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CAPITALIZING ON A CONSISTENT STRATEGY
Notwithstanding the financial market turmoil of 2002, the market for life insurance and pensions is broadening perceptibly with the aging of developed-country populations, (fiscal) stimulation programs, European integration and increased wealth. There is reduced public faith in the ability of government-sponsored social security programs to provide desired levels of living standards for retirees. At the same time, consolidation is reducing the number of private sector providers able to offer both protection and prudent investment on a sustainable basis. Together, these changes present opportunities for long-term growth. Both the expansion of distribution and cost management are critical for achieving the scale and expertise required to take advantage of these opportunities and form a part of AEGON's long-term strategy for profitable growth.
"Partnering covers a broad spectrum of alliances with other players in the world of financial services. This approach focuses on building efficient collaborative networks to reinforce AEGON's existing strengths and extending its reach to customers."
Expanding distribution is key to AEGON's growth strategy, which relies on strengthening existing sales channels while simultaneously building new capabilities. Across the decentralized AEGON Group, business and marketing units pursue multiple initiatives to reach customers more effectively. Yet a common thread is always to reinforce and expand distribution relationships. Reflecting this importance, AEGON's businesses are increasingly organized by distribution channel.
Effective distribution and cost efficiency are two of the principal keys to success. Multiple distribution channels, and targeted branding, have helped AEGON build an impressive client base of millions of clients around the world. This, together with a broad range of well-designed products and effective cost management, has made AEGON one of the leading publicly quoted life insurance companies in the world.
Despite showing many of the characteristics of a global industry, life insurance and pension and savings products have strong regional characteristics. In southern Europe for example, banks are the dominant distribution channel for these products, while in northern Europe professional intermediaries such as agents, brokers and independent financial advisors (IFAs) are the prime producers of new business. In addition, new direct sales techniques are growing in importance in all markets. Customers are demanding access, convenience and flexibility, creating new opportunities to sell insurance and savings products when shopping, surfing the web, or at work.
Because of the country-specific nature of insurance and pension products, AEGON partners must exhibit a high level of local market knowledge and specialization in order to contribute to AEGON's goal of expanding distribution and increasing cost effectiveness.
Partnering takes many shapes, including partial (or outright) acquisition, joint ventures, alliances and outsourcing. But whatever form it takes, AEGON seeks out certain core characteristics whenever and wherever partnering begins. More than ever, AEGON is working hard to build sales through all available channels, leading AEGON companies to cooperate closely with other specialized entities through partnering. In the United States, distribution through financial institutions is increasingly important. For example, Transamerica Capital, drawing together a wide range of products, serves as a highly effective partner to wirehouses and intermediaries serving retail customers. And a partnering strategy, jointly executed by Transamerica Capital and Transamerica Financial Institutions, brings the broadest product portfolio to clients, through commercial banks and leading brokerage firms. Offering an expanded portfolio of AEGON products through institutional partners has helped generate significant organic growth in 2002 for AEGON USA.
The growing importance of direct distribution techniques including direct mail, point of service, the internet, telemarketing and direct response advertising is evidenced by the strong performance of AEGON Direct Marketing Services (ADMS), following the 2001 acquisition of J.C. Penney's direct marketing insurance operations. The success of ADMS operations in Korea - which achieved a high response rate in the marketing of supplementary health products - demonstrates how the partnering of technology with direct sales expertise can provide a highly efficient means of entry into new international markets.
The opportunities for partnering are nowhere more important than in Europe, where we expect significant growth. Here, fundamental changes to pension provision are unfolding as state-funded retirement programs weigh heavily on the rising indebtedness of EU member states, already challenging the terms of the EU Stability and Growth Pact. Changing demographics, increased life expectancy and rising costs all render the European economy progressively less able to support the ongoing burden of the old 'pay as you go' schemes. The probable long-term solution is a migration to the largely funded approaches already adopted by the Netherlands and the United Kingdom, supported by country-specific solutions.
AEGON The Netherlands has launched a number of initiatives to create a more integrated distribution network and to extend its reach to customers. For example, AEGON The Netherlands joined forces with oil major TotalFina to help distribute supplementary pension plan products to truck drivers with loyalty cards.
As a result of an enhanced logistical partnership among AEGON Particulieren, Spaarbeleg and agents, clients were informed within a very short time about the effects of changes in the fiscal treatment of employee savings plans and about possible solutions.
In 2002, AEGON UK expanded distribution in its core business through a number of acquisitions, bringing access to over 700 independent financial advisors. The expansion in distribution will allow AEGON UK to accelerate its own ambitious product development plans in response to the ongoing regulatory changes aimed at simplifying the UK's complex rules on distribution. These investments clearly signal our commitment to our distribution strategy and our belief in the quality of the independent sector in the United Kingdom. In addition to building significant in-house sales capability, AEGON UK is also working to build closer links between insurer and intermediaries using web-based technology. An additional benefit of distribution ownership is that AEGON UK can develop better, more integrated servicing solutions through its improved understanding of customer and intermediary needs.
Joint venturing with strong local partners also provides the key to new growth markets. In China, AEGON announced in 2002 an agreement with China National Offshore Oil Corporation to launch a life insurance joint venture in which AEGON will provide insurance-industry expertise. The new company is expected to commence operations in the second quarter of 2003 to pursue the rapidly growing demand for asset accumulation and protection products among the Chinese population. Another step towards this came in September 2002 when AEGON announced an alliance with La Mondiale, the French mutual life insurance company. This alliance, formalized in December 2002, will create the first specialized European group pensions network, and the partners expect to benefit from the sharing of expertise, client referrals and administrative efficiency. In addition to serving the French market, where La Mondiale is one of the leading pension providers, the alliance aims to distribute specialized pension products through bank and agency channels in other EU countries, complementing AEGON's existing position.
"The alliance with La Mondiale will complement AEGON’s existing position as a leading pension provider in the Netherlands and the United Kingdom, and creates the first specialized European group pensions network."
The acquisition during 2001 by AEGON Canada of Money Concepts, a financial planning organization with 400 advisors, added a new distribution channel and a mutual fund dealership. In 2002, the dealership was rebranded as AEGON Dealer Services and made available to other AEGON Canada distribution channels. The launch in June 2002 of AEGON Fund Management and its imaxx™ mutual funds leveraged the segregated funds infrastructure to create a broader retail investment product offering. In Spain, various activities are being developed to double the number of specialized life insurance agents within a period of three years; in Hungary the network for life sales was strengthened by improving the independent agency channel and intensifying our cooperation with brokers. Preparations were made for the commencement of operations in neighboring Slovakia in 2003. In Taiwan, distribution was expanded beyond the captive agency network to include independent broker outlets as well as the bank channel. In early 2002, the acquisition of AXA’s branch in Taiwan was successfully completed.
AEGON also puts technology - e.g. via internet - to work supporting distribution and more traditional forms of customer service. Web-based technology is used to help provide customers and agents with convenient on-line account information, and to support the sales process. Outsourcing with specialists in such areas as ICT, claims handling, telemarketing and administration also produced important results in 2002.
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