Speech at GAMF 2022
I am going to focus my comments if I could please on the future of the financial and insurance industry and the landscape as I see it. First for those that don't know us, Prudential is a 174 years old insurer, we originally started in the UK in 1848. We have a very successful and well rated joint venture, which covers about 75% of the Chinese population and regulatory footprint. Our partner in China is CITIC, together we started a joint venture as CITIC-Prudential Asset Management Company in 2020. And we have Eastspring, a standalone WFOE.
We have been a successful firm in China that continues to grow at a rate that competes with the industry very effectively, but as the foreign players do in China from a smaller base. What we have also done in the last few years is divested our UK businesses, M&G Asset Management, the original Prudential Life insurance, and in the US, the retirement business Jackson National Life. To become an Asia and Africa focused insurer completely and making us one of the largest pan-regional in this space. So just to give you a context of where my comments are coming from, that has been my experience, I have been with the firm for 26 years.
So, when I look at the industry going forward, I see a number of things. I think from the comments I just made, focus matters. The role of truly global conglomerates is much more complicated than it has been in the past. Historically what that model has brought was experience. You were on a market journey in different markets, in different levels of its development, so experience from multiple crisis from the US and Europe, and you could bring those to the emerging markets for example. Or you watch the emerging markets in Asia develop, and you look for similarities for developing markets in Africa, and you bring those learning across. I think this is still very doable, but the key now, in the current climate is the balance between that historic market experience, historic market presence, and local talent, local culture, local understanding of the nuances of the consumers, the regulators, and various stakeholders in markets. I don't believe the old expat model as it was, has the ability to understand the nuances, that comes mostly from the speed of change in the consumer.
Regulators have become more global, they have become more effective on that, there is very much a best practices model where the regulators globally share what they think is working. Their ability to absorb the historic lessons market across market is very efficient. The consumer level, the needs of the consumers that we see globally are very similar, they worry about health particularly in the midst of Covid, they worry about the education of their children, they worry about having enough money for their retirement. What is materially different, in each of these markets are the paths that those consumers take, or the journey that they have been on to get there.
China is no exception, the acceleration of growth in China has been unique, I have been fortunate to travel, and do business in China for 26 years, and it's an extraordinary path, and the dynamics that have moved on that will socially and culturally going to affect again health, education, and retirement, have changed massively. I have friends asking me the one child policy's impact on retirement culturally, it is material, so is the earnings and educations of those children. So is the development of the healthcare, and so is the development of some of the government pillars in China, again has retirement planning going back to the Han dynasty. So, there is a balance. In the developed markets in the west, you see a lower birth rate, so in some of those markets you have federal, and government funded health and retirement plans. Their challenge becomes, do you have enough young workers to fund that model, as the number of older people in the population starts to outweigh the younger workers?
The needs of the consumers are similar, but the journeys are different, the learning can be applied I think across a variety of markets. The tools we have in front of us now are also unique for this time. Because they are maturing of the best of what we learnt in financial services, certainly across my career. The earlier speaker talked about insurance, so in the capital stack, in the world of where money should come from, the insurer should be the long-term player, the bank should be short-term, the asset manager the intermediate, if that happens then there is a virtuous circle of consumers trusting us for 20 plus years in educational, retirement savings and health programs. And that has been able to invest back in those countries for a very long time, and not competing against the other entities in that space. It doesn't mean the firm with a long-term look, long-term investment cycle, long-term guarantee, doesn't need to have the same technology, same scale, and same cost and effectiveness as a player in the shorter end of that capital stream. Let me give you an example, digital banking has been very effective in most markets globally. And it has brought younger consumers to banks, and unbanked people into financial services, having tremendous social value. It also brought them into insurance, we have almost 30 million downloads into our Pulse health ecosystems, in Asia and soon now moving to Africa. The billability of digital technology, to allow us to fractionize or use another common term micro product, they are a key part of financial inclusion globally, and they are key part of financial inclusion inside each country. Because they allow younger, or a household with lower income to participate in very similar products and services to those household of middle class, higher net worth, and high net worth.
And the trend across the industry, I think there are a couple of key elements, it's more fractionalization, more making of products that were originally for higher net worth consumer, available to every consumer, more delivery without paper, digitally, which is more efficient and respects the time of the consumer, and still addresses the needs of the regulator to the company. The balance of information that a speaker earlier today talked about asymmetry. There are tools that are emerging, as there are more and more mutual funds, more and more insurance companies, more and more decisions for these consumers to make, there are also more tools to help them. The role of the traditional advice provider the agents, person in the bank lobby they are supported by much more digital and effective tools.
So, I think the trends you're going to see are fractionalization of what were high net worth products, again mutual funds started this fractionalization of institutional asset management.
In the case of insurance, we started in nineteenth century as a penny company in UK, giving the working person in the UK a chance to save, we even had an accounting software in the UK that measured policies in half pennies to allow people that worked in low-income roles in the United Kingdom to be able to save for retirement and knowing they had money with Prudential when they retired. It happened some 170 plus years ago if you can imagine that. We now have digital products that are very inexpensive, digitized health products in Indonesia, we have in Africa life insurance and savings products available on mobile minutes, again on technology that are fairly basic, and millions of clients benefits from this. And if the industry does its best, it brings more and more consumers into financial, and health inclusion, it could do both, its role will grow in importance.
The last trend is globalization, there is no consumer in any market I ever met, and I have been very fortunate to travel to a lot of countries in my career and current role, that doesn't have some products, some brands that they like, that's not manufactured there, or they don't know where it's manufactured. And that is a common trend. Consumer's needs are global, that means when we talk about inflation globally, we are also talking about protecting the buying power of the savings of the consumer. It can't be done through a single lens of domestic GDP, domestic inflation. How do you solve for that? You open-up your social-global standards, you get the scale of the global markets, you get the connectivity and standard of the global markets when you allow the consumer to invest globally with part of the savings, therefore tying their value of their future savings to similar items that they might purchase in the future.
So, these are fairly basic, I conclude by saying that I think there are nuance, but the trends for the consumers are very similar in every market we are in around the world. The paths are very different, and the solution tend to be very similar. The regulatory support, the learning, the stakeholders would suggest that these trends are going to accelerate over the very short-term, and I know however tragic Covid is, it will be a short part of the history of a broader and more inclusive health and savings experience for consumers. With that, thank you for your time, it's a pleasure joining you today.
GAMF 研讨会 | 中概股如何破局
GAMF 研讨会 | 俄乌危机下的国际形势与全球市场
GAMF 2022上海峰会 | 第2天 顶级机构展望全球投资机会
GAMF 2022上海峰会 | 第1天 全球共同复苏下的经济金融新图景
GAMF 研讨会 | 全球经济发展与结构性改革
GAMF 2021北京峰会 | 全球绿色复苏与ESG投资机遇