How does SEB Life International fit within the SEB group?
Within the group we are a legally wholly-owned subsidiary of the life division. We are in eight countries at the moment: Sweden, Finland, Italy, France, UK, Belgium, Spain and Cyprus.
The aim of the division is to offer added value products to local nationals and internationally mobile clients resident in all those eight countries. The key is that we are offering diversification to the group from the primary focus which is private banking.
Recently SEB Life International was renamed from Irish Life International, and in effect there are two Dublin SEB entities, both of which are currently being merged into a single entity. By year end, we will be an insurance subsidiary based in Dublin with about £5bn under management.
The key for SEB is to provide efficiency and to provide good service levels, so what this will enable us to do is move from having two boards, two sets of compliance, two sets of literature – into a single entity focused on our core markets. So efficiency will improve and I think it’s a very credible size at that point, in excess of £5bn assets under management. It will allow us to focus more on getting down to the development work that is core to the role.
What are the advantages and disadvantages of working for an insurer registered in Dublin?
Dublin is a fantastic place to be based. I say that for a number of reasons. You’ve got a range of European legislation here, and our focus is on the EU. There are few barriers to entry for our new markets across Europe.
One of the key benefits of being based in Dublin is to have this wide asset admissibility, so it allows us to link our policies to a significant range of assets across the board. In addition, Ireland has got a huge range of double taxation treaties.
That’s not to say there weren’t significant reputational issues through the earlier parts of the financial crisis, but the strengthening regulatory structures, credible capital requirements and strong corporate governance here makes Dublin a very positive place for a life company to be based.
We also have a lot of support services such as actuarial services and multi-lingual people who are based in Dublin. As a cross-border specialist, those services and that pool of labour are important to us. Although we are not physically attached to the rest of Europe, we are 20 minutes away from the airport so we can get to our core markets easily.
Where are you seeing the strongest sales this year both in terms of region and products?
The vast majority of our sales are portfolio products across all markets. We’ve recently added some pension portfolio products and that’s helping the growth.
The key markets for us growth-wise are Sweden, Finland and Italy, and they have all outperformed last year and the year before.
Overall, there is a focus on the Scandinavian or Nordic region of about 25% to 30% of our business, southern Europe takes about 30% and the rest is diversified across the other areas.
The portfolio products are open architecture, which we tailor to each market. They tend to have a starting premium of about €30,000 or equivalent, the services available within each product gives access to our select range of internal funds which is about 120 best of breed insurance-linked funds. Plus we have a dealing desk facility depending on the market to allow access to equities, bonds, cash and other funds.
We can also link what we call investment accounts, which are external third-party discretionary managers and external custodians. So we have tailored the products for local requirements making sure that everything is appropriate for the local market in terms of tax language and support.
Can you give a specific example of how a product is tailored differently in two markets?
If we focus on France versus the UK, the French assurance V product is written under French law, and it is issued by an Irish insurer under Irish admissibility. That product can link to a wide range of assets, and under the French tax code there are eight sub categories that we would normally link to.
It has an extremely tax-efficient structure in the French tax environment. So there’s an option to have the insurance company withhold tax and the rate of tax diminishes the longer you hold that policy. There’s also an option for those with lower incomes to go on the self-assessment basis, so you have an ability to tailor how the product works to your personal needs. Whereas in the UK, post-RDR, we’re going to have a low cost product with no commissions and ‘chargeable events’ tax legislation.
Are there any areas where sales have fallen this year?
We’re not a big player in the UK, but I think there is capacity to build that business in the UK, post-RDR, which is an opportunity for us. The reasons for this is that we can specialise in linking to discretionary management services on a low cost basis and we’ve recently increased our investment in IT and value added services available to clients and intermediaries.
Over the last 12 months all of our markets have performed very well, and we’ve had growth in the majority of them. But going forward, we won’t be actively marketing in the Netherlands for a variety of reasons including the impact of this new commission ban.
There’s also the requirement to put life cover on local products for insurance brokers to sell them, and also there is a focus in the market moving away from open architecture to restricted asset products. We’re in run off at the moment, so at the end of this year we will no longer be offering products in the Netherlands. The timing is the same as RDR implementation, so we will re-launch the UK product into the UK on an RDR-compliant basis.
Europe has not exactly stood out as an economic powerhouse in recent times, yet your sales are in positive territory. Why is this?
We have entered new markets recently and as we are building those sales we are seeing positive trends. I put that down to not just market diversification.
We’ve had a rebranding this year, we’ve seen a strengthening of the Irish position from the economic perspective, and we have a really strong proposition with local compliant products. Clients’ needs have changed over the past couple of years, and we are able to meet those through the flexibility of the Irish products.
How does SEB Life International differentiate from its competitors?
Building the propositions for the local market is one of the key differentiators for us. We build everything, focus on local markets and we don’t have a generic product that is available in multiple territories. The Irish admissibility gives us a really broad universe of investments to work with and that helps us to tailor products and differentiate further.
The select list, which is a range of internal unit-linked funds, was built and launched recently to meet a range of needs in multiple currencies – so making them available in the same products as the discretionary asset management agreement and the open architecture allows us to compete effectively.
A key point for us as a company is the constant review of processes. That has allowed us to improve efficiency and the service proposition. As time goes on, products are becoming more commoditised, so service is becoming increasingly important.
What regions of the world have the most potential?
Many years ago, the company made a strategic decision to focus on EU markets, and the reason for that initially was the access to quality distribution, certainty of legislation, and our multi-lingual capability so we could get into multiple markets.
It was a good strategic decision, but it does not mean that we can’t look further abroad. If there is significant potential or market opportunity we will certainly look at those, and SEB group is represented in all continents of the world.
There is significant potential in southeast Asia and Latin America, but at the moment we will keep the focus on the EU.
Looking ahead, what are SEB’s priorities?
The main priority at the moment is to review the service quality and satisfaction after the acquisition of Irish Life International into the SEB group. We have a short-term priority in finalising the operational aspects of the merger with a focus on getting administrative efficiency up.
We will be strengthening our sales support in our key markets of Sweden, Finland and Italy, and we will continue to work on the other markets such as France, Spain, Cyprus and perhaps some further countries within the EU in the coming months or years.
We are looking to write £400m to £500m a year in the short term, and to drive that up towards the billion a year mark in years to come. We have a strong assets-under-management base and we want to write further business in our core markets.
