Prudential Thailand: State of the business

Keilic Wong, CFO of Prudential Thailand, met with us during a visit he and his team made to Chiang Rai, where they were teaching financial literacy and disaster prevention skills to children as part of Prudential’s “Safe Schools” community initiative. There, Keilic took time out to provide an overview of the Company’s performance year-to-date and its challenges and opportunities moving into 2023 and beyond.

Prudential named to the KPMG 2022 Customer Service Hall of Fame

Our discussion came hot on the heels of a new report from the independent, third-party accounting firm KPMG, which names Prudential Thailand as their top performer in Thailand for customer experience ratings, placing them #1 in the KPMG Thailand “2022 Hall of Fame.” This prestigious citation, based upon interviews with thousands of customers across a variety of business sectors, is awarded to firms that are, as the KPMG report explains, “intentionally focused on delivering positive customer experiences…and positioning themselves to be flexible, agile, and prepared for an evolving, uncertain future.”

Keilic stated with pride that KPMG’s commendation strongly reinforces Prudential’s core values of agility, empathy and ambition that Prudential strives for in all areas of its business.

Strong revenue and higher market position

Now firmly situated (since March 2022) in their new Bangkok office at Samyan Midtown, next to Chulalongkorn University, the Company has enjoyed strong growth in 2022, with its market position rising two spots to sixth place. The CFO attributes this growth to “People working together across the Company – distribution, marketing, product, finance and back office - to [provide] the right products and incentives for customers coupled with strong training, the right marketing materials and a great user experience. The company is doing what it’s supposed to do.”

Keilic points to several key metrics contributing to the strong growth numbers:

   · A 22% rise in annual premium equivalent (APE) or sales from 2020 to 2021, a figure that significantly outperforms the industry 

   · Market share in the bancassurance channel grew to 14% from 10% (from period 2020 to 2021) making Prudential Thailand the #3 player in Bancassurance 

   · And perhaps most notably, the fact that new business profitability grew 129% year-on-year (from year 2020 to 2021)

This surge in new business profitability that the Company has experienced stems from a number of factors both within and outside of the Company’s purview. As Keilic explains, growth in the health protection and credit life products, as well as the “ttb easy care plus” product are examples of the Company “focusing on our true value creation metric of new business profitability.” “We have shifted the mix of our products to better serve the health protection needs of the wider Thai population. This makes us a strong company with one of the most balanced portfolios compared with our peers.”

Prudential’s new distribution agreement with TMBThanachart Bank (ttb) is noteworthy, Keilic says, because it has “significantly increased the scale and size of our distribution platform via bank branches and sellers.”

The recent rise in interest rates has provided one of many challenges the insurance business has needed to navigate, although this should ultimately be beneficial for the Company as well as Thai long-term savers.

Q3 Profit numbers cloud the strong performance

Although these factors have contributed to the underlying growth of Prudential Thailand, Keilic tempers this good news with what some might find confusing in local financial results – an expected negative profit (financial loss) for Q3 (the first significant negative profit quarter of 2022) along with a drop in shareholder equity. “An immediate reaction from anyone would be ‘what is going on?” Should we be worried about this?” he acknowledges.

Keilic points to the somewhat paradoxical nature of insurance accounting standards to help interpret the negative results: Due to the nature and complexities of Thai accounting rules, the CFO says, some profitable companies that are doing very well on an economic basis can show poor results in some quarters based on the historical accounting policies taken.

The historical standard of relevance is known locally as TFRS 4, which was an initial standard that grandfathered the measurement basis at the time of issuance in 2004, while a full standard was being developed. Notably, TFRS 4 does allow insurers to change their accounting policies if that change makes financial statements more relevant to the economic decision-making needs of users.

Much of this accounting discrepancy is due for change by the year 2025 when the Thailand accounting approach will be revamped to reflect the new international accounting standards system (named TFRS 17).

“Based on these new international standards, our results are very strong, while on a local basis they show a loss. Like in many countries, the local accounting basis has been modernizing, which is why the International Accounting Professions are introducing the new guidelines (greatly supported by the Thai Federation of Accounting Professions and The Office of Insurance in Thailand),” Keilic clarifies.

Although the new TFRS 17 standards will only be implemented in 2025, Prudential Thailand may be adopting other accounting changes to deal with some of the current issues to avoid any misunderstanding or confusion, by users of the local results.

Underlying strength, commitment to Thailand and customers remains resolute

While acknowledging the negative Q3 profit numbers (based on the outdated local accounting), the CFO is steadfast in his confidence in Prudential Thailand, and looks to challenges ahead with a determined, we’ve-got-work-to-do attitude. As for the Company’s commitment to Thailand and its 1.8 million customers, Keilic mentions the Company’s current local solvency number: This economic indicator - related to the ability to withstand risks - stands at 265% for Prudential Thailand, almost double the minimum statutory requirement.

The CFO continues, “In terms of some of the recent failures of our non-life competitors who over-extended in their COVID-19 coverage, we are well weighted in our risk taking and product development, which allows us to appropriately take on emerging risks to protect our customers and be very responsive to claims payments.”

This is particularly meaningful given that the Company did not veer from its claims-paying promises during the height of COVID (and, unlike some competitors who created standalone COVID products paid on diagnosis, Prudential included coverage in its health policies or payment upon fatality). To Keilic, though, it’s all part of the Company’s core value of empathy – “It’s not just a slogan, It cascades into the true kindness we have for each other and our customers. Relative to other companies, our customers truly come first. Our company is different.”

Wrapping up our conversation, Keilic affirmed that Prudential Thailand is an agile company “on the move”, one that embraces innovation and new technologies as ways to serve its growing customer base. And one that, given its USD 1 billion investment in Thailand, is not going anywhere:

“Let’s look at the results. We’ve introduced new platforms, increased our revenue, increased lines of business we want to sell. We’re in a fantastic new place doing things in an agile way. The company is here to stay and will continue to go places.”