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Rising from the ashes
Ageas is the new name for the old Fortis insurance business. And while it’s a company that still grappling with it’s past, that’s not been stopping it in its search for a brighter future. We hear how Ageas has gone back to basics: like trying to have happy clients, employees and distributors; we hear too how the world of insurance isn’t going to go global any time
For the financial services group Fortis, the financial crisis could have spelled the end. Previously the 20th largest company in the world, after 2008 they were forced to pay off their government bailout which they did by dividing the company into parts and selling off most of them. However, for one arm of Fortis, this change was only the beginning.
While the rest of the company changed hands, the insurance operations remained under Fortis control, taking on a new name – Ageas - to signal a fresh start for the future. Since then, the company has achieved what at one time seemed a “mission impossible” - transforming their reputation and leaving the past behind.
Today, Ageas sports divisions across Europe and Asia, with more than 13,000 employees in Europe and more than 15,000 employees in Asia and an annual inflow of over €21 billion. They are Belgium’s largest insurer, finding success in taking the skills they have learned in international markets and applying them locally, wherever that might be.
We met with CEO Bart De Smet to discover how Ageas has succeeded in transforming their destiny, and to find out what their plans are for the future.
The sky’s the limit
When De Smet talks about the mentality in the lead-up to the financial crisis, it’s obvious this is a man who is dedicated to doing things differently this time around. He says, “It was the period of ‘The sky is the limit.’ The business was stimulated by compensation methods, stimulating people to concentrate on the short term rather than the long term. There was always a risk of losing the priority namely that you first need happy clients, employees and distributors, before you get the good results. There had been this general industry tendency for more and more, and that finished in rather an abrupt way for Fortis.”
“If you look today, you’ll find quite a few companies where this mentality is again active. We are choosing to do it in a quite different way. It does not mean we don’t go for performance and results, but we try and achieve this in another way than what I call ‘the American style’.”
Rather than continuing with their previous model, Ageas chose to develop a new internal approach. De Smet explains, “We have made some very basic but important choices. We restarted the company in the first half of 2009. One thing we knew is that we never again wanted to have a need for cash that we could not produce ourselves. We want to be cash rich, so we do not depend on others. Secondly, the capital base - which is called, in our business, solvency ratios - has to be such that we are, even in the worst cases, never under pressure. In the meantime, we have had some bad news, the whole Euro crisis for example, and although we were rather exposed to the European debt, it never brought our solvency ratios in danger. The third thing is that we want to be extremely proactive and transparent in our communication, whether that is financial or communication about other things.”
Communicating the good and the bad
“In the past, we used to ‘decide what we wanted to tell.’ Today, we have more the attitude that if there’s something to be told, we’ll tell it, whether it’s good news or bad. That way, we create a relationship with the press where we have a mutual confidence. Of course, everyone has to do his work. If a journalist writes something that I don’t like but it’s correct, I can’t blame him: he does what he has to do.”
This change has paid off handsomely. De Smet says, “Last year, we achieved an important milestone in our change process. We received the prize for the best communication in Belgium. This is a prize based on views from analysts from Belgium, France and the Netherlands. Knowing where we came from, this shows that the efforts we’ve made to communicate in greater detail - on a number of things that are not always the things people would like to see - has created a lot of credibility. If you get this prize, you can share it with your people.”
Changing from the inside
The transformation in Ageas couldn’t happen immediately, and De Smet is keen to emphasise the importance of regaining the people’s trust. He says, “In the beginning, it was seen as a mission impossible. The number of people at that time who were eager to come on board was limited. It took a lot of courage. The first stage was to let people to take the time they needed to rid themselves of the traumatic experiences, the anger and the deception about what had happened.”
“Somebody asked me recently, ‘What you have achieved in the last three years, couldn’t you have done it quicker?’ My reaction was, ‘Probably, but we also might have lost a lot of good people if we’d tried to do it quicker.’ ”
“You have to make sure your teams understand why you do things. They need to follow the reasons and understand the speed behind it. It is my sole conviction that a lot of success in the change is down to the preparation and motivation of the people, getting everyone on board. My colleagues and I spent a lot of time trying to convince people that what we were going to change was the best choice. That’s the first stage: give people some time to get into a normal mode.”
