Saturday, July 27, 2019

Richard Li

Financial Times


2019 July 05

https://www.ft.com/content/d6b0333c-9e43-11e9-b8ce-8b459ed04726

Richard Li: the tech nerd taking on the insurance companies Workaholic son of Hong Kong’s richest man is building an Asian empire Associates describe Richard Li as a detail-oriented workaholic. Two decades ago, Richard Li, the second son of Hong Kong’s richest man, Li Ka-shing, was going through a techie phase. Sporting a T-shirt and a backpack, he stuck out on Hong Kong’s streets as a far more visible presence than his staid elder brother Victor. Today, at 52, the younger Mr Li prefers the shade to the limelight. Although he was educated in Silicon Valley, at Menlo College and Stanford University, and might have had the appearance of a tech entrepreneur, he never made it in that industry. Instead, he has emerged as a force in the most conservative, traditional and undisrupted corner of finance: insurance. As the founder of FWD, an insurance group backed by Swiss Re that spans Asia, Mr Li made two acquisitions in the last week of businesses in Thailand and in Hong Kong, worth a combined $3.3bn. The deals have shown Mr Li’s ambition for expansion, in an effort — ambitious and possibly premature — to challenge the two dominant players in the region, AIA and Prudential. $4.5bn Richard Li’s net worth, according to Forbes Rival insurers, some of which confess to being sceptical at first, now say that he has the focus, the ability to find the right people and to execute. “He is a visionary,” said Henry Cornell, former vice-chairman of Goldman Sachs Merchant Bank and now head of Cornell Capital, an investment firm with offices in New York and Hong Kong. “Ahead of his time and hardworking.” Associates describe Mr Li as a detail-oriented workaholic who will fly to London for a meeting and return instantly to Hong Kong, pausing only to take a shower in the airport lounge. Sometimes using his Canadian passport, he flies commercially, which counts as austerity for one of the wealthiest residents of Hong Kong, with a net worth of $4.5bn, according to Forbes. At one recent morning meeting at the Hong Kong Club, Mr Li’s breakfast consisted of half an avocado and a cup of weak tea. “The first generation instilled great discipline in the kids,” said one former HSBC executive. The senior Mr Li, now 90, retired in 2018 as chairman of his conglomerates CK Hutchison Holdings and CK Asset Holdings. Five years ago he described his youngest son as having “a playful nature but is also serious about his work. His career has been improving, which gives me peace of mind”. As technology finally starts to impact the dinosaur insurance world, Mr Li will have to adapt. Hong Kong has already started to award virtual insurance licences. The first licensee, Bowtie Life Insurance, launched its voluntary health insurance business in early April. Joe Tsai, the number two of Alibaba and Ant Financial, has mused publicly about starting an online insurance business in the region. Even as he builds his offline insurance business with the purchase of Siam Commercial Bank’s insurance arm and the Hong Kong operations of MetLife, Mr Li is also quietly building a digital operation out of Singapore that will be run separately from FWD, his main insurance vehicle, with two different, newly recruited teams. Recommended Insurance Hong Kong’s first licensed digital insurer Bowtie raises $30m Moreover, future expansion in markets such as India will be more virtual than physical. “Going forward everything will be hybrid — not either or,” said the former head of one of the dominant players in the region. “Everything is a combination of robo services and humans, everything is digital to some extent. It just isn’t always visible.” Nevertheless, there is still a lingering question about whether it is too late to build an insurance business that can one day rival the two regional giants. “If you are going to do it anywhere in the world, this is the region you would do it in,” said the former insurance chief executive. “This is the part of the world that is growing, given the scale of the emerging mass affluent class. And because of the growth, getting market share here is not a zero-sum game as is the case elsewhere.” In earlier days, Mr Li was widely seen as the wayward son, mercurial and occasionally petulant. “But today he has totally reinvented himself,” said the former HSBC banker. “He has found his own path. It is a very Hong Kong story.”


📸 : Mandy Wu

$3 bln purchase of Siam Bank Life co

Met Life HK Purchase

Collaboration with his brother Victor Li, on 1881

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Global Venture Capitalist


















The son of Asia's richest man receives the Jubilee Award from Canada's minister John Baird.




































Richard Li builds an Asian insurer

Finance Asia story by Alison Tudor  2014 April 17

FWD Group's new chief executive Huynh Thanh Phong has hit the ground running: forging a pan-Asian insurer out of new ventures across Southeast Asia and a multi-billion-dollar business bought from Dutch bank ING last year — while scouting for more acquisitions.


