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MetLife aims for growth in emerging markets

Having completed a major acquisition and integration in Hungary, U.S.-based insurance major MetLife is aiming to boost its emerging market businesses where it sees ample room for growth. The Budapest Business Journal spoke to president of MetLife’s EMEA region Michel Khalaf about how the company plans to move ahead with its efforts, what its plans are for Hungary and how Snoopy fits into all this.

What brings you to Hungary?

I’ve been meaning to visit here for a while and finally I have had the chance to do so. We have held a convention when for the first time our agents from both companies – ex-Alico and ex-Aviva – met under one MetLife roof. Of course, our acquisition of Aviva in Hungary was important for us and I am proud to say that the integration has gone extremely well. We have a very talented group of people and the combined talents from the two companies complement each other perfectly. This combination creates the foundation for us for future growth, so we are very pleased with how the process turned out.


What convinced you to go ahead with this acquisition in the first place?

Central Europe is a vital part of our strategy of focusing on emerging markets that have big potential for us in terms of growth. There is significant room for expansion in these markets and the acquisition presented a huge opportunity for us that fits well with our strategy.


What is your reasoning behind such an acquisition in Hungary where the market isn’t exactly lucrative right now, considering the state of the economy?

Of course, the Hungarian market actually shrank in the past year, but we have a long-term approach. When we look at Hungary, we see that insurance penetration is relatively low. We realize that countries in Central Europe have been affected by global and eurozone economic events. This accounts for the slowdown, but our expectations are that as these economies pick up the insurance industry will also benefit and show a healthy rate of growth. We would like to be at the forefront of that.


What kind of saturation are you aiming for in Hungary?

I think we have a long way to go since the base is low, only about 1% penetration. The potential is very big here. Obviously, a healthy growing economy helps and if that comes in the future, then the industry can, of course, grow. Any optimism I may have naturally doesn’t involve a rapid recovery that happens overnight, because Hungary certainly isn’t immune to global events. But if you look at the long-term prospects, given that the political environment is stable, the region as a whole and Hungary in particular will emerge from this.


What are the main reasons Hungarians buy insurance? Is it a form of saving or a safety net to assure coverage in case something happens to them?

They have many reasons, even though there is still plenty of room to increase insurance awareness in this country. Many motivators are present, for example whether it’s building savings for their children’s education or to protect against unforeseen events. There are many aspects to those needs and we try to cater to all of them. Unit-linked policies are highly popular, but there is also huge growth potential for accident and health insurance solutions. Each of the markets we operate in has different dynamics, so you will see our product range in any country aims to meet local demand and circumstances.


You mentioned that the market shrunk last year. Can you put some numbers on that?

Yes, there was a contraction of 6.8% (10% single premium and regular premium) in the market. This is I think the consequence of the economic climate, which makes the situation challenging. I think the main issue for the industry is the uncertainty that is created by the current economic climate, which leads to decisions being delayed or deferred.


What is your impression of the current regulatory environment for your industry?

We believe that a stable political and regulatory environment is helpful to the industry as well as in terms of investments when capital is scarce. We believe that an environment that encourages the inflow of capital rather than restricts it is very important to any economy.


Are you involved in any interaction with the government? What is your opinion of the current taxes and regulatory approach that affects your business in Hungary?

MetLife is a member of the Hungarian Insurers’ Association. In that respect, we can convey our opinions and we conduct our business in line with the local conditions. Last year, we paid HUF 852 million in the finance sector tax to the state. We hold on-going discussions with the regulators aiming to help create an environment that encourages the industry to grow.



What is your opinion about the government changing its earlier declared position and making the tax permanent?

I wouldn’t like to comment on that. I can repeat that we are hopeful and confident that our Hungarian approach will fit in well with our new global strategy.


Which is where Snoopy comes in?

Snoopy is our brand ambassador. There is a perception that insurance companies in general are not necessarily the most accessible companies to do business with. For us, it is very important to be known and seen as a company where this isn’t the case. We have ground to make up to present ourselves as a more accessible and more approachable company to our clients, and we believe Snoopy can help in achieving that. Most markets where this campaign has been introduced produced positive responses.


How will this newly integrated company work? Do you plan on selling policies in branches and letting the clients come to you, or will you keep to a more traditional ‘insurance salesman’ approach?

We will continue with the face-to-face model. We have a strong agency, especially now after the integration. We also have partnerships with independent partners that we aim to build on as well as exploring new channels in the region to fuel growth.


Are you looking into other acquisitions in the region? Are any new targets being eyed in Hungary?

In Hungary we have just concluded a major integration. We are not pursuing anything in particular, but certainly we will look at our options as they come. We are open to more acquisitions in the region if they make sense in terms of our strategy.


What is the main thrust of MetLife’s global strategy now?

The main focus is to enhance our presence in emerging markets since the U.S. and Japan, which are our biggest markets, are also highly saturated, with limited room for potential growth. This growth that the emerging markets have to offer can be achieved both organically as well through acquisitions. Our main effort is to make MetLife globally recognized as the leading provider of life insurance. Here in Central Europe, we see major potential for growth for this industry and we want to be a very big part of that.



Michel Khalaf

Besides being the president of MetLife’s Europe, Middle East and Africa businesses, he is also a member of the company’s executive group. He was appointed to his current position in November 2011, having earlier supervised various regions within MetLife’s global portfolio, and previously worked at AIG. Khalaf is a graduate of Syracuse University with a B.S. in engineering and an M.B.A. in finance. He is a fellow of the Life Management Institute.