Hello, everyone, and welcome to the Prudential plc Conversation with the Prudential Vietnam CEO, Phuong Tien Minh. My name is Nadia, and I'll be coordinating the call today. If you would like to ask a question at the end of the presentation, please press star followed by one on your telephone keypad. If you have joined via the webcast, please use the questions tab above the slides. I will now hand over to your host, Patrick Bowes, CEO of Investor Relations, to begin. Patrick, please go ahead.
Thank you very much and welcome to you all. Thank you for joining us for this, the third of our series of snapshot webcast sessions, designed to further introduce you to some of the leadership teams of our operations. Joining us today in Ho Chi Minh City is Mark FitzPatrick, Group CEO, and he's joined by Minh, the CEO of the Vietnamese Operations. We have just put up on the web some slides which include some background information on the industry. We'll have about 30 minutes of discussion between Mark and Minh, and then following that, we'll have about another 30 minutes where there's time for questions and answers as we've done before.
The conference call host will repeat how you can ask questions via the conference call or on the webcast in much the same way as we've done on previous results calls. Over to you, Mark.
Patrick, thank you and good day, everyone. Glad to have you join us here in Ho Chi Minh City. It's great to be here, and I'm delighted to be joined by Minh, our CEO of our Vietnamese business. Minh, maybe just to kick off, maybe just a few words in terms of your background.
Thank you, Mark. Greetings from Ho Chi Minh City to everyone. My name is Minh. I'm the CEO of Prudential Vietnam since June 2020. Before this role, I was the Chief Marketing Officer and Chief Distribution Officer, including Agency for Prudential. Prior to that, I have totally more than 13 years experience in financial services, with the expertise in customer value management.
Minh, you are the first Vietnamese CEO the business has. How does that feel?
I would say I have a great pride to it at the same time with huge responsibility. That's partly coming from my agenda is to improve the profile and support for the growth path of life insurance in Vietnam, especially for Prudential. Being a local Vietnamese, I have an advantage of understanding the customer behavior and needs. Also I have a feeling and the trend of how life insurance in Vietnam, and that help me to arrive quick decision responding to the dynamic and complex of the situation.
Minh, it's been a busy few years. Can you talk to us a little bit about what you've seen and what you've done in the first couple of years since you've been in the role?
It's actually a very unique experience for me. My entire two and a half years as a CEO fall directly within the COVID period in Vietnam. I took the role of the CEO in June, and then COVID happened in July. The way I look at it is an opportunity rather than a drawback. So me and my team actually used the opportunity to reconnect with our customer and our people. We rolled out a series of initiatives to call our customer to check with them to see if they are okay, and we provided support for them. At the end of that initiative, 2,000 customers received medical support from our eDoctor program.
At the same time, we also used that opportunity to encourage Prudential staff to call our customers just to check in and make sure that they got the support they need. For Prudential employees, we also provide a lot of support for our employees to make sure that they cope with the pandemic well by supplying them the vaccination, food, and an effective remote working policy.
Minh, there are very few CEOs who have done that, actually connected with customers. I'm really pleased that you actually and your team took the time to do that. Looking forward, post-COVID, what are your priorities for the business?
Thank you for that, Mark. We feel that, together with the reconnection with the customer and people, I also focus on strengthening the people capability. Our people element is extremely important since life insurance in Vietnam is such an early and a young industry. The priority is focused on people capability and developing a pipeline of talents, so that we could drive through the challenge and move forward. The second priority is also digitalization, because COVID just make digitalization become a must. The way I look at it is we use digital transformation to enhance customer experience and sales experience. For customer experience, during COVID time, we introduced virtual office.
During a lockdown to serve customers, we improved our auto loan, I mean, auto claim to 77%, automated underwriting to 81%. We also promote cashless payment. For sales experience, we also launched online sales generating room where we connect our agent from, you know, across the country. In one of the events, 16,000 have participated in the call room. We also introduced more than 9,400 sales to online as the way we do a group sale online.
Now, Minh, I've been amazed in my few days here about the volume of cranes that are up and the amount of construction that's going up. Maybe you could spend a minute just talking a little about how you're adapting your business to the rapid urbanization that we're seeing in Hồ Chí Minh City and the other major cities around Vietnam.
I think what you see is actually happening at the moment already. Urbanization is happening in Vietnam, and we see that it's a great opportunity for us to expand. Just to put into perspective, in 1986, less than 20% of our population, equivalent to about 30 million people, living in urban areas. At the end of 2021, this number amounted to 36.6 million, which is about 37% of the population. The government has an agenda to reach 50% of the urbanization rate. Urbanization rate is actually happening. The opportunity that we see is because, when urbanization happens, when people who live in the urban area become richer, more educated, resulting in higher servicing expectations, yet there's still lack of investment and protection solutions.
