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Comeback tale of two fellow UK insurers

THEY say when one door closes, another opens. In the case of Prudential and Aviva, they might have had doors slammed in their faces last year, but things still panned out, well, not too shabbily considering the circumstances.

Let's start with Prudential, which has greater cause to pat itself on the back.

Its new business growth was modest with annual premium equivalent (APE) rising one per cent to 351 million (S$605 million) and present value of new business premiums (PVNBP) 5 per cent higher at 2.63 billion. This was the same story for its single-premium new sales income and annual-premium segment.

At first glance, Singapore, the insurer's second-largest market in the region, pales in comparison with Hong Kong's 40 per cent APE growth to 1.9 billion and 38 per cent rise in PVNBP to 10.9 billion in 2016.

Certainly, the growth story for Prudential in Asia is in Hong Kong - its biggest market in the region - and China, which is up and coming despite the Chinese authorities' crackdown on insurers, particularly the sale of Universal Life products and capital flight, among other things.

In contrast, Singapore, Indonesia and Thailand businesses are struggling.

In all honesty, the Singapore operations, particularly the smaller agency force of about 4,000, redeemed themselves with fourth-quarter sales that some describe as a staggering finish for the year.

Industry veterans point to how the Singapore team managed to pull this off even after losing some 200 out of 400 agents from one of its largest and more productive agency units - Peter Tan Organisation (PTO).

Amid earlier unhappiness over plans to cut the agents' benefits, the loss of agents who were poached by fellow British insurer Aviva and, in turn, low morale in the agency force, as well as legal warfare, Prudential Singapore has managed to make up for the lag in 2016 in three months and even achieve modest growth.

Turning over to smaller player Aviva, which was stung by the loss of the DBS bancassurance tie-up in 2015, the end of the bank deal could be a blessing in disguise on hindsight. As its group chief executive Mark Wilson mentioned last year, the insurer paid only a fraction of what the DBS deal costs, in return for a group of experienced agents.

Parked under Aviva Financial Advisers or Aviva FA, the team of former PTO agents are given the liberty to sell rival manufacturers' products, in what the insurer says gives consumers more choices.

For FY16, Aviva Singapore's value of new business (VNB) slid 10 per cent to 104 million - something it needs to adjust to for not having a bank distribution channel. But stripping out the bank distribution, the insurer said VNB in Singapore grew 23 per cent in 2016 - what it described as far exceeding market average of 6 per cent.

To put things in perspective, Aviva FA started operations in July 2016. For the FA arm, its main distribution channel, to recover some ground resulting from the end of the DBS tie-up which used to account for more than 50 per cent of full-year VNB and narrow the loss to 10 per cent, isn't miserable at all.

Of course, the recovery by both insurers come with a hefty price tag, so it's something they need to watch closely.

If it's anything to go by, their cost ratios (including distribution costs, expenses and so on) are among the higher ones of the major life insurers in Singapore.

Their toplines might look decent for now as one senior insurance executive points out, but will their bottom lines still be healthy after factoring in costs of incentivising agents and advisers to turn in new sales? Now, that's the million dollar question, he notes.

In the months ahead, maintaining the upward momentum while ensuring business is sustainable will be the tricky part for the two fellow Brits, whose fates these days seem inconveniently intertwined, particularly amid slowing economy, more intense competition and more layers of rules.

In the meantime, let's see what openings will present themselves and what will shutter in 2017.