The Unbeaten Path

For a huge global company like Allianz, what is the importance of the Turkish market, and what are your expectations?

In today’s globalized business environment, companies should have a strong presence in emerging markets in order to maintain sustainable growth. Since Turkey is one of the so-called MIST countries, its relevance is clear to us. The Turkish economy is showing the most dynamic growth in Europe, and it is one of the continent’s largest economies with a fairly young population of 75 million people. The opportunities in the Turkish insurance sector are shaped by the dynamics of a growing middle class, favorable demographics, and low penetration rates. We see rapid progress in Turkey along with an attractive economic landscape and stability in the physical, regulatory, and economic infrastructure. The acquisition of Yapı Kredi Sigorta by Allianz is the biggest investment made in the Turkish insurance sector, and it definitely underlines Turkey’s position as one of the key markets. This is how we see Turkey in a nutshell and why we are investing in this country. Turkey is clearly one of the key markets where growth potential is seen, and where we observe that growth can be captured without losing focus on profitability. We are subscribing to double-digit growth over the next year, and also plan on double-digit growth in profitability over the coming years.

How do you expect the merger with Yapı Kredi to change your role in the market?

We are becoming the market leader in Turkey in non-life, life, and pensions. We have a combined market share of 15.6% in non-life and 20.4% in pensions. In terms of life protection, we rank third following a number of company mergers. Furthermore, we have taken the lead in the health branch with a market share of 33%, which is around 19 percentage points ahead of second place. Our plan is of course to maintain our market position, but we will never do so for the sake of market share alone. We are always focused on sustainability, which means that if we cannot maintain our market share with a return on our risk capital, we will forego it. The sustainability of growth and profitability is always our top priority. Our mission is to serve the Turkish population because, as a market leader, what you feel most is a responsibility to society. Turkey is growing, emerging, and transforming into a developed economy, but as yet the assets of Turkish wealth on a global scale are rather low and need to be protected from any downturn. At Allianz, we are aware of the emerging needs of the market, to which we have brought our global expertise. On the one hand, we are utilizing our global knowledge and expertise in Turkey, while on the other benefiting from our local experience.

How does the new private pensions law change your outlook on the growth potential of private pensions in Turkey?

Pension savings have been supported with state contributions, which is a major milestone in the development of savings in Turkey in general. Again, looking at it from a macro perspective, it was an extremely smart move from the government. When we consider the level of the current account deficit, increasing the local domestic savings quota is crucial. As of October 2013, the contribution of the state to the pension funds was around TL700 million. We are talking now about a sector worth TL24.2 billion as of October in total pensions volume, of which TL700 million comes from the state. This was a major milestone in the development of Turkey as an economy, and for us as an insurance player. It was crucial in that we are now in a position to gain scale. Pensions’ profitability margins are quite low, for both insurance and asset management companies in Turkey. To have an asset management culture, to grow funds, and to intensify savings in order to establish a professional sector is the only sustainable plan, and with the current margins this is going to be difficult.

As awareness and participation in the insurance and private pensions system grows, what effects will we see on a macro level in Turkey’s economy overall?

It is important to increase the savings quota in Turkey. Deputy Prime Minister Ali Babacan’s announcements mark a rise in savings in 2013, and I believe that pensions do play a role in this. In Turkey, we have a problem of high and growing private debt, and this will become a problem in due course. I would even go so far as to say that we might already have an asset bubble. As insurance players in Turkey, we need to do a better job of communicating and convincing all related stakeholders, i.e. customers, the government, regulators, peers, and also connected sectors like banking, into making a story of it. Insurance is a fundamental need for societal development, and we have to leave the foundations in the hands of those who are in a position to manage them. The government, regulators, peers, and banks have to communicate this together to our customers. It will be a great development for Turkish society and the country’s long-term growth because we will become more resilient against external shocks, and one strong way to buffer a downturn is insurance. That is something we need to communicate better, and here again Allianz, as the market leader, will play an important role.