Once trust has been established, the next stage is increasing morale. De Smet says, “Then you take up the quick wins and low hanging fruit, because that gives confidence to the troops. Some of the more fundamental steps have been realised, as far as we are concerned. Even the outside world begins to say, ‘Hey, these guys are able to make the difficult choices.’ The recognition from outside is something that is an enormous motivator internally.”
A view to the future
De Smet envisions a number of developments in the insurance industry over the coming years. However, globalisation is not top of his list of concerns. He explains, “We are convinced, though it’s an opinion not shared by everybody, that insurance will remain a local business for a good number of years yet. When you see things like transactional banking that has become international. But the insurance business will stay local.”
“One of the reasons is that regulation is very country-by-country driven. The distribution modes are very specific in each country. Because of this complexity, there are almost no real cross-border IT systems. Any insurance company active in forty countries will have forty different IT systems. The cost to make a cross-border system is so huge that the benefits don’t compensate for the costs of doing so. That’s one given.”
However, De Smet does see the insurance industry following banking in one respect: “A second given is that we will see more regulation in the industry, as in the case of banking. There are two reasons for this. One is out of prudential concerns: after what happened in the financial sector, authorities want to be sure the industry is capitalised enough. Secondly, from a consumer protection point of view, there will be even more regulations to avoid miss selling. This will increase the information available to the customers, but it will also impact the way products are distributed.”
Whatever happens, De Smet believes Ageas has the tools to keep up. He says, “The third big element will be communication, which will have an important impact on distribution. We believe that a lot of consumers will still want to go to brick channels for advice, but you cannot look at this in an isolated way. Information gathering for insurance is increasingly done through the internet. Online quotations have started already and in some countries, such as the UK, this has been developed much more than in Belgium. However, the conclusion of the contract is still not done by these modern channels. This will, of course, evolve in the coming years. We do not believe it will be a sudden dramatic change - it will take some time - but for a group like us, it’s extremely important to follow these evolutions. We need to be strong in the markets. We don’t have to be the first movers, because that could cannibalise what we have today, but we need to be able to jump on the train when the train passes.”
Working with Vlerick
One major lesson Ageas has learned from the past is to think carefully about whom they take advice from. With many large consultancy firms duty bound to protect their own interests, De Smet stresses the importance of finding an impartial point of view. He says, “Some companies are more and more managed by outsiders, rather than by the real management. Today, not a day goes by without a meeting with two or three bankers or consultants. They come to meet me, and if I don’t accept the appointment they’ll go to some of my colleagues or ultimately to my chairman. They are trying to infiltrate wherever they can.”
“My personal viewpoint is that we should try to fall back as little as possible on external help. They are never neutral. They will always try to advise you, and they're always thinking about the next mission. But with Vlerick, we’ve always had good experiences.”
“The merit of an organisation like Vlerick is that you can count on people with a lot of experience, who have been in all sectors and are able to compare them. Who, due to their experience, can work out a sound methodology. It’s not about somebody telling you what he’s already told your five competitors, and then you all drown together in the sea. Or, you all together have success, but you can never really all be successful. This really was customised to our needs. We have a partner who has not been created to generate recurring fees for the same company.”
Having the respectability that comes from Vlerick’s seal of approval has also benefitted Ageas. De Smet explains, “In a relationship with a business school like Vlerick, you don’t only take information because it also works the other way. For instance, if there is a specific topic we have as a company or as an industry, whatever we say about it, we are seen as preaching for our own chapel. People think, ‘Of course they say people should save for their pensions, they’re in the business.’ With the help of academic sources, we can make this story, which is a real story, more credible.”
A word from Vlerick
Bjorn Cumps: If there is one thing I admire in Ageas it is how they embraced change and were able to regain customer trust and rebrand their business. The transformation they went through is one from a caterpillar to a butterfly. For a company that operates in a sector that once was at the bottom of the reputational food chain this is a true accomplishment.
With Ageas as a partner, we further commit to deepen our expertise in financial services. Their challenge is to further grow, build a reputable brand and further invest in their people in a heavily regulated sector that is still suffering from the aftermath of the financial crisis. Their story reminds me of the epic fight between George Foreman and Mohammed Ali: the first being able to take some punches, the other one being fast and flexible. To be successful in a turbulent environment Ageas proved that you need to combine resilience with agility. Roll with the punches and be faster and more flexible than the competition.