Global expertise and local culture combine to produce impressive results

How would you evaluate the insurance sector in Saudi Arabia and how competitive is it compared to other countries in the region?

The G-20 summit just finished recently. Saudi Arabia is one of the member states and possesses the fastest growing insurance sector amongst all the G-20 countries. A couple of very unique characteristics of our insurance industry are that all of the companies are listed in the Tadawul and medical insurance comprises 50% of the total market. The penetration and density of the insurance sector is extremely low here; in that aspect, Saudi Arabia is probably at the bottom of the G-20 countries. If you exclude the compulsory health and motor insurance there is still many areas for growth. There are so many houses being built and huge infrastructure projects; those are some of the areas with potential for future growth in this unique market.

From the regulatory point of view, I see a big change in SAMA’s (Saudi Arabian Monetary Agency, the central bank) approach to the market since 2013. It is well known by the main players of the industry that SAMA has had enough of dog fighting amongst the different insurance companies for market share; they want now more efficient and profitable companies. By the time SAMA has realized of this, we find ourselves with already 36 companies operating in the market. SAMA is making big efforts to regulate the market in a better way, so it is likely that we see the number of companies decreasing and a more competitive and sophisticated market in the near future. It is not easy to find the right balance and to implement regulations such as what they did with medical insurance. We are starting to see the results now and we can say that it is becoming a profitable segment. I can see a much better insurance market now than three years back. The profitability is improving quarter by quarter, and companies are increasing their level of professionalism and risk management following SAMA’s requirements; standards are rising but competition is as well, therefore some smaller companies in the market will have a hard time to survive.

According to Moody’s, despite this significant growth, Saudi Arabia has the lowest insurance density in the GCC and one of the region’s lowest penetration levels. What actions can be taken to increase the penetration level in order to uncap the potential that such low percentages offer?

That’s totally right, and that’s why our main promoters, Tokio Marine and Alinma Bank, decided to join forces and set the objectives of making insurance products available and easier to the consumers. Awareness can be pushed from either the bank’s customers or through Tokio Marine’s client database. Also, one of our shareholders is SABIC, one of the biggest companies in the kingdom, with a large number of employees, so we aim to cater to all of them and the 1 million clients of Alinma Bank. All of the previous plus the big groups with whom we engage in marine cargo and motor activities will drive our penetration in the market and consequently increase the insurance ratios in the kingdom.

So would you say that your diversified shareholder structure is one of Alinma Tokio Marine’s competitive advantages?

Yes I believe so. I think the market understands that and that’s why our stock value is rising in overall terms. I can feel high expectation from the public towards our company.

The company has secured a license from SAMA to cover 34 insurance products in the areas of general, health, and protection and savings insurance. How important is for the company to keep innovating and diversifying its portfolio?

In July we just launched protection and savings insurance products, which will cater to needs like educational funding, retirement preparation or just simply saving needs. So this is an area where we would like to be slightly different from what others are offering to the market. Rather than just saying: “Would you like to have a life insurance?” Why don’t we go further and try to see that there’s an inherited risk of not being able to fund your children’s education if one of the parents is not there or if they don’t have the possibility to save enough money by the time their children reach the age to step into higher education.

These products have just been launched as I said and first we are going to distribute them through the bank. We will use the network to cater to our clients whether they are looking for educational funding, retirement preparation or help with the increased down payment required by the new mortgage regulations. We can help our clients to prepare in advance for this. The savings ratio of the Saudi market is very low. People are used to just borrowing money for their immediate needs because of the low interest rates, but with these products we want to educate our customer base and anticipate all those needs. That will give us a competitive edge.

The company started operations in 2012 and all the above-mentioned products require building a relationship of trust with your clients and a strong brand name. What measures is Alinma Tokio Marine putting in place to create a stronger brand name and a high-profile reputation?

I think that in order to be able to compete with bigger players in the market we need better service and expertise. First we started with marine cargo, which is our foreign partners’ main strength, and by the end of September of this year we have positioned ourselves as the number sixth insurer player in marine cargo only.

Overall we are number 29th in the market but one by one we will tackle every segment and try to compete and position the company as a leader.

Some of the new products we are launching have a long-term ROI, so we have to be patient since we need to raise awareness and create the need for our clients. In the meantime other products such as marine insurance, property or health will support our growth.

Our priority now is to strengthen our market share, especially in marine cargo, we want to quickly recover the space lost and in the meanwhile create and establish new markets. I think it’s a good opportunity that government also started to borrow money, because if we want to do a long-term saving product we need an investment methodology to have a stable long-term interest. Typically we use government bonds, which were not available in this market before, since the government had no need to borrow. If we look at markets such as Japan, when the governments need money and issue a lot of government bonds, the financial institutes will try to raise that money and invest, and then the cycle starts running well. From the big picture of the economy, the government’s initiative of getting some funding to manage the annual deficit will foster the people’s initiative to start saving more. That cycle probably will not stop unless the oil prices back up to $100 or $150. I see that we’re in the right time for the change to happen.