Based on these differences, our strategy continue to expand our network with focus in urban area, and diversifying our product suites and solutions so that we can cater into the customer segments.
Min, if we now pivot to the market, it's a very, very competitive market, and I'm delighted to see that you and the team have regained the number 2 slot. How did you do that?
This is actually another powerful one for me. Thank you for asking that question. I think the key winning strategy for us is to understand the opportunity of urbanization. We strike the right balance between our Bancassurance and Agency mix. We focus on rebuilding the agency component and making them more relevant to urban. Let's upskill them and helping them to score better. Both channels bancassurance and agency are improving and contributing to the growth trajectory of Prudential Vietnam. That is actually helping us to have a very fast recovery.
Minh, what was the stickiness around, for example, the distribution strategy that you brought about in terms of being able to regain the market share and really focus on that urbanization that we're seeing play out at the moment?
For Prudential Vietnam, I would think the agency continues to be our core strategy. Our agency continues to be our core distribution channel. What we did in the past year is that we continue to focus on the top agency producers, and we foster their success journey, and we want to use that success to influence the other groups of agency. By doing this, we invest a lot into training them, helping them to score better during the COVID period and also serve customer in urban city better. As a result of which at the end of 2021, we managed to achieve 1,245 NBRBs. We ranking number two in Vietnam and other Prudential LBU as well.
Our agent productivity improved, with cases per active agent also improved by 11% and case size also grew by 9% due to the focus on the top core agent. Having said that, we also try to help the other group of agents to score better with the changes in the customer segment as well by upskilling agent capability. There are actually two different digital tools that we use. We help them to use social media. Social media become, you know, a must in nowadays life. We use social media. We help them to use social media. We help them to use PRUForce and PRULeads to manage their sales activity.
This gives them the confidence to combine online and offline sales, so make it become an upskill sales process when they meet customers face-to-face. By this method actually work for them because we try not to push the insurance agenda, but at the same time providing an additional tool. At the moment I think we have more than 10,000 agents use PRUForce on a monthly basis. That is actually work very well for us. At the same time, we also want to experiment the new type of agent. We recently introduced our PRUVenture. Our PRUVenture is an initiative for us to actually promoting full-time agent, full-time professional agent. We recruited about 270 agent, young agent, and we put them through an intensive 24-month program.
At the end of that program, we want them to become a new generation of leaders. At the moment, in an early stages, we observe the improvement in attitude and productivity.
I had the benefit of being at PRUVenture for a bit yesterday, and I was blown away by the energy and the enthusiasm of these young agents. Speaking to them, their focus and their commitment to creating a career and the energy they're putting in, not just to kind of learning more about the products, but being able to work with some of the agency leaders who come in and see them every month to be able to provide them real-world support to make the whole thing, you know, less theoretical, more practical.
Yes.
give them the selling skills that they'll need for the future.
I think the initial response on the PRUVenture has been positive because the newly recruited agents, they're looking at PRUVenture as a new career rather than a short-term solution. PRUVenture, for us, is a new initiative to address urbanization. At the same time, we continue to leverage on our banker partners who have a customer base, who have the wide network, who have the infrastructure there in order for us to tap into the customer base and improve our penetration in urban as well. At the end of it, PRUVenture, the new initiative, our agent model and the banker is part of our organization focus for us.
Great. Thank you. When you think about customer and customer segments, how are you looking at that and how are you looking at it vis-à-vis product and how we enrich our product offering for the changing needs of the consumer here in Vietnam?
Thank you, Mark. The customer segment in reality and in a nutshell are quite simple. For Vietnam, it has three different groups. In the provincial area, we have an element of Mass Customer Segment. In a little bit more urban city, we have a middle- income and affluent segment. Each of the segment, their needs are different. For Mass Customer Segment, we are looking for a protection needs with an affordable solution. That is when we provide affordable, simple solutions. For our Middle- Income Segment, we are more concerned about savings, education, and the protection needs. We have a protection and savings product program. For our more affluent customer, they are more interested in investing, managing their assets, managing growth. We have an investment-linked product program.
All of these are tagged with the right rider making a comprehensive solution. Having said that, the way we look at customer segment is also different in the sense that the urban and non-urban segment are a little bit different. For example, the higher segment in the urban city, they behave a little bit different than the Affluent Segment in the non-urban cities. They are more socially aware. They're more concerned about their status quo. Because of that, we could offer them an investment-linked with a very specific additional fund focused on ESG or helping them to reach or explore their investment needs to another country by leveraging on our connectivity in Thailand, Singapore or other countries.
That is an opportunity that we are looking at the moment in order to create a unique opportunity and a unique proposition for this segment.
