Victor Apps, general manager at Manulife for Asia ex-Japan runs an insurance empire that has 16,000 sales people in Hong Kong, Shanghai, Vietnam, Taiwan, Indonesia, Singapore and the Philippines. Manulife is the second biggest provider of MPF by number of employees in Hong Kong and claims the number two spot in life insurance.

FinanceAsia: What is the competitive landscape like in Asia?

Victor Apps: I think you are likely to see contraction among multinational insurers from around 30 to seven or eight. You need significant scale in everything you do and you must be aggressive in Asia to survive. Some people who are still operating a strategy of flag planting here need to either get out or get more serious. In my role I cover eight Asian countries (ex Japan) and my job is to make every one of those significant to Manulife corporate. Currently only Hong Kong is significant but the others are all growing fast.

What are your growth prospects in Asia?

In general there is huge room for growth in individual life insurance, it's not saturated in any market with the possible exception of Japan. There's a whole series of factors driving this growth including culture, aging population and disappearance of the 'iron rice bowl'. We have grown our agency force in Asia from 10,000 to 15,000 over a 12-month period and hope to bring it up to 20,000 this year. Growth can be very fast in developing markets; we launched three years ago in Vietnam and already have 5,000 sales people. The China operation has only been going five and a half years and we've already broken even and have 3,300 agents just in the city of Shanghai, the only place we can operate currently. Now that we have a good model in Shanghai we can probably multiply our business by 20 times in China after WTO opens the floodgates.

How does your joint venture work in China?

China is not an easy place to operate but it's improving. Currently we have to have a joint venture and our partner is a huge chemicals business called SinoChem. We basically run the company and they provide 49% capital, the local expertise and the government relationships. The board meetings tend to be more educational not unlike working with an external board of directors. Only Alliance, AXA and Manulife have been allowed a majority stake in a joint venture in China.

Does that make your operations different from foreign rivals?

Essentially, there is very little difference between this 51-49 partnership and a 50-50 jv in that management control issues are still discussed between the two parties.

What are the major challenges for you in Asia?

The last 10 years have not been good for the insurance industry in Asia - we've seen some real crises developing. The two largest markets, Japan and Korea, are both experiencing serious problems and there are a lot of Japanese companies with suspect balance sheets and practices. Foreign players have benefited from the problems of the local companies, which have driven a flight to quality. Manulife has made the most of the opportunity by buying one of the bankrupt life insurance companies in Japan. The major hurdle in Asia is the poor regulation. Foreign companies are gradually gaining market share because we have the disciplines of our home country regulators to follow and we can't just operate to the local market standard. Good regulation can have a major impact on business success.

The poor regulatory environment in Japan meant companies were allowed to sell guarantees on products in excess of their ability to repay; they were basing their calculations on historical high returns before the bubble, and now two thirds have gone bankrupt. In Indonesia where the regulation is also weak the largest life insurance company is hopelessly bankrupt although it is still operating - on the other hand our company operating in the same environment is very profitable.

With such a huge sales force how do you ensure consistent high quality?

It is tough to recruit, I think the secret is the sales manager structure, good solid training programmes, ongoing supervision, continuous training and the fact that at the grass roots level we are a very local company. We have high churn especially in first year; only half make it through the 12 months as it takes a certain skill to sell and that's difficult to identify in the recruitment process. This issue is a real focus for us at executive meetings.

Do you also see consolidation of MFP providers?

We expect to be a big MPF operator in HK. I am sure the business will flow towards the big providers like us who have agents constantly out on the street. As a first step I can see back-office consolidation. The MPF process is complex and overheads are high and I think not everyone will be able to afford to keep going. You probably need 5% of assets to break even but you need to get to 10% to make any money. Our market share is probably 15% and growing but we have made a very big investment to get there.

What was your target market for MPF?

Our client base is very mass market for MPF. We have 35,000 company schemes with an average size of about eight people per account. Small accounts yield the highest margins; although the administrative charge is also higher, the business is very sticky. Our competitors won't be attacking the Seven Eleven store account in Kowloon; they tend to compete for the big accounts so you will see those margins being squeezed more than ours. It is a hassle to change providers, which is why our strategy was to be aggressive about acquiring accounts up front. We had all of our 2,800 agents in Hong Kong selling MPF.

Any new products or new markets on the horizon?

Not really, we are focusing on penetration with core products although we may introduce hedge funds to the mutual funds range. The core of the business is running strong distribution systems to get large volumes of quality business and putting different products through it to meet client needs. Our product base is surprisingly homogenous across Asia considering the differences in terms of cultural identity. It is not that they are culturally blind, some adaptation is necessary, but the concepts of life and health insurance are very transferable.