The labor force in the kingdom is almost 12 million-strong, but only 47% are Saudis while the other 53% are expatriate workers. Saudization aims to bring more Saudis into the workplace, particularly in the private sector. How effective is Saudization against unemployment or how is it being implemented in Alinma Tokio Marine?

As of December 2014, we have a Saudization ratio of 40%. I just had an executive committee yesterday and I managed to bring it up to 63% now. We have been growing and primary looking for Saudi nationals to join us. We were able to increase without asking the expats to leave because we’ve grown from slightly less than 100 to 130 in the total number of employees; therefore, we were able to increase the ratio organically. The question from the board was, “what’s the cost of that?” We got some consultancy services on this matter and their conclusion was that we are 9% higher in terms of payments. Would you say that 9 is high or low? I was expecting a higher number. So what it means is that our position is slightly above average so we are not paying that high or that low. If we maintain all our expats and all our Saudis the salary difference won’t be so much. We probably increased by 9% our human resources expenses but I would say it is a good investment. We’re still having difficulty to have Saudi senior management that’s probably why you have a Japanese CEO in this company. Within the eight people that are supposed to report to me, three are Saudis and the rest expats, but below that, all together our Saudization ratio is 63% now and I am very proud of that.

In terms of skills, our new employees can be trained, but before the skills I would point out the attitude. I was quite surprised they are willing to learn; they are willing to work overtime, and they are mainly joining us for the values and principles that our group is trying to push. Tokio Marine has a common value statement called “to be a good company” and that value is attracting young talented Saudis to us. We want some good culture from Japan to be exported to this company. We encourage our employees to engage with the management and ask them what do they think a good company is. We gather all their statements and opinions and we implement and execute them. It’s quite simple but it makes a difference and helps me to improve our institution. So attitude-wise I see absolutely no difference between Saudis and expats.

In terms of skills, yes; some of our expats have been working in the industry for more than 10 years so there’s still a gap, but with the hunger that I see from nationals to learn, that gap will be overcome in 5-10 years. I am very positive regarding the human capital in our company. I always look forward to hearing their comments and I reward that participation. We have created a prize, the CEO monthly prize. The winner will be offered overseas training in Dubai or any of our Asian locations. My board is very supportive with all these important initiatives and programs. Having said that, I’ll make clear that even if it’s a Saudi person I don’t hesitate to ask him to leave if he is not a good resource. We are trying to achieve excellence in Alinma Tokio and that’s our priority.

How important is for Alinma Tokio to build relationships with well-known international companies to carry out insurance operations on a large scale and how attractive is the insurance sector for foreign investment?

It’s a bit overpriced. The insurance industry has a very high expectation compared to other industries in the kingdom. I guess because it’s a new market and only from 2007; under the new regulations, all these new insurance companies were created. The real point to look at is what we discussed earlier, meaning, the new areas of growth such as retail, insurance of savings, home insurance and weather or not people will buy those products by themselves as it is usually done in other G-20 markets. If all those markets take off then is the real time to invest but currently I would say it’s overpriced. I think the insurance industry is probably, I would say, not a buyer at the moment but we need to carefully watch if people start behaving to save money and buy insurance as a part of the everyday life. That’s really the tipping point and we’ll be ready to jump on those opportunities and raise awareness.

You have a rich experience of 32 years with Tokio Marine across marketing, business development, and bancassurance, including four years of experience in Saudi Arabia and launching life and non-life insurance companies in India, Singapore, Thailand and Malaysia. How do you think previous experiences will help you in your role as CEO of Alinma Tokio and what is your vision for the company in the years to come?

It’s an interesting question. My experience in Malaysia helps a lot because I started a Takaful for the Muslim market. The main purpose is to help Muslims understand the compliance of insurance products, and definitely that experience has helped me to understand how Sharia-complaint retail products are managed. My start-up experience of life insurance in India helps me as well because actually here in Saudi the industry itself is a start-up. My experience in the Japanese market could be less useful, even some Japanese people could say that being in Saudi is a hardship but I think it’s the other way around. You meet hardship in Tokyo! Commuting in the train every single day! So yes, I hope my experience and those combined views will be useful for the company.

Going forward, I think we have done more than double of the results of 2014. I’m happy that we have doubled this year and we expect for the next 2-3 years to have rapid growth, maybe not a 100% growth every year but quite an aggressive growth, which we can still probably expect at this stage.

In the long term I think we need to be between the third and fifth position to be able to really make a difference in society. When I was in charge of the Malaysian operations we started at 29th and we went up to number six in the market, so I’m sure we’ll achieve similar results here. It’s a challenge that I enjoy very much.