Great. Thank you.
Mm-hmm.
Now, Vietnam has a population of about 100 million people.
Yes.
I think the average age is about 30 years old. It's a very young, a very vibrant population. How would you articulate the opportunity for growth that investors should be interested in from a Prudential perspective?
Vietnam, at the moment, we are the third largest population in Asia with more than 100 million people. Yes, the average age is 30 years old. At the moment, we have, like, half of the population is around 20-59 years old. In Vietnam, we call it a golden age. Okay? Very fast-growing Middle- Class population and, you know, together with the urbanization, we're looking for a prospect of population, which is really a huge potential for us to increase the coverage. At the moment, the life premium is only 1.6% of the GDP, and compared with the average of 2.1% from emerging Asian markets. That's the Protection Gap for the country is also about $36 billion.
This presented a huge opportunity for us. Recently, the government also openly promoting and advocating to increase the penetration of life insurance in Vietnam. That is actually a real opportunity not only for us, but for the entire industry.
Now, I had the opportunity earlier this morning to spend time with a very senior advisor to the Prime Minister talking about the economy in Vietnam. It would be useful to get your take on the economic outlook for Vietnam. If I recall correctly, the World Bank has just increased the expected GDP for Vietnam. How do you see that helping? How do you see that supporting? What do you see as the key drivers there?
I think Vietnam is among a very few countries to have a positive GDP growth during the two consecutive years of COVID. I think 2.9% in 2020 and 2.6% in 2021. Vietnam had very fast recovery after COVID, and we managed COVID very well. You are right. World Bank just updated forecast, but also achieved about 7%-7.5% GDP growth this year. I personally feel that this is achievable given that Vietnam have a track record of a very good growth, GDP in the last few years. At the same time in Vietnam, recently normality in the last quarter of the year, the quarter that a lot of action happens. That is a good potential for us.
That we see the economic recovery, it seems that our government effectiveness in terms of managing inflation very effective in using controlling methods such as interest rate and monetary policies. That's helping us ride through the challenge this year and put us into a very good position to achieve such a massive GDP growth this year. For us in Prudential, the last quarter of the year is also one of the quarters that a lot of action happens. We have very good result in the first nine months of this year. We managed to grow 20% compared to last year. Therefore, we feel that this is an opportunity for us to take the growth to the next level.
When you talk about looking forward, what should we expect from 2023? What changes, what additional focus are you going to be encouraging your team, the agents and some of our bancassurance partners who we met earlier today? How are you gonna be encouraging all of them to operate in a slightly different way?
I think, from a longer term perspective, Mark, Prudential, we have a lot of advantage of being the first entrant in this market. Very strong foundation and very strong brand visibility. In the next few year, I'm going to leverage on that strength, improve the brand visibility, particularly in the urban city. We're going to invest in urban city in the sense that we will open a lot more outlets to serve customers, and engage with the customer. That investment, it, I think it's a big canvas for next year, to focus on urban.
We also focus on capitalizing on the agency digital transformation because a lot of good work and foundation has been done through PRUBeliefs with the engagement raised from the agents are very positive. I think it's going to be capitalized on in the next few years that give us the organic growth of the business. From bank and partner perspective, we continue to deepen our relationship with bank partners. At the moment, the level of customer penetration with the bank customer profile is still very low. That actually opens up an opportunity for us. We're going to strengthen our relationship with bank. At the same time, we continue to look for new partnerships with that available next year and the year onward.
While we're doing all of that, I'm only trying to experiment with a few new things in the market. I think last year we did an experiment with the Bite-Size product.
Mm-hmm.
Which yield very positive response from the consumer. We're going to continue to explore that by doing Omnichannel approach. A lot of good work has been done, and next year we're going to focus on working with e-commerce side like Shopee. Shopee is the Number One e-commerce partner in Vietnam. We work with them and try to explore new things, introduce Bite-Size products so that we can reach customers faster. We're also working with our partner at the moment, Viettel, the Number One telecom company in Vietnam with 23 million customers. I think that is still a potential there for us to tap into. Those are the few things that we're going to focus in order for us to prepare for a longer term.
Thank you. I think off the back of this trip and off the back of this conversation and from some of the interactions over the course of the last few days, whether it's with the chair and the head of retail of the largest retail bank in Vietnam, and also meeting with some of our most senior agents. It's clear they have a massive enthusiasm, a massive passion, and a massive desire.
Mm-hmm.
to do more with us, and they believe that there is a lot more to be done and a lot more that we can do collectively. I think it's, it feels like a very, very promising market, very exciting prospects. Delighted that we are, we've regained the number two position and look forward to reclaiming number one in due course. But we'll talk about that at next year's objective setting. With that, why don't we open up for Q&A? Thank you.
