➤ Yunfeng Financial plans to use technology to help MassMutual Asia's insurance agents do their jobs, not to eliminate positions.
➤ MassMutual Asia wants to boost sales to Chinese customers, which make up a significant share of Hong Kong's life insurance market.
In November, Hong Kong-listed Yunfeng Financial Group Ltd. and several other Asia-based investors completed the acquisition of Hong Kong-based MassMutual Asia Ltd. from MassMutual International LLC, Massachusetts Mutual Life Insurance Co.'s holding company for international operations. Following the transaction, MassMutual Asia is 60% held by Yunfeng, while Yunfeng is 24.8% owned by MassMutual International.
Yunfeng, which operates wealth management, securities brokerage and corporate finance consultancy businesses in Hong Kong, is backed by Alibaba Group Holding Ltd. Executive Chairman Jack Ma.
CEO Li Ting spoke with S&P Global Market Intelligence on how Yunfeng plans to leverage technology to help MassMutual Asia improve services, and also shed light on how the deal came about. The following is an edited transcript of the conversation.
Li Ting, CEO at Yunfeng Financial
Source: Yunfeng Financial Group Ltd.
S&P Global Market Intelligence: What changes will Yunfeng introduce to MassMutual Asia in 2019?
Li Ting: We will optimize the company's operations rather than change it. MassMutual Asia offers a wide range of insurance products, including well-recognized annuity insurance products. We will offer new products based on market demand. On investment, we will continue to cooperate with Barings LLC, an investment company under MassMutual, over the next three years to keep investment strategies consistent. In terms of insurance sales and post-sale services, we will leverage more technology to improve efficiency and help customers save time.
We do not hope to use technology to eliminate agents. Instead, we want to use technology to improve agents' service quality, by helping them to provide more timely and accurate information to customers. There can be great differences in quality among agents; a top-tier agent may offer much better solutions to customers. By using technology to process customer information, we hope to lift the average service quality. In terms of distribution channels, we will keep expanding the agent force. We have less than 3,000 agents and we wish to see relatively quick expansion.
Why is MassMutual Asia's agent force important to Yunfeng?
Building up an agent force requires quite a long time. You also need to build up trust in the market, and stringent recruitment and training is needed. It is not easy. MassMutual Asia's agent force has a good reputation in the market and therefore the agents are very important to us. Meanwhile, Yunfeng has been focusing on [financial] technology solutions in the past three years. If Yunfeng had employed a lot of people, the different work cultures might have made it more difficult to integrate both sides. But we don't have such a problem. We are a perfect match.
With the acquisition, do you expect MassMutual Asia's brand to become more recognized among Chinese customers?
We hope so. For the first three quarters of the year, Chinese customers accounted for 28% of [direct new business sales in Hong Kong's life insurance] market. We think this trend of Chinese customers accounting for a significant share of Hong Kong's life insurance sector will continue. The Chinese business has not been MassMutual Asia's focus, but we want to gradually grow the segment. We are looking for a breakthrough in the Chinese customer market within Hong Kong.
How did the deal between Yunfeng and MassMutual International materialize?
Since [2015, when Yunfeng Chairman] David Yu and Jack Ma invested into Yunfeng, we had been looking into obtaining an insurance license. We looked at all of the life insurers up for sale in Hong Kong and ruled out other candidates. The deal is not a marriage we rushed into; we have dated each other for quite some time.
We wanted to figure out if we can work together in the future. Many of us at Yunfeng have work experience at large U.S. financial companies, and unlike senior managers at some Chinese companies, we do not have to communicate through translators, nor do we encounter culture shock when working with them.
What is Yunfeng's outlook on the investment environment for 2019?
We expect great market volatility in 2019 and for tensions between China and the U.S. to be a long-standing issue. Although the clock is ticking on the 90-day negotiation period for trade talks, the outcome may not resolve everything between the two sides. Both countries are looking to rebalance their relationship, and when two superpowers are jockeying for position, the rest of the world will be impacted. In the past, people did not use the U.S.-China relationship to value a sector or a company, but that relationship has now become the biggest variable. If that variable is uncertain, it is difficult to just look at an individual company's fundamentals.
Further, investors may have overreacted on some companies. There are always investment opportunities when the market does not perform well. If some companies with good fundamentals are undervalued because of a market sell-off, there may be good investment opportunities. In 2019, we need to be vigilant and sensitive to the political environment. We need to prioritize risk control, while actively looking for bargains.
Yunfeng has been promoting the role of robo-advisors in the investment business. What is your opinion of the fintech environment in Hong Kong?
Fintech development in Hong Kong is catching up [to leading world markets]. The city is highly penetrated by financial institutions serving a population of just 7 million, and so it was fine in the past to not develop technology.
But Hong Kong has realized that no international financial institution will now come to the city to just serve its population. How can an international financial center serve regional clients or connect regional clients to the global market without cutting-edge technology? As a result, we have now seen Hong Kong introducing policies to support virtual banks and digital insurers, and the regulatory environment is improving.