Dutch insurer Aegon sees digital distribution as the path to growth in China and rest of Asia

Aegon hopes to attract new customers in Asia by tapping into something that is never far from consumers’ eyes and almost always on: their mobile phones, the Dutch insurer’s regional chief executive said.

It is partnering with the likes of mobile payment providers MobiKwik in India and Ant Financial’s Alipay in China to reach new customers in the world’s fastest developing region for the insurance industry. Ant Financial is an affiliate of Alibaba Group Holding, the parent company of the South China Morning Post.

“The strategy in India, for example, and more broadly in the region is around distributing through e-commerce partners and relationships. It’s digital, it’s a more direct distribution for consumer-type products, non high-net worth products,” said Aegon’s Asia-Pacific CEO Andrew Byrne. “It’s about being where customers already transact.”

Aegon, based in The Netherlands, has operated a global insurance business since 1844 and acquired TransAmerica in 1999, giving it a strong presence in the high-net worth business in Asia.

High-net worth remains the company’s largest business in Asia.

The insurer’s Asian businesses had underlying earnings before tax of US$65 million last year, a 17 per cent increase from 2017. Overall, Aegon reported a profit of €744 million (US$837.9 million) in 2018.

The company had losses from its strategic partnerships in Asia of US$15 million last year, an improvement from US$21 million in 2017.

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In China, the company offers life insurance and protection products, including critical illness and whole life coverage, through Aegon THTF, its 50-50 joint venture with the Chinese technology company Tsinghua Tongfang. The business has more than 800,000 active policies and generated health and life sales of US$91.8 million last year.

Byrne said Aegon is happy with the relationship as it stands despite the opportunity for foreign companies to take larger stakes in their Chinese joint ventures as the nation’s financial services sector opens further.

“We think the joint venture actually works quite well,” Byrne said. “Our partner understands the market better than we do, can help introduce us to people that we do business with. Where we think we add a lot of benefit is that we’re a life insurance company with a global reach. We’ve operated in multiple countries around the world where we believe that our value added is around introducing products to the China market that we think consumers need.”

It also has a 49 per cent stake in Aegon-Industrial Fund Management Company in China. The asset management joint venture had assets under management of about €16 billion at the end of 2018.

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The Chinese life insurance market has overtaken Japan as the second largest worldwide and is set to overtake the United States in the next decade, Byrne said.

“It’s a massive market opportunity for anybody,” he said. “You’ve got an emerging middle class, but you also have an ageing population … The one-child policy has had an impact on that. At a very practical level, you’ve got one person earning an income for every two adults and maybe their grandparents as they’re getting older.”

Aegon announced in May that it planned to sell its stake in its variable annuity joint venture in Japan to its partner Sony Life for €130 million as the market had “contracted” for that product in recent years.

Byrne said that the company has a huge opportunity to distribute its products digitally and is talking to at least five potential e-commerce partners in the Asia-Pacific region.

In addition to MobiKwik and Alipay, Aegon has a digital distribution partnership with GoBear, which allows consumers to search for loans, insurance, credit cards and other financial products in Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

He noted that about 70 per cent of Chinese consumers have made or are in the process of engaging in financial services transactions digitally, compared with about a third of Americans.

“The opportunity [in China] is significant,” Byrne said. “We think there’s opportunities in terms of primary health insurance, basic life insurance, retirement savings, etc. We want to participate in all of those.”