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Expansion in China Goal for Life Insurer
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Everyone in AVIVA-COFCO Life Insurance, from the president to his driver, has a clear idea about what to achieve by the end of 2010: a 10 percent market share in 10 Chinese branch cities.


With this vision in mind, the Sino-British insurer is continually making progress towards this "10-10-10" target.


After entering the Chinese market in 2003, AVIVA-COFCO, a 50-50 joint venture between British insurance giant Aviva Plc and China National Cereals, Oils & Foodstuffs Import & Export Corp (COFCO), has been expanding rapidly.


It opened four branch companies in Beijing, Fuzhou, Chengdu and Guangzhou.


The company expects to set up another six branch companies within three years, including one in Shangdong, said Eric Chang, president of AVIVA-COFCO Life Insurance Co.


Chang said development potential is the most critical aspect about choosing a branch company location.


"If I have only 1 yuan (12 US cents), I would like to put it into the place with the highest return on investment," said Chang. "The second-tier cities, such as Chengdu, have even more market potential compared to Beijing and Shanghai. Besides, the cost there is much lower."


In its first year, the premium of AVIVA-COFCO Chengdu branch reached 220 million yuan (US$27.2 million), taking 7.8 percent of the market share in Chengdu.


Although AVIVA-COFCO has maintained fast-growing momentum, the company will pursue both speed and quality, Chang emphasized, adding the firm would not let rapid expansion erode the profitability.


"We will first have a detailed market survey and consolidate the head-branch-sub branch business structure before entering the new market," he added.


Meanwhile, to reduce the possible risks caused by the rapid expansion, AVIVA-COFCO is striving to enhance its internal management.


The company joined forces with Bearing Point, one of the world's leading consultancy firms early this year, adopting the Oracle financial system and SSC (Shared Service Centre). AVIVA-COFCO is the first foreign company to adopt that project.


Increasing capital has also been a top agenda for the Sino-British insurer this year, Chang disclosed.


"The capital boosting has the go-ahead from the board," said Chang, declining to disclose details. "It will be a considerable number, and each party will contribute the same amount," Chang said.


The company has a registered capital of 50 million yuan (US$6.17 million).


Experts estimated that the company may need around 2 billion yuan (US$247 million) to 3 billion yuan (US$370 million) by 2010 to fuel its development.


By the end of 2005, the premium of the company totaled 89 million yuan (US$10.9 million), 12 times as much as in 2004. The company ranked fourth among 22 joint venture and foreign insurers in the country.


Chang said bancassurance, a combination of banking and insurance business, and group insurance are the major driving forces, with each contributing one-third respectively to the premium growth.


In Chang's blueprint, bancassurance would take 40 percent of its all business by 2010, with agents and brokers taking another 40 percent and group insurance getting 20 percent.


"Although the profitability of bancassurance is lower than other types of business, the amount is considerable," said Chang. "Moreover, we are discussing with our partner banks about new types of business. For instance, selling out products through the wealth management centre of the bank."


AVIVA-COFCO is also thinking about establishing a pension company.


"Pension business is a long-term strategy for us, and also the highlight of our work in 2006," Chang said. "We will finish the feasibility report in the first quarter of this year."


When expanding business to more cities and areas, AVIVA-COFCO is also strengthening its marketing and management system.


"We are striving for diversified marketing channels, including agents and brokers marketing, bancassurance and group insurance," said Chang. "And we will try telephone marketing and direct marketing this year."


With 13 years of experience in the top management of insurance, Chang believes joint venture insurers survival in the increasingly heated competition depends on knowing the Chinese market by localizing the management and technologies in the shortest amount of time.


Chang joined the insurance industry in 1992 as financial controller in Winterthur Life Insurance Company Taiwan Branch. During his career there, he held senior positions in various functions of the company before becoming the individual life vice-president.


In 1999, Chang joined Zurich Life Insurance Ltd, Taiwan Branch as general manager. Under his leadership, the previously loss-making company turned profitable in two years, with the company's ranking (market share) improved from the ninth to third among all foreign insurers in Taiwan.


Chang obtained a bachelor's degree in economics and business studies of Hong Kong University in 1978, a master's of business administration degree from the Chinese University of Hong Kong in 1984, and a doctorate degree in economics from South Western University of Finance and Economics in 2005.


(China Daily February 28, 2006)


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