The region is experiencing unprecedented growth, with a fast growing middles class looking for more of the creature comforts that come with improving fortunes. As more and more people seek the trappings of a better life, they also seek ways to protect and preserve what they have. As such, insurance is a leading indicator of middle class income growth as people emerge from a subsistence-based lifestyle, moving from living day to day and focusing more on planning for the future and protecting their families and property.
Rebalancing the Portfolio
Shrinking wealth management sales in Canada (down 5% YoY) and the U.S. (down 12% YoY) in Q1 of 2012 only further highlight the potential in Asia (up 7% YoY). On the insurance side of the business, Asia saw 31% YoY growth to $365 million and a 79% increase in Canada, while the U.S. languished, losing 1%. This drove a 35% increase overall in their insurance business in 1Q 2012. They manage $512 billion in assets, up 3.5% over Q4 2011.
Manulife has operated in Asia for over 115 years but is now ramping up operations in the region to take advantage of the growing market. The company estimates that within five years the world’s middle class will reach the 1 billion mark, with Asia accounting for roughly 85% of that. Manulife reported record revenues from the region in Q1 2012. Asia now represents the highest percentage of their insurance sales which have doubled from ~5% of total revenue to more than 10% since Q1 2011.
To service this growing market Manulife has plans to aggressively grow the number of agents in the region over the next five years to 100,000, nearly double what it has at the moment. The company recently became the first foreign insurance provider to operate in Cambodia, opening its main office in Phnom Penh with about 40 staff, which it plans to grow to over 1,000 by 2015.
Manulife’s Senior Vice President in Cambodia David Wong expressed that the company is committed to the region, saying that Manulife “sees the potential of Cambodia, with a population of about 15 million and an emerging middle class, as a growth area in the ASEAN countries. The commencement of operations in Phnom Penh reflects Manulife's commitment as a strong, reliable company to the ASEAN region in general and Cambodia in particular."
Manulife is already operating in Indonesia and Vietnam, both major, relatively untapped markets, with a combined population nearly the size of the U.S. between them. In addition to sales operations, the company has initiated a campaign to educate the market on the benefits of having insurance coverage and protecting their family and assets.
War of Attrition
As the financial situation in the west deteriorates, those that survive are in a great position to pick up distressed assets on the cheap. Manulife is one of the last bidders standing in the quest to acquire ING’s Asian business, which is under orders from the E.U. to divest themselves of their insurance business in the next year to qualify for their bailout. This is a potential $7 billion deal at this point.
American insurers Metlife and Prudential, who are Manulife’s biggest competitors in Asia, have recused themselves as bidders in the deal, leaving only Korea Life Insurance and KB Financial group as the other second round bidders.
They are also bidding against Prudential for Aviva’s stake in their Malaysian insurance joint venture with CIMB group (CIMB:MK). While a much smaller deal, ones like this will continues to dot the landscape as asset deflation separates those with unencumbered balance sheets from those without.
.For now, it looks like Manulife is well-positioned all across Asia to pick up the pieces.
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