture with China Everbright Group - Sun Life Everbright - would open its Nanjing branch this month, followed by others in Ningbo and Shanghai.
Like another Canadian insurance giant, Manulife, Sun Life has observed that mainland insurers are selling policies at cheap prices.
Mr Prieur said another challenge to the group's mainland expansion was the difficulty in retaining staff who had received Sun Life's in-house training.
Mr Stewart said that although competition for talented staff was a worldwide problem, it was particularly serious in China because the insurance industry was still young.
He said the company's strategy to retain staff was to offer them more opportunities for training, such as a short-term placement in its Toronto headquarters.
Commenting on the opinion by some analysts that the $3.5 billion takeover of CMG Asia last year was expensive, Mr Stewart said: 'The view from the market in Toronto, which is the view we pay close attention to, was very favourable towards the deal. It was a pretty good price.'