Huynh is bringing to life a plan drawn up by Hong Kong-based businessman Richard Li, Li Ka-Shing's younger son, to create a pan-Asian player selling insurance to the region’s emerging affluent classes. 

In the most complete picture so far, FinanceAsia maps out FWD’s expansion across the region from Indonesia to Hong Kong and explains why FWD is targeting acquisitions in Vietnam, Singapore and Malaysia.


“It’s not just ambition and money,” said Huynh to FinanceAsia in his first interview since taking up the reins in March.


Now that the business plan has been hashed out, capital is in hand and a management team assembled the next step will be bolt-on acquisitions across Southeast Asia. FWD will have to navigate such pitfalls as soaring company valuations and an evolving regulatory landscape.


For Li this venture marks a return to insurance after he sold Pacific Century Insurance to Fortis in 2007 and a low-risk way of riding the economic growth across emerging Asia. The profitable businesses in Hong Kong and Thailand more than pay for FWD’s expansion.


FWD is betting that the traditional ruling classes in Southeast Asian countries such as the Philippines and Vietnam have accepted the rise of an upwardly mobile middle class and that this increasingly wealthy segment of society will look to protect its improved lifestyle via insurance and rely less on dwindling state support.


But does Asia need another insurer? The comparative data suggests yes. Researchers at Swiss Re estimate that only 2.21% of the population across the Asean region in 2013 owned a life insurance policy compared with 4.91% in industrialised countries.


Improve the image

FWD says it will help rehabilitate the industry’s reputation, which has been marred in recent years by miss-selling scandals. “We want to change the way people feel about insurance — we vowed to do things very differently when we created this brand,” 47-year-old Huynh said.


FWD’s use of technology would make the sales process more compliant and efficient and keep sales documents up-to-date, helping to attract younger-customers.


To do this FWD is leveraging Li’s control of Hong Kong’s dominant fixed-line telecoms company PCCW, although this has to be done delicately because of Hong Kong’s strict rules on data protection and the fact each company has a distinct set of shareholders. 


“The whole of society is moving very fast online and screen-based. How we, as an insurance company, adapt and leverage that technology to sell and support customers is vital,” Huynh said in the interview at FWD’s new headquarters in Hong Kong. The paper slip in the nameplate on his office door underscores the speed of change at the enterprise.




Big Ambitions

The new insurer on the block certainly has big ambitions — FWD is ranked ninth in Hong Kong but wants to be among the top five insurers within five years.



It has the capital to back it up: Li Ka-shing, one of Asia’s richest men, said in 2012 that he would fund his son (pictured below) Richard’s ventures. In addition, Swiss Re,  the world's second largest reinsurer, acquired a 12.3% share in FWD in 2013 for $425 million.



“They don’t think small,” Huynh said of his shareholders. “They certainly have very big ambitions and to back them up they have [the] financial strength and expertise.”

To be sure, there are risks involved with the rosy growth projections of insurance across emerging Asia, a volatile region both economically and politically. This was demonstrated by the recent political turmoil in Thailand which has hit insurance sales across the board.



“The immediate impact was minimal when tensions escalated late last year — but as the situation drags out the average person is hurting economically,” Huynh said, when asked about the effect of the global financial crisis on insurance sales.



Credit rating agency Fitch gave FWD a single-A rating in February, partly reflecting its solvency ratio of 243% as of end 2013, well in excess of the 150% regulatory benchmark. But it did warn that the operating and pricing risks associated with material growth could affect the stability of FWD’s operating results.



Cross-border acquisitions are also harder to pull off and make profitable, particularly if the target is in an emerging market. Consultancy Towers Watson notes that domestic acquisitions generate a higher average return for investors in the acquiring company of 8.3 percentage points above the local MSCI benchmark over the six months post completion of the deal; well above the average return generated in a cross-border deal into emerging markets such as Latin America and Asia, of 4.5 percentage points above the acquiror's domestic MSCI benchmark. 



Globally, insurance deals take a long time to close, 116 days on average versus 70 days for other industries, and in Asia it takes even longer mostly due to a lack of data, a shallower talent pool and weaker financial management, Alan Merton, Asia-Pacific insurance director at Towers Watson, said. 



Li and Huynh face stiff competition from other insurers while scouting for deals in countries such as Malaysia and Vietnam from as far afield as Japan and Canada.



