AIA Group Ltd., the Asian insurer that American International Group spun off last fall in one of the world’s biggest ever initial public offerings, is in the early stages of a plan to climb its way to the top of the industry.
That’s the message Mark Tucker, the company’s Hong Kong-based chief executive officer, sought to deliver last week during visits to key shareholders in the United States and Canada. Those ambitions could cause new headaches for Manulife Financial Corp., which made repeated attempts to take over AIA in recent years and is becoming more reliant on Asia for growth.
Mr. Tucker’s trek to North America comes on the heels of AIA releasing its first set of half-year financial results since becoming a standalone operation, showing surprisingly strong profit that have given the market confidence in Mr. Tucker’s strategy. Analysts upgraded their target price for the company’s stock on what they characterized as a swift turnaround in performance at the 90-plus-year-old firm, which has about $108-billion (U.S.) in assets.
Mr. Tucker says the full impact of his plans for the company will not be felt for some time. “We’re on a journey, and we’re six or nine months into that journey,” he said during an interview in Toronto.
“When I first came to Asia 25 or so years ago, AIA dominated,” he said. “There was AIA and almost nobody else. Other people were a long way behind. What has happened for different reasons is that AIA has fallen into the pack, and our job is now to take it back into a strong leadership position.”
It’s a job that Mr. Tucker, 53, relishes, having found himself following a career trajectory that could be the stuff of novels.
Prior to his current role, Mr. Tucker was the CEO of London-based Prudential PLC, and had previously spent many years building that firm’s Asian business into a serious rival to AIA. As the head of Prudential, Mr. Tucker had explored the idea of a takeover bid for AIA.
But Prudential wasn’t ready to make such as gamble at that time and Mr. Tucker retired from the firm in the fall of 2009. Five months later, Prudential stunned observers with the announcement of a $35.5-billion deal to buy AIA from American International Group, which was hunting for ways to repay the U.S. government for the massive bailout it received at the height of the financial crisis. Prudential had outbid Manulife, whose former CEO Dominic D’Alessandro had long eyed AIA, in the quest to secure a stranglehold on the life insurance industry in Asia, where the growth prospects outshine those of the West by a wide margin.
But Prudential’s investors balked at the deal’s price tag, and U.K. regulators signalled concerns, forcing Prudential to renegotiate its offer. Manulife’s executives, led by current CEO Don Guloien, used the opportunity to go back at AIA, though the firm was not willing to pay anything approaching $35-billion. With the highest bid on the table being Prudential’s new offer of $30.4-billion, AIG CEO Robert Benmosche decided to reject all bids in favour of an IPO in Hong Kong.
And so, mere months after he left Prudential, Mr. Tucker was in South Africa watching the World Cup when he got a phone call from Mr. Benmosche. “It was a call out of the blue, and England had just been beaten that day, so I wasn’t very happy and Bob called me at a great time,” Mr. Tucker recalls. “The opportunity for me to come back to Asia and lead the IPO, lead the company that I knew a lot about and had enormous respect for into independence and into a new life was too difficult to resist.”
And so Mr. Tucker finds himself going head to head with the company he used to run, a company whose mangled takeover attempt for AIA left deep wounds.
Mr. Tucker has publicly mused about turning AIA into the world’s biggest insurer and the largest company in Hong Kong. “If you look at the position over the last year, I don’t think anybody would have thought AIA would be the fourth- or fifth-largest insurance company in the world, which we are today,” he said.
The ambitions signal just how strongly AIA intends to step up its game – creating a more fearsome competitor for Manulife Financial in some of the Asian countries that the Canadian firm is increasingly tying its fortunes to as insurers grapple with relatively stagnant growth in North America.
But Mr. Tucker suggests that the opportunities in Asia, where the vast majority of the population does not yet own life insurance, are so vast that he welcomes competition. And, as the lingering impacts of the financial crisis and economic malaise continue to be felt, he thinks that all of those insurers who concentrate on Asia will be rewarded.
“In the East you’re seeing positive economic growth, you’re seeing stronger fiscal balances, you’re seeing stronger foreign currency reserves, you’re seeing a stronger and better capitalized banking system, you’re seeing less leverage, both personal and corporate,” he said.
“Ultimately, my view would be that what this crisis has done is moved Asia ten years ahead and move the West ten years behind. And that gap that’s being created I think creates and solidifies the Asian century.”