Great Eastern in need of fightback plan

IT is never too early to take stock and, judging from the latest development, there is much thinking to do for insurer Great Eastern which has been under increasing pressure to maintain its business growth in the face of a walkout by senior executives and agents in the past year or so.

The losses stretch even further back to the past 18 months, sparked by a restructuring exercise in the company, which is the insurance arm of OCBC Bank. At least seven key executives and 300 agents have quit since then.

The resignations may be the inevitable result of housekeeping, which happens in every organisation at some point. Or it may signal deeper underlying problems.

But for now, Great Eastern is still in good shape. The question is: can it stay that way when the impact of the thinning of its top management and downsized sales force becomes fully felt?

The insurer's balance sheet shows no sign that it's losing its fitness. In the first nine months of the year, Great Eastern's net income almost doubled to S$732.9 million from S$394.1 million a year ago. The third quarter alone saw the insurer's net profit jump 21 per cent to S$235.5 million on higher operating and non-operating income, as well as more profit from shareholders' funds investments.

Total weighted new sales of the group rose 16 per cent to S$306.3 million in Q3, led by higher contribution from its Singapore agency and bancassurance channels.

While other insurers have to fight tooth and nail and pay big bucks to tie up with local banks to sell their products, Great Eastern can rely on parent company OCBC as a distribution channel. This is a big edge it has over its competitors.

Banks are a coveted sales conduit for insurers here, given that they have accounted for the lion's share of revenue for quite some years. While banks as a distribution channel have surpassed agency forces in sales, boosting insurers' topline more than anything else, the products sold are typically low margin. As some in the industry say, bancassurance is a "volume business".

Insurance agents, though, are the opposite. Their sales in terms of volume may not be as high, but the profit margin of the plans sold are. This is why insurers here are now saying their focus is on the protection business, which really means life policies.

Great Eastern seems to have taken a big hit in this low-sales, high-margin segment of the business when its rival AIA poached some 300 of its agents, known to be one of the most productive groups, to join the latter's new financial advisory firm. AIA dangled lucrative packages for the agents to migrate, but it said it was the price paid for moving up the technology ladder quickly.

The tricky bit for Great Eastern though is how it's going to pick itself up after the double whammy - first the loss of executives at the top and now its agents.

One of its biggest losses must be that of Khoo Kah Siang. In the past two years or so, Mr Khoo was heading Great Eastern's business development and regional bancassurance - and has given the insurer's competitor Manulife much competition in the market share department. From February next year, Mr Khoo will be helming Manulife as its Singapore chief, succeeding Naveed Irshad who has been promoted to a bigger role.

If Manulife, which distributes its products through Singapore's largest lender DBS, wants to beat Great Eastern in this game, the musical chairs cannot be any more strategic. The playing field for Great Eastern has certainly gotten more level - and it remains to be seen how long the insurer continues to stay in a position of strength.

Amid rivals' moves to push forward, Great Eastern has to figure out how to keep its agents' and advisers' morale up, maintain its bancassurance lead and embrace technology in a bigger fashion to transform its business.

So watch this space, because it will be one hell of a race.