tv Leaders with Lacqua Bloomberg September 25, 2016 1:30pm-2:01pm EDT
survived with wilson at the helm. he has improved the company cash flow and strengthened the balance sheet. you have been in the business for such a long time. what was the most stressful in it? mark: it does seem like a long time. sticks out isy the day aig collapsed. you got people outside the window and cameras in your face. you have queues outside every branch we had around asia and you realize come on you haven't been to bed that night, there were a few wishes going on. that is what sticks in the mind. you had regulators, government, customers. what do you do? ?rancine: so what did you do
it was early morning. you realized this was happening. who is a frustration -- was a first person you call? mark: the people you trust on your team. the plans you have been running your business with -- there was a british prime minister in the 1950's and 1960's, harold macmillan, someone asked him a question, they said, prime minister, what blows you off course? he answered, events. events blow your plans off course. a global statesman, mike tyson, and someone asked him, people have a plan to beat you. he said all my opponents have a plan to beat me until it punch them in the mouth. in the ceo field, you get punched in the mouth metaphorically a lot, whether
industry issues, competitors, you have to adapt. francine: in a financial crisis hardly anyone saw coming, what did it teach you, how could we not have predicted it, that regulators did not know how to grapple with it or the fact we are still suffering from eight years on? mark: the markets had over exuberance in the times of good times and they get way too bearish in bad times. we saw at the time we converted the loss of aia balance sheet into cash. the fundamental aspect is short-term. the markets are short-term and they become short-term for the nano second, and there are ceos and leaders. and as media and governments and other
stakeholders, we have to think longer term and that is the key. as countries and economies and businesses, we still have to learn. francine: are central banks too short-term? mark: absolutely, when you look at interest rates, there needs to be a much longer-term perspective. francine: that means central banks taking a step back? they say the economy would have been in a real mess had we not stepped in. and we speak to ceos and business leaders and they say make a break are not counterproductive, they are crumbling the industry. mark: interest rates and negative interest rates are a key facet. i am not sure what question low interest rates are trying to answer. in 2008, you have extended debts and the housing market in the u.s., in many countries you do not have those same economic dynamics. i believe in the uk what we need to stimulate is investment in the economy, things like
infrastructure, people would love to invest as long as we have the right environment, the right terms, the right regulations on capital requirements to do it. that is a big step from where we are. francine: why have we not done it? we talk about fiscal, the halo that will face us, we could've done it three years ago, four years ago, five years ago? mark: that is the right question and you may have to ask central bankers. we can do a big step forward. we have 350 billion pounds in funds, an appetite to invest more but we need the government to take more construction risks, solvency on capital requirements sorted out to make it more effective and a pipeline of the good infrastructure we can invest in. investors like insurance companies, pension funds have the longest term assets or liabilities that need to match with assets.
if we do that, it is good for all parties. francine: brexit, the uk can invest more in infrastructure, a perverse that they about exiting the world stage in some ways? mark: i do not think it is a brexit phenomenon, it is something we had to do, we need more infrastructure. we need more real jobs and investments in the economy. we love the uk, we have been here for 320 years and we want to invest, we just want help. francine: the insurance industry is heard in general by negative rates. aviva less so than rivals? mark: if i talked to many investors, i say you are a large insurance company so obviously rates are hurting you. we took the chance and fix the roof while the sun was shining, from a weaker balance sheet to a stronger balance sheet in europe
and that is helpful. we have also insulated ourselves to a large extent from low interest rates, we do not have guarantees in our products. most investors think large insurance companies have impeccable rates but that is like saying all cars perform the same in wet weather. that is not the case. aviva performs well in wet weather, and low interest rates do not have the same impact for us. francine: is that luck or us. francine: is that luck or planning? mark: both. we did not have enough capital for a while so we did not have high guarantees and now we have plenty of capital, a wonderful balance sheet that is helpful. as we saw solvency, rates which structured our business to be more resilient and we have shown
