Ergo’s China moves: CEO Schmitz on its “central role”

June 22 2020 by Yvonne Lau

Dusseldorf-headquartered Ergo Group, a Munich Re company, has been making compelling moves into mainland China.

“In our global portfolio, China holds a central role,” emphasised Markus Riess, chief executive and chairman of the board of management at Ergo Group.

Though the group has been active in China since 2005, recent activity has signalled a heightened market commitment.

“The P&C sector suffers from a heavy concentration in motor, which indicates that non-motor business, with 23% annual growth, is worth our attention.” Juergen Schmitz, Ergo China

In early June, Ergo confirmed they were diversifying – and finally moving into China P&C markets through a 24.9% acquisition stake in Taishan Property & Casualty Insurance (Taishan).

The Taishan investment is a “strong entry point into China’s P&C market that complements our existing life and health businesses in [the country],” said Juergen Schmitz, chief executive of Ergo China.

And last October, Ergo established its China headquarters in Beijing’s Chaoyang district. The same month saw Ergo China ink a joint venture agreement with Chinese car manufacturer, Great Wall Motors.

Building up the China book
The German group is primed on an international growth strategy — but Ergo says the Middle Kingdom is an integral element that no international insurer can afford to neglect.

Schmitz (pictured) told InsuranceAsia News (IAN): “Our approach is deeply rooted in our understanding of the Chinese market and respect for Chinese consumers. Ergo China is made in, and for, China.”

The group has put a series of strategic initiatives in place to “fulfill a multi-line business strategy.” This will be conducted through local partnerships, a ‘buy-to-operate’ model and exploring opportunities in varied sales channels.

For Ergo, building up their China book means greater market access and a diversified portfolio across business lines. Because there have been market changes in the last few years, Ergo China has also begun prioritising the demand for health offerings.

“The P&C sector suffers from a heavy concentration in motor, which indicates that non-motor business, with 23% annual growth, is worth our attention,” Schmitz indicated.

The in-country penetration rate stood at only 4.3% of GDP by the end of 2019. Insurance density reached Rmb3,046 (US$430) per person. The global average is 6.1% of GDP and US$635 per person.

Indeed, its life unit – Ergo China Life Insurance – was formed in 2013 as a 50/50 JV between Ergo and Shandong State-Owned Asset Investment Holdings (SSAIH). It’s led by director and general manager, Jason Yin and delivered 40% growth in 2019.

Ergo China Life is headquartered in Jinan, also in Shandong province. Shandong’s 97 million-strong population makes it China’s third-largest domestic market – which incentivised the company to set up shop there. The JV mainly offers life, health and accident products tailored to China’s middle class.

Moving ahead, Ergo “will zoom in on the business lines of health products, while paying more attention to non-motor [segments] such as the areas of [agriculture] and liability. We have underwriting expertise to enable us to provide innovative products to satisfy market needs.”

Virus impact
And the Covid-19 outbreak seemingly hasn’t stopped Ergo China’s works.

When the Wuhan lockdown was finally lifted, Schmitz commented: “Our Ergo China colleagues have spared no time and efforts to carry forward our key strategic projects – which have been progressing very well. Even under the most difficult conditions, business had to and must continue.”

Schmitz added that there had been “no let-up in pushing ahead” with their crucial initiatives. This included their P&C market entry, which successfully culminated in the Taishan investment and “joint ventures to establish brokerage companies.”

For Ergo China Life, chief executive Jason Yin noted that “digitisation has received an additional boost” due to Covid-19. The pandemic showed Yin that business communications can be converted to digital formats for longer periods of time.

Ergo established a tech strategy early on. This enabled them to handle 100% of business online — enabling business development and agency sales through digital methods.

It meant that the Covid-19 impact led to a natural digital shift in distribution channels. “Online sales more than compensated for the dip in growth in the agency sector. The first two months’ gross written premium achieved 120% growth year-over-year,” said Schmitz.

And digital efforts continue to be a key focus — particularly for China — a “fertile land for technological innovation. [We already hold a] full-fledged digital plan to scale up digital business development [in-country].”

Long haul strategy
Ergo emphasises that there is still “huge space for growth” in China.

The in-country penetration rate stood at only 4.3% of GDP by the end of 2019. Insurance density reached Rmb3,046 (US$430) per person. The global average is 6.1% of GDP and US$635 per person.

And because of this market potential — the German group is committed to China for the long-haul.

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