Thank you very much and for that session. Just to flag that the slides are up on the business presentation tab of the IR site. I know they've just recently gone up, so you know, as we go through the process of Q&A, you've got some time to have a look at the materials, and we can also bring them up on the screen if you've got any particular questions on those. Let me hand back to Nadia to give you the instructions as to how to submit your questions, both on the webcast and on the phones.
Thank you. If you would like to ask a question today, please press star followed by one on your telephone keypads. If you have joined via the webcast, please use the Questions tab above the slides. If you choose to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your phone is unmuted locally. Our first question today comes from Andrew Crean of Autonomous. Andrew, please go ahead. Your line is open.
Morning, all, and thank you very much for the presentation. I was just gonna ask really a couple of questions. One, on the urbanization theme, is there an element to which Prudential is not represented in all the cities in Vietnam, therefore you need to develop and expand both banks and agents into new cities, or are you just deepening penetration in all cities? Secondly, just to get a sense of it, could you give us a split of your new business by banker versus agents? Could you give us a sense as to what you think the long-term growth rate in new business sales is for the industry over, say, a five-year period? Thanks.
Andrew, thank you for those questions. Minh, the first question, urbanization. Given urbanization, are we in all the major cities in Vietnam, or is it just a question of going deeper into the cities where we have the elements? Maybe start with that one.
Thank you for that question. At the moment, Prudential presence is spread across the country. We have a presence across the country. The only thing different is because the strategy that we use in Vietnam in the previous year is to assess the customer in each of the cities as soon as possible, as fast as possible and provide them the right consultancy so that they can have a protection policy. However, that approach due to the fast urbanization, it require us to have a different approach to target on the urban city and that is the area where we are focusing at the moment. The way we target on urbanization in different ways.
Number One is improve our presence and upskill our agents in the urban cities so that we are more relevant for urban customers. Secondly, through the partnership with bank, we also help us to tap into the urban customer segment as well. Firstly, we explore a new agent model, the PRUVenture, which I quickly explained earlier, by introducing a full-time professional agent which is more suitable for the urban customer segment.
Thank you. The second of Andrew's questions was around new business. Andrew, we don't disclose the NBP component, but I think in terms of the slides, you'll see the breakdown between the bank and the agency. I think it's about 50/50 from last year in terms of AP. Andrew's last question then was around thoughts around long-term growth rate for the industry over the next five years, whether you have a sense of where the industry broadly is going and what the industry is setting out for itself.
I actually, the Ministry of Finance has predicted that in the next five year, the life insurance industry in Vietnam continue to enjoy a double-digit growth. That is actually a good opportunity for us, to focus on urban and rich customer in different segments.
Great. Minh, thank you very much.
Thank you.
Thank you for those questions, Andrew.
Thank you. Our next question goes to Greig Paterson of KBW. Greg, please go ahead. Your line is open.
Hello, everybody. Can you hear me?
We can, Greig. Thank you.
Right. Excellent. I see on the slides you're giving the agent numbers 25,000. I was just wondering if you could tell us what the year-on-year growth rate in agents is. The second question is, if I understand correctly, your traditional product is a with-profits 60/40 rule product. I was wondering how that percentage has changed year-on-year and what is at a higher or lower margin relative to the other products you sell within Vietnam. The third thing is I'm trying to get a feel for how far Pulse has been rolled out in the market.
I wonder if you could sort of give us a feel for what percentage of your APE in the first half of this year was a consequence of leads that were generated via Pulse. Thank you very much.
Greig, thank you. All right. Let's start on the first one. Minh, in terms of the elements of agency numbers, 25,000, and the sense of the scale of growth that we've had or scale of growth changed over the last year.
I think in terms of number of agents, in the previous sharing we focused a lot more on the highly productive agents. Therefore we are more selective in terms of recruiting the right agent for us rather than looking at a mass recruitment strategy. Having said that, the focusing on better quality agents has had a certain challenge. At the same time, through the experimentation of different segments, particularly in the key cities and for other provinces, we expect the country to enjoy the growth in the next few years. We don't think that we're going to go through the mass recruitment strategy.
Greg, unless I'm mistaken, I think about two-thirds of our agents are effectively kind of urban agents.
Mm-hmm.
That's the area I think we're going forward, you're gonna see our greatest focus.
Mm-hmm.
As Minh said, with PRUVenture, it really is about getting a greater number of agents where it is a full-time career. It's a full-time role. Actually, therefore, and from the experiments that, you know, the pilot that we've done so far, we've seen quite a material uptick.
Okay.
In terms of productivity through both case size and number of cases per agent. The second question was in terms of the traditional products, the with-profits type products and the margins, the profitability on that vis-à-vis the other products in the suite. Any comments that you can give, any color you can give?