the market, it seems to be reacting well. francine: if you had an elevator pitch to convince the central banker to help you out or to abandon negative rights, what would it be? mark: it is not negative breaks, i would say what question are you trying to solve with negative rates or low rates? and how will we invest in the real economy to create real jobs? if you can answer that second question maybe you don't need the first. francine: do we need to change demanded on central banks, they focus on inflation, should we focus on growth, the citizens they represent should they be targeting? mark: the mandates of central banks are fine. if you look at the central bankers around europe, quite impressive individuals. they have the right view on what they are trying to do. they cannot do it by themselves. this is a combination of central bankers and a combination of government policy, and a combination of people like me
francine: since mark wilson took over as aviva ceo of 2013, he has folks on strengthening the balance sheet at is now looking to return his investment growth. yes men a buying spree, last year aviva purchase friends in life group in the biggest insurance deal and 15 years. if you had to build aviva from scratch, what would it look like, or another insurance company? mark: we have this discussion a lot with our internal team, we say if you are in venture capitalists and you came into
our executive meeting and said, you have five billion pounds to spend on expenses every year, would you do the same thing? if you wanted to build the best insurance company and the most future proof insurance company in the world, the answer is you would do things differently. i asked the question, what are we doing those things? i would keep a lot of things, the history, you cannot beat 320 years of history. i would keep the brand. a remarkable competitive advantage. the technical expertise through the business. i would modernize it and make it simpler and much simpler and much more digital. i would make it much more customer-focused going forward. that is what we are trying to do. that is our strategy, focusing on digital. the insurance industry i think globally is in the stone age when it comes to digital. aviva -- maybe we invented fire, invented the wheel, we have a
lot of tools and now we need to see what we can build. francine: how do we choose our insurance? do i go online? a male customer goes online and buys it for the household? do i buy it all at once? mark: that is the key point, over the last decade, either you're a car insurance, house insurer, i believe the next decade is about what i call having all of those things together. in the digital world, what the customers are saying they want is simplicity, digital, they want to be rewarded for loyalty, and as an insurer like ours it
helps because we can do a cheaper, more effectively, more capital efficient, being a large insurer with a large customer base gives a strategic advantages. francine: because you have access to data on the customer and therefore you can make an informed decision on whether you want to ensure them or at what price? mark: exactly, if you have the data, we know where you live, the length of your driveway, the pipes in your house, we have all that big data available to us and we can use that in their models. it is also about the brand, capital efficiency. as what we call an insurance, you are more capital efficient, you can put it together and i think the next decade is about insurance globally. francine: what you have to do due to be right in the next decade? mark: all about digital, we have started of a digital garage in london, singapore, and other places and are spending a lot of money on it. we are getting guys with ponytails and technical backgrounds. it is a different way of working, a different culture, to us has become quite iconic.
i spent a couple days a week down there dressed in jeans. francine: no ponytail? mark: they would probably throw me out, they cut it off when i were a tie. an iconic changing culture. francine: do i buy my insurance on mobile, and easier interface, what are you trying to get them to do? mark: you wanted simple, when you have a pension with us, you want to know we will give you a discount on home insurance. we can produce our products to existing customers about 30% less cost, 30% less cost than to a new customer or what other people could do. a 30% less cost advantage gives us a phenomenal strategic position. we will do a better price, low-cost producer, low-priced -- we are making it simple and we
can pre-underwrite. just like a credit card, we say you have your pension with us, you do not need these forms, three clicks to get home insurance. we have a revolution in the insurance, we have all of our systems talking to each other. even though we are 320 years old, all of our system talk to each other. digital is the future. francine: how do you sell digital insurance to the chinese? mark: they are in a string market, they are going to economically tough times. i call it the shanghai sabbatical. china has been going through 20 years of growth, the first 20 years of double-digit, the second 20 years of single digit and slowing each year. i am a bull on china. they need to relearn how to do business in the low growth environment of 3% to 5%. if they look at that they will