As a result, mergers and acquisitions are becoming more costly. “We’re keen to look at M&A opportunities but we have to be financially disciplined,” said Huynh. “Organic is my preferred mode because I like building companies, but it takes a long time,” he said, while lamenting that new insurance trading licences can be extremely difficult to obtain.



In terms of sales, FWD is targeting relatively younger clients than more established players such as AIA and Prudential. While these clients are less experienced buyers they are also likely to stay with the company longer.



Putting money to work

FWD’s cornerstone is the former ING franchise in Hong Kong, Thailand and Macau. Li’s flagship investment vehicle Pacific Century Group completed the $2.14 billion acquisition in February last year. “That was a perfect start,” Huynh said.



FWD was granted a licence in the Philippines and is the first major foreign life insurer to win a licence there for years since Maritime Life of Nova Scotia in 2004. “We’re working very hard to build our operation there — the macro trend looks good,” he said.

FWD has a strategic cooperation agreement with Indonesia’s PT Finansial Wiramitra Danadyaksa, which was established in November 2012, and is operating under licence from Otoritas Jasa Keuangan. The two partners do not have a cross-shareholding. 

“We provide technical and managerial expertise. In the meantime we have a chance to learn much more about the local market,” said Huynh.
In Malaysia, FWD was one of the final bidders for a stake in AMMB Holdings’ insurance arm but lost out to the US’s Metlife. “We continue to look for opportunities in Malaysia and Vietnam and other Asean countries,” said Huynh, who was born in Vietnam but grew up in Canada.

New licences are very rare in Malaysia and foreigners are not allowed to own more than 70% of an insurer. “With the right partner the initial size doesn’t matter,” especially one with bancassurance distribution, Huynh said.

Huynh said FWD is not actively seeking a foothold in Myanmar as yet. “We continue to watch Myanmar with interest — but it looks premature at present,” he said. Foreign insurers are only allowed to open representative offices in Myanmar as the government seeks to protect its nascent domestic players.
FWD does not have a licence in mainland China. “Competition is fierce and market entry is not easy,” said Huynh. An insurer has to have a representative office in China for two years before even applying for a licence.

Banking on growth
FWD was also among the bidders when Citi auctioned rights for selling insurance policies through its Asian bank branches — a relationship between an insurer and a bank known in the industry as bancassurance.

“Banks will continue to be a critical part of distribution going forward and competition will be intense for any relationship coming up for renewal,” Huynh said, sighing when he was asked about the big up-front payments banks are demanding these days for distribution rights.

Aviva’s bancassurance relationship with Singapore’s DBS is up for renewal next year and insurers are lining up to eject the British insurer and step in on more attractive terms for the bank, according to people familiar with the matter.

He spies one positive trend in the growing length of bancassurance relationships, which encourages more investment by both parties and the sale of more complex higher-margin products.

FWD already has a bancassurance relationship with the Thai Military Bank (TMB) and in Hong Kong with the Bank of Communications and China Construction Bank.

FWD is investing in making sales through banks or door-to-door agents more transparent, compliant and less bureaucratic using technology.

At TMB, one of its biggest bancassurance channels, FWD supports the bank branch salespeople with technology and has some of its own people embedded in the network. “By the time the client has had a cup of coffee they should have been presented with the policy either on screen or printed if they prefer — none of that mail it to you later stuff,” Huynh said.

The same goes for when an agent makes a sale — the whole consultation process is supported by technology: the signing is on the tablet and the payment is an e-payment. In a clean case, documentation and approval can be instantaneous. 

This helps FWD control the conversation between the agent and the client — forms are instantaneously updated — making sure everything is compliant and transparent. 

“In Hong Kong a lot of agents are still using paper and pen — we make it screen-based and give them a tablet,” said Huynh, “We don’t give our agents a pen anymore.”

Technology is also helping FWD’s sales force to target the right people by harnessing Big Data, which helps insurers identify who needs which policy at what stage in their life.

“That is one of our big strengths in a market like Hong Kong and that same skill could be employed in a country like Indonesia where Big Data could be amazing.”  

© Haymarket Media Limited. All rights reserved.

Richard trained at Gordon Capital in Torontowhich he subsequently bought in the 1990's and sold to HSBC

"In the 1980s, Gordon Capital pioneered the “bought deal,” wherein a brokerage buys an entire stock offering directly from an issuer at a discounted price. If the shares aren’t flipped to third-party investors quickly, the broker can take a disastrous hit."   -- GLOBE & MAIL 2016 February 6