I think Minh should.
At this stage, I don't think there's anything particular we've got out in the public on that element, Greg. I think overall, the elements of the business has been pivoting more towards a ILP type of business. We've seen huge demand from customers in that particular piece. The with-profits style, and it was a kind of a an old UK style, with-profits style, but it wasn't a 90/10. I think it was more like a 70/30. Yep. Rather than a 60/40.
Mm-hmm.
It is a very important backbone to the business. That being said, the ILP is where the consumer interest is, and that's where we're spending a little bit more product.
I'm just trying to.
Um-
Sorry, Mark. I'm just trying to get a feel. I'm aware of that trend. I'm just trying to get a feel if that's a headwind or a tailwind in terms of margin.
I think in terms of margin, the ILP business is producing a good margin. I'm not expecting the mix of business per se to give rise to a major increase in terms of the margin. I think the guys are gonna continue to keep very close in terms of customer demand, and therefore, I think, and I would expect the elements of the margin to be pretty in line with where we're at. I think, you know, if you look at the overall picture in terms of the growth segments as a whole, we had reported margins of about 38%.
You can see just the size and scale of the Vietnamese business that we say we're a meaningful contributor to the elements of an aspect of that margin. At this stage, we haven't disclosed any.
Mm-hmm.
Any of the particulars. The shift in the mix between the with-profits, because it was a 70/30, and the ILP, I don't think we're gonna see a major shift in terms of the margin coming through from that. The last question was in terms of the Pulse rollout and just a sense of how pervasive is that, and how well is that going?
In Prudential Vietnam, we have about 2.5 million registered users for Pulse. The way we embrace Pulse is slightly different. We use Pulse as a way to engage with customers, which our agents are very much receptive of the idea. At the same time, our Pulse is used by the agents to engage with the customers and as well as to help the customers to perform self-service in there. We have been doing a lot of enhancing in the features, allowing customers to use Pulse as one platform.
As we continue to use Pulse as a way to actually improving the buying experience, the customer service element of it, and also trying to gather more data and insight on the customer so that we can serve the return customer better. In a sense, it's very well received by our agents.
Good. Great. Thank you very much.
I mean, I'm trying to get a sense of how complete the rollout of Pulse is?
Is there much more to do in Pulse in Vietnam at the moment, or have we done as much as we think we're going to do with Pulse for the time being?
We are actually focusing on Pulse, PRUServices on Pulse at the moment. We've done the engagement. We've done the branding. We've done all of the customer-facing part already, and that's complete. We are now into the first phase of using Pulse as a place for the customer to conduct self-service. PRUServices on Pulse has been successfully introduced few basic features. The next feature is we actually allow customer to do payment. Yes, it's quite in line with the roadmap that we want it to be.
Yeah. Greig, in essence, as Minh says, there's some great examples of where it's being used. There's still quite a way to go yet.
Yeah.
In terms of rolling out Pulse. PRUForce is in play. PRUServices is becoming into play more and more, which is where the consumer actually decides how they wish to interact and be able to self-serve to a degree. The element of PRULeads, as we've discussed, is a component, and we're looking to activate it even further, especially for the younger agents who are certainly engaging with it. From speaking to some of the senior agents earlier on today, it's something that they are. They've got a huge interest in engaging with even further.
Thank you.
Thank you.
Thank you. As a reminder, if you would like to ask a question today, please press star followed by one on your telephone keypad. If you have joined via the webcast, please use the Questions tab above the slides. Our next question goes to Tianjiu Yu of Bernstein. Tianjiu, please go ahead. Your line is open.
Hi, good afternoon. Thanks for the introduction. It's quite helpful. I guess, obviously, Vietnam is growing very fast, probably one of the fastest country in Asia. I'm just wondering if you can talk about the competition dynamics in the market, and especially after COVID, and if any, you know, behavior change, agency numbers change. Also, I see somewhere in the slides you are ranking number two in terms of the overall company's sales numbers. I'm just wondering, if we just look at the agency channel, how does the competition looks like? And who are your, you know, the competitors in terms of the agency recruitment? Yeah, how is market dynamics looks like?
Perfect.
Thank you for the question. Yeah. In Vietnam at the moment, there are 18 insurer players in the country. The market, due to the very good growth opportunity, the market is extremely competitive. Prudential is one of the first entrants in 1999. Our success factor are meaningful in term of. I think we have a key unique advantage compared to other insurer is because our ability to invest in training and development. We spend a lot of investment on helping the agent to upskill and engage with the customer rather than focusing on the compensation element only.
