It was standing room only at yesterday’s keynote luncheon address at the Credit Suisse Asian Investor Conference. And no wonder for Tidjane Thiam is quite a draw and CS certainly scored a coup by being able to put the chief executive officer of Prudential on the agenda this year.
In his introductory remarks Brady Dougan, CEO of Credit Suisse, said that the ability to unlock Asia’s large pool of savings is critical and thus it is no wonder Asia represents the best growth opportunity globally for insurers today. “I personally know most financial services CEOs on the planet and Tidjane is one of the smartest, most visionary and most daring,” said Dougan.
“There are times when I’m happy that if I blush it is not visible,” said Thiam, who is of French-Ivorian descent. In his opening remarks Thiam spoke of the macro-economic events, which are shaping the world. He referred to the lessons that had been learnt from the financial crisis and then moved on to more recent developments.
“How many of us had understood the depth of desire of people in the region to effect change?” he questioned, referring to the ongoing turmoil in the Middle East and North Africa, going on to remark that while uncertainties remain with respect to the outcome, what is certain is that there is a process of change underway.
And finally, with respect to Japan, Thiam said that nature has once again painfully shown us how she has the ability to change our plans. Prudential does not have a large business in Japan but Thiam said he has developed a great respect for the people of the country on his visits and highlighted how quickly they have taken up the challenge of rebuilding.
“Building a better society is challenging and complex and one input is capital, which is at the heart of the insurance industry,” said Thiam, neatly segueing into the heart of the presentation. “We help to generate wealth through investments in quoted companies,” he added, citing one example that 50% of the long-dated debt issued by utilities in the UK is held by insurance companies. Water quality in the UK has never been higher and I see salmon again in the Thames near my office – we provide capital which fuels this, said Thiam.
Thiam is clearly a believer in Asia and said that the financial crisis had demonstrated that the global economy has been reliant on the US consumer for too long. “The US economy is now challenged by its own issues,” he said referring as one example to the fact that the US will have 10,000 retirees every day for the next 20 years. Thiam expects Asia to play a key role in creating a new wave of consumers and said the insurance industry will effectively channel wealth towards long-term capital creation.
“Insurers act as key stimulants to growth and of equity and debt markets,” he said naming Indonesia, where Prudential is one of the largest investors in the country’s capital market, and Vietnam where Prudential owns more than 40% of the country’s government debt. During the course of his presentation Thiam also referred to the 40,000 agents Prudential now has in Vietnam, and the competition from local players, which is growing the pie and the profile of the insurance buyer.
The role insurance companies play in facilitating the creation of infrastructure was also highlighted by Thiam who said the area was “too important for any government to fund alone”. The long-term nature of infrastructure financing is also suited to the liability profile of insurance companies. “China spends 20% of its GDP on infrastructure while India spends 6% and needs to follow China’s example [and spend more], as do other South East Asian economies,” he said.
Credit Suisse, alongwith HSBC and J.P. Morgan, was a buy-side adviser to Prudential on its $35.5 billion bid to buy AIA Group, the Asian life insurance unit of American International Group (AIG). The deal would have been the largest ever in the insurance sector and catapulted Prudential into the world’s biggest non-Chinese insurer by market capitalisation.
The deal, which was announced in March 2010 only six months after Thiam succeeded Mark Tucker at the helm of Prudential, was a good example of all the adjectives Dougan used to describe Thiam. When it failed Prudential had to shell out £377 million ($612 million) in fees including a break fee of £152 million to AIG. Some onlookers speculated that the deal could even cost Thiam his job.
But Thiam, who joined Prudential in March 2008 from Aviva, has demonstrated that he can stand his ground and deliver even during the tough times. At the time the takeover collapsed Thiam had said that growing Asia remained a strong focus for Prudential. The insurance major released results for fiscal 2010 earlier this month and that focus is yielding dividends. Asia, under the watch of Barry Stowe who heads Prudential in the region (for an in depth interview with Stowe see the April issue of FinanceAsia magazine) contributed 44% of new business profit and earned a 60% profit margin on new business.
When the floor opened for questions, one delegate, who was clearly somewhat skeptical of Thiam’s optimism with respect to Asia, posed a question. “You said rule of law is very important and yet the largest country in Asia, China, has no rule of law and the second-largest, India, has a rule of law however one will die before one’s case gets heard. How can you be so optimistic when the two largest countries don’t have one of the principles you yourself cited as important?” he queried.
Every society has its own pace of change and we are respectful of that, replied Thiam. He added that he could not put an exact date on when things in India would improve but he was confident they would, choosing, perhaps wisely, not to allude to China in his answer.
Thiam did not distribute a handout and used only two slides with some macro-economic date. I've probably bored you to death, he said self-deprecatingly when the floor had no more questions and his allotted hour had time to spare. However, the fact that few delegates had walked out during his talk, which has happened at other lunches, was testament to how captivated the room was.
“There is no doubt to me that Prudential’s future growth will be in Asia and I firmly believe we can serve these [Asian] communities well and generate returns for our shareholders,” he said in closing. “It is a privilege for Prudential to play a part in the transformation of Asia.”
