What's your unit-linked strategy?

De Silva: Since 2000 we've invested in technology so we could get into the unit-linked insurance business. Our view at the time was that unit-linked was a fast-growing product segment, and it remains a high growth segment for us in the market.

What's the reason for the growth of unit-linked insurance?

Until 1997 many people in Hong Kong focussed on real estate for financial security and retirement planning. People in today's market are disillusioned with that as a long-term solution. So there's been a huge shift to start looking at managed investments and other investment alternatives that will complement real estate holdings but also provide financial security.

What is your main product line?

Our main line of business is Fortune, which is a unit-linked product. In March of this year, in addition to our equity-based funds, we launched a guaranteed interest fund (GIF). It's not like the guaranteed return funds that are out there. The principal is guaranteed and an annual interest rate for five years is guaranteed based on the current rate on the date of purchase. When we launched this in March we were able to launch it as 5% per annum for five years. Recently bank rates have fallen further here in Hong Kong, therefore our five-year GIF was 3.6% interest per annum for five years.

We're in the midst of a new project now to launch a line of business that is going to have a very low insurance component but will be more of a guarantee type plan, or more of a guarantee that you can wrap around unit-trust type products.

How do you distribute your products?

We were successfully awarded an exclusive distribution alliance with Citic Ka Wah Bank. This gives us access to their 37-branch network and 180,000 customers. Citic Ka Wah is contributing an increasing component of total sales in Hong Kong. We also provide exclusively for them a financial planning channel that works with the more affluent segment of their customer base to do more specialised insurance plans. We hire and manage them, but they are actually employed by the bank. We also distribute through a very professional agency system of about 300 agents. In addition we do business through brokers.

How do you see the competitive environment in Hong Kong, are there too many players?

Well there is still high growth for insurance here. If we look at the incidence of insurance ownership in Hong Kong, we estimate about 70% of the people in Hong Kong own insurance polices. That compares to North American markets where you see almost 200% penetration. So there's growth potential there.

The issue about Hong Kong, and I wouldn't have said this a year ago, is that we're entering a period of consolidation. Insurers have had problems in other parts of the world. For example the European insurers that were so strong in a bull market are now struggling and having to boost capital reserves and that sort of thing. This will, therefore, have an impact here. If they don't have a strong foothold in Asia, then I can see pressure on them to exit. This is also the case for Australian players.

Are you involved in China?

It's something that is more of a longer-term strategy. The way the regulations are at the moment for foreign insurers in China is you get a licence on a city-by-city basis. We have just got the entry rights to Tianjin, in north China. The city has a population of nine million and is the second biggest port next to Shanghai. We're really excited about being there. We have 2000 agents operating there, and in their first four months they sold 50,000 life policies. That compares to our Philippine operation, which historically holds the record for the most sales, and sold 20,000 policies in the same period. So the growth potential is huge. We're looking at building from Tianjin as our northern China base.

Asia as a whole is increasingly significant for us. In 2003 we expect to sell more life policies in Asia than in Canada. In India alone by 2006 we expect to be selling three times the volume we're selling in Canada.