By doing that, our agents become one of the most sought after by competitors, and therefore we frequently receive a very unhealthy competition by the other player to poach our agent, poach our staff. At one point and until now, Prudential Vietnam is still considered a University of Life Insurance in Vietnam due to this aspect. Having said that, we have been able to have a very loyal agency force. They have been very loyal to us. Our compensation works. Our training and development continue to be a big priority for us. Because of that, we have managed to improve our ranking position in agency in a very short period of time.
At the moment, at the end of June 2022, agency channel from Prudential Vietnam is the only agency channel that enjoyed double-digit growth compared to other five top big guys in the market, and for the most part, due to our focus in upskilling their capability last year. On the other hand, our bank insurance is also extremely competitive. We have seven partner at the moment. Our partner are mid-sized banks, and they have very good focus in retail banking, which gives them the opportunity of have a very good quality customer portfolio.
This particular area is also presents a risk for us as well because other insurers in the market tend to approach the partner and try to take away the partnership from us. However, again, our key strength is providing the support not only in terms of financial support, but in terms of the investment in training, development, and digitalization. We make ourselves become part of the bank strategy, and that is our key strength at the moment. The competition is fierce, it's aggressive. However, we pride ourselves in the way we invest in agency and bancassurance through the right areas, instead of only depending on the financial support.
As I mentioned earlier, we also recognize the importance of trying new things, exploring new model. The Prudential model is a model that we experiment and we observe to see unusual success coming out of it. That is the area where we would fine-tune and scale up in the next few years.
Thank you.
Thank you. Can I just follow up on the agency business in Vietnam? Can you give us some colors in terms of the agency monthly salary in Vietnam, and how does that compare with your competitors?
Well, I'm not sure I caught the question. How does the what compare?
Yeah. I'm just trying to get a sense of the.
Monthly salary.
Monthly average salary for the agents, and how does that compare with the market, or maybe compare with the average salary in Vietnam?
Okay. Got it. How does an agent average salary compare with the average salary of a normal employee in Vietnam?
The agents are not our employee, and therefore they would earn the income coming from the commission, support of incentive and contest. At the moment, because of the way that we change our focus into top producer, and therefore our top producer, when they reach in a certain range of the top tier of agent, their salary are very competitive. I think we are one of the top three in term of competitiveness, in term of top producer.
Thank you.
Our next question goes to Nafis Ahmed of EFG. Nafis, please go ahead. Your line is open.
Hi. Thanks for taking my questions. So my first question is on slide six. I noticed there's only one domestic player within the top ten. Just thinking about how the regulator thinks about this, are they encouraging more domestic involvement in life insurance within Vietnam? And also in terms of professionals that are working within the companies as well, you mentioned Minh is the first local CEO as well. Is the regulator kind of pushing more local professional involvement in the insurance industry? And then, secondly on, again, on slide six, you've got the industry product mix. Is that presumably Prudential is similar to that? Just following up from Greg's question, within traditional, it's only the with-profits product, there's no guaranteed business as well. Is it? Thanks.
Right. In terms of domestic players, Minh, if you wanna cover off the elements of any kind of government or regulatory flavor to try and get, you know, strengthened domestic player, and then we can cover off the element of the team, which actually is by and large, you know, kind of local.
I think at the moment, the regulator and the government have not had any specific agenda to push for domestic player in the market. I think at the moment, due to the fact that life insurance industry is still very young in the market, and therefore, the Ministry of Finance constantly are reaching out to international player like us in order for them to build a much better legal framework and insurance law to support for the growth in the country. Simply put, there is absolutely no agenda to push for a domestic player to be the dominant in the market.
The lion's share of your top team, executives and the next team down are local.
Yes. We have altogether including myself 10 members. I'm a local Vietnamese, and I have two foreign in the team holding important role in the company. That is very well received by the regulator.
Yeah. Actually, in an interesting way, the agents, when I met them earlier on today, the senior agency leaders said how delighted they were actually that the chief agency officer and the CEO are both local Vietnamese, just from an element of understanding the culture, understanding the market, and having a much closer contact with the customer. For your second question, is the element of the industry product mix. Yes, it's our product mix is very similar, and there isn't anything really in our product mix of any size or scale at all that would be guaranteed. It's a quality book in that regard. It's one that's been built over, you know, carefully over a number of years. That discipline is something that we're gonna ensure that we hold into.
Thank you.
Thank you.
Thank you. We currently have no further questions, so I'll hand back over to Patrick for any webcast questions.
Thank you, Nadia. We have a large list of web questions. I will start, please, with Edwin Liu of CLSA, and I'll just read out the question. Which I think we've actually answered the channel mix and the product mix of Prudential Vietnam compared to industry mix. I think probably the question then is our product mix similar to the rest of the industry or not?