come back strong. francine: volatility short-term. mark: i think he will have volatility in china until 2019, 2020. it is inevitable. there is an impact on asia. our asian strategy aligned with our china strategy is simple, about being disruptive. about the digital play, about doing distribution fundamentally differently, we have a great bread in places like china. about a 10% name recall which is extraordinary in that market. we are about being disruptive. we have the brand, the system, the people, and we want to be disruptive with some of the established players, you have more to protect. francine: are you worried about radiation in china that hurts the insurance company? mark: you have to embrace it and for companies like us based in
the uk, the uk has conservative regulations and increased regulation in asia is inevitable. i see that as an opportunity for us as a threat because we are used to working in tighter regulatory environments and i think the chinese regulators have done a good job and they are modernizing their industry long-term i am a china bull. francine: the regulator you get along with most? mark: i will not pick out one. i like them to understand what they want, they are on the same site, they want to protect customers and so do we, they want to make a secure and so do we. my view is build a relationship the four you need them. in the global financial crisis, we have been closed to regular for a long time and there are
wonderful regulators in asia. we had some great discussions over that time, when you need them to help you, they were there. francine: what surprised you the most in your business, what surprised me that you have told me in the past, the brits, the uk, that are meant to be very honest, especially if you are a italian, they have the highest number of fraud or insurance in europe, is the right? mark: i will give you stats. flashforward in the uk, 27 times higher than france. most brits would not agree but it would appear so from the data. the insurance is higher here and that in most parts of asia. i think it is a national disgrace. it has to stop and i applaud the moves by the government to stamp down on whiplash and bodily injury fraud. the impact on uk consumers alone is about 50 pounds per motor insurance policy per year. it does impact us, as she does not impact us come we will get
via climate change or anything else to your employees? mark: it is a concern, sustainability is a key part. i call it enlightened self interest where a investor in a business that has liabilities of 30 and 50 and 50 years. if we do not do it, it would be a dereliction of duty. sustainability, if we do not get it right will be the biggest contemporary market failure of all time. business is not just about making money, no business survives just on making money. it must have a social purpose. i believe the answer to sustainability in the global sustainably goals, business is the answer. francine: have you always felt this way? mark: it was part of of bringing in new zealand where the air is clear and green, that probably influenced my believe. we have to have an impact on the step as leaders and the short-term that is the disease
that pervades business globally has got to be stamped out. capitalism has to begin for everyone. i lived in asia for 14 years and i saw the unacceptable face of capitalism and that it could bring hundreds of millions of people out of poverty. and businesses like us can make a difference. francine: what kind of leader are you? mark: easy to work for, no doubt about it. a bit impatient, demanding, when i have a look at it, there is a world from new zealand called mana, about being a leader that does the right thing. does the right thing for the group with a conscience that has respect for those they are working with and that is probably me. i look for people i work with, i have two key attributes i look for, not in order, experience is
secondary to me, the first two are about if you have a complex issue, give it to a smart person and they will sort it out. and values, not in the traditional word about honesty and integrity, of course you have to have that, i mean values to the business. four, create legacy, the a good ancestor, think long-term, eating just buy history at sometime. the next is never rest, always be unhappy. unhappy with the status quo, look to improve, have a business culture that means you are very best is not quite good enough. the third one is care more, do the right thing. the last one is complexity, make it simple. francine: is there a piece of advice you would give your self to your 18-year-old self? mark: a few years ago to be fair. i would say trust your judgments and learn more.
i have always been impatient and perhaps i should have more patience. just enjoy it as you go along. i enjoy what i do, i love the industry, i love business, it is what i wake up thinking about, what i go to bed thinking about. francine: what don't you like? mark: i do not like arrogance and the confidence tied together. -- i don't like arrogance and incompetence tied together. francine: quite a combination. mark: in crisis, i do not like consensus, crisis and consensus are two words that do not go together. too much in business and politics we strive for consensus and that is not always the best outcome. francine: is there someone you admire, or that you look up to? mark: not specific individuals but organizations, i think business and religion and sports have a lot in common. it would not surprise you to know that i admire