What is your role in the Turkish non-life segment?
UĞUR GÜLEN In terms of distribution and lines of business, we are very well positioned in the market. We are able to reach each customer segment easily, from individuals to large corporations. AK Sigorta has power and competence in every part of Turkey, and this is a differentiating point for the company in terms of the market. In terms of our strategy, we are slightly different from other companies because our model is to be well balanced. We don't want any distribution channels or any product line to dominate or prevail over others. We want a very well-balanced product portfolio and mixed-channel portfolio. This is why we invest in all product lines and distribution channels. Mostly, the market focuses on the motor sector of the business, such as damage and third-party products. There is a big market there. Although we are there, we are focusing on under penetrated, uncapped product lines. These are the non-motor lines of business and health lines. Our distribution channel is largely focused on agencies in Turkey; 70% of distribution comes from agencies, but at AK Sigorta we are less than 70% focused on agencies. Only 65% comes from them. This differentiates us from the rest of the market because we are focused on bank distribution. Another important difference is that our company has the highest brand awareness, with 95% of Turkish citizens knowing who we are and who owns us. That is a very important issue for insurance. We sell pieces of paper, with trust on top of them. The other differentiating point is our capital base. Our solvency ratio, at 150%, is one of the best in the market.
OKAN UTKUERİ The Dutch insurance group Achmea has a history of over 200 years. It is by far the biggest insurance group in the Netherlands in all categories. The insurance market in the Netherlands is pretty saturated, so the company was looking at different countries with growth potential in the insurance market. In 2006-2007, there were some other M&A processes in Turkey. Our company was a 100% subsidiary of Garanti Bank. It was then called Garanti Sigorta, and I was the CEO of Garanti Sigorta before the Dutch shareholders bought a stake in the company. From the Achmea perspective, Turkey is a good country to invest in, being a growing market with a huge potential, considering Turkey is one of the biggest economies in Europe and certainly the fastest growing. We import a lot of experience and know-how. We have strong cooperation with Garanti Bank and we have traditionally been the market leader in bancassurance for a long time. We are still looking to increase our competencies. Eureko Sigorta only operates in the non-life segment of the market. It has about a 4% market share, which is ninth in terms of GDP volume. Eureko is one of the most successful companies in the market in terms of financial results, return on equity, and technical operational profitability.
Would you characterize Turkey's insurance sector as overpopulated?
UG No. There are 32 insurance players with a total volume of about TL20 billion. There are many very small players following the top four, each of which occupies a small market share. Currently, these companies cannot reach a solid profitability scale, but the insurance business is a long-term endeavor and success takes time. I believe that the competition brings innovation and new ideas to the market, and the number of players in Turkey will only increase in the future.
OU The problem isn't the amount of companies, but rather the fact that so many companies are applying the exact same business model. It is hard to differentiate them from one another. What Turkey needs is more differentiation and more niche players for different products, segments, and marketing channels. From a regulation point of view, it is a very regulated market. Things are still changing and volatile, but from a legislative and supervisory framework, we have everything that we need. The problem is that there is not enough differentiation. Only 20% of households have home insurance. Two-thirds of car owners don't have insurance. There is a compulsory earthquake insurance law, but 70% of people don't have any earthquake insurance. The core problem is to convince people that they need insurance. It will take time.