In terms of the product mix and channel mix in Vietnam, Prudential is very in line with the industry norm. At the moment, I think. In terms of product, due to the fact that all of the product need to go through the approval from the regulator and therefore they have a very clear framework of the control, what sort of product available in the market, and that makes all products in the market from all insurance player are quite alike with each other. That is why I will say that product mix that we have is very much in line. In Prudential, the way that we make it different is the way that we bundle with the rider and the protection rider that we have.
The way we market it in terms of the proposition and the service element of it to make it different, differentiated. That method is also the method copied by other insurers as well. In terms of channel mix, we're also quite similar to the industry norm. In the recent year only, let me go back a little bit. Prior to 2016, the channel mix in Vietnam is pretty much 90% agency, 10% bancassurance and other channels. Prudential is leading that type of channel mix. We were the first company that actually focusing on diversify the concentration which in terms of channel mix by moving ahead to the bancassurance from 2016.
The market followed in 2017. At this moment, the entire market is quite similar in terms of channel mix, which is very equal in terms of bank and agency, 50/50 split.
Thank you. I've got a question here from Dexter at Macquarie. Are the health and protection products that you're selling the primary product or are they riders to savings products?
The health protection product that we have at the moment are riders. They are very good rider and supplement for the basic product that we have. We offer the product like investment-linked or universal life for customers, then we also bundle in the different health protection rider to it and make it a comprehensive product solution for each type of customer segments.
Thank you. I think next one is from Kailesh at HSBC asking on bancassurance, if you can give a bit of a color on the market share that Pru has in the bank branches in Vietnam, or are the deals exclusive or non-exclusive. Is there any great difference between the urban and rural market shares within bancassurance? I think you highlighted in your statement that it was mainly in urban areas that you use banks. Is there any difference in particular in product mix between agency and bancassurance? Typically, you would expect more protection to come through agency.
From our bancassurance perspective, we have 7 exclusive partners. The partner that we have are mid-size commercial bank, and they're very large in terms of their network and coverage across the country. The nature of this commercial bank is in the urban city, and therefore the customer base are actually very urban type customer. The product mix is because of the product mix that we have is quite similar to the product mix the agency customer in the urban city have, okay. It quite similar with a little bit due to the fact that the customer segment on the bank side usually is a higher segment. Position of number one in terms of market share of bancassurance business in the country.
There is no differentiation between, that's not market share in the urban population. We only measure in bancassurance business only.
Thank you. Then a couple of questions from Thomas Wang at Goldman Sachs. The PRU market share was around 14% in financial year 2021. Which channel was the source of the market share gain? What kind of product was the source of your success? Can you provide some color on the solvency position of the domestic business?
At the end of 2021, the market share is 14%. I think for the most part, it contributed from the bancassurance business. We employed that a lot coming from the bancassurance business. Because due to the COVID situation in Vietnam in 2021, the agency channel suffered a little bit of a setback due to the lockdown situation. At the end of the year, that market share that we have is due to the growth in the bancassurance. However, that position has been changed since November 2021 until June 2022. At the moment, our market share has improved from 14% to 18%, thanks to the fast recovery of the agency channel.
In reality, from the last 10 months, we were able to regain our market share for agency up to 6%-7%. That is the fastest recovery in the market at the moment. In terms of the product mix last year, it divide into two different products. It's investment-linked and universal life. But however, for the most part, it's driven by the investment-linked product. And the riders that we have attached to the product and the number of riders we sold last year has been very positive as well.
Thank you. Marcus, a question for you. This one is from Thomas Armour, Mackenzie Investments. How important is Vietnam to Prudential now, and how important do you expect it to be in the next five years? How has this evolved over the last few years?
Quite simply, it is important with the level of growth rate that we're seeing in the economy, with the fact that you've got a government and a regulator that are massively behind the growth and evolution of the industry. Given our number two position in the market, given the footprint that we have and our growing focus on urbanization, given the fantastic agency and banker partners and the support that we have, Vietnam has been important. What you're seeing is Vietnam keep growing in importance. The size and scale of the back book, the size and scale of the profitability coming through, the size and scale of the sales, all are beginning to matter more and more.
I can really see, and in many ways, I suppose like the world economy is seeing, Vietnam is playing a bigger role. I do expect Vietnam to continue to play a large role and to be playing a larger role as we look forward and as we look into the future.
Thank you. You touched on the profit and trajectory. Blair Stewart has a question, which is obviously you had APE growth, which was material in the first half, and profits growth, which was appreciable but not of the same order of magnitude. Can you give any guidance in terms of the development of how profitability will develop in the future? A connected question which Ashik Musaddi at Morgan Stanley was asking, which is, to what extent is the IFRS profit a function of sales growth rather than fee spread and insurance margin?
Let me give a first stab at that and then anything else you wanna add. I think in terms of profitability and growth of profitability, I think as we do more ILP sales, as the agency business really starts coming back online, as the strength and scale of the in-force book continues to grow, ceteris paribus, which we know will not prevail because of IFRS 17, but notwithstanding, actually we would expect to see the IFRS profitability of the business continuing to grow and continue to grow quite well. In terms of the sales growth with ILP, in terms of the profit signature component of that, it has a different profit signature than the with profits business by definition.
As we pivot more to that, as the market does more of that, would expect the IFRS profit trajectory to continue to grow and to continue to support the business. That being said, that's gonna have a shelf life for you of kind of less than 12 months because, sometimes in the course of the first half of next year, James is gonna be sharing with you IFRS 17 numbers, and the team will also then be able to just give you a cut of IFRS numbers and the impact of that for the Vietnamese business. I know they've been making good progress on the preparation around that. Minh, was there anything else you wanted to say?
No, there's nothing now, I would like to add because that is absolutely what happened because the channel mix that we have, we struck the right balance between bancassurance and agency. With the fast recovery of agency, we feel that the profitability we're beginning to get is actually in a positive trend.
Thank you. I'll consolidate a couple of the last questions, conscious of time. Could you give us an idea of the sort of returns that are available on the traditional products? You mentioned that there weren't significant guarantees, but those that are, can you give us an idea of what the sort of returns are? On the unit-linked side, what's the popular client demand? What sort of assets are people wanting to put into the unit-linked products? Next one. Those are the two I'm focused.
I don't think we're necessarily gonna go into the detail of the traditional product, a specific return. Suffice to say, actually, we have a general mantra and a general discipline of being very committed to high IRRs and for fast payback. Continue to see that component playing through. As for the element of ILP, Canada undecided on that. Minh, I wonder if you have a lens on that in terms of the type of component that the customer demands for.
Yes. I think people ask that question because the bucket of the customer segment that we are attracting in the past two years have been urban customers coming from banks who have investment needs and saving needs. Therefore, when they bought an ILP product, they have a tendency to choose an equity fund or an element that guarantee them a certain return on their savings. Those are the two funds that I think it's popular for Vietnam at the moment to satisfy the investment needs.
Okay. The majority, you know, nearly two-thirds are effectively kind of equity-
Yes.
-focused ILP, that's the key component that investors are focusing on having that buy for. The exchange is doing well, unlike many other markets. It's supporting that level of appetite that we can see.
One further one on the traditional business. Could you just give us an idea of the duration of the products for that traditional business? Is it two-year pay, five-year pay, 10-year pay? That's from Ashik of Morgan Stanley again .
It's quite lengthy in terms of duration. I think it's what? It'd be in the 5-10 plus-
10+, yeah.
Yeah. In terms of that type of scope. They are lengthy contracts, and the policy payment premium is effectively recurring premium, and therefore that component will continue for some time.
The final one I have is Greig Paterson slipped in a question on both the webcast and orally. His question is you referred to a potential bancassurance and interest in bancassurance developments next year. Are you able to give us any color on that and timing and size and so forth?
I think it's at this stage, Greig, a cheeky question deserves a cheeky answer, which is, we continue to keep ourselves open for possibilities in the future as things evolve, as against anything specific as such.
Okay, Nadia, that concludes the web questions.
Thank you. As a final reminder, if you would like to ask a question, please press star followed by the one on your telephone keypads now. Thank you. We currently have no further audio questions. I will now hand back to Mark for any closing remarks.
That's great. Nadia, thank you very much indeed. Everyone, thank you very, very much for joining us. I'd like to take the opportunity to thank Minh and the team for hosting us today and for giving you a chance to glance inside the business. Just to be reminded how fantastically well Vietnam is doing, and also just get a sense in terms of how well and the momentum that our business here in Vietnam is doing. Just some high-level broad comments, just to remind everybody. Now we are exclusively Asia/Africa focused. We have a multi-channel distribution. We have a good geographic footprint in terms of Southeast Asia effectively being 50% of our APE, NBP and IFRS with-profits earnings. We continue to focus hugely on the digitization opportunities, and you heard that from Minh.
Agency continues to be a very, very important part of the business. It was great to see the agents today and how excited, how motivated, how ambitious they were to be able to grow their business, even further. I think as we look forward, as Minh and the team continue to try and outperform the market, we look forward to being able to bring you further updates, in terms of the Vietnamese business. Thank you very much everybody for your time and attention, and we look forward to other forums for hosting another one of these, before the end of the year. Thank you very much, and enjoy the rest of your day. Thank you. Minh, thank you once again.
Thank you, Mark. Thank you to everyone.
Thank you. This now concludes today's call. Thank you for joining. You may now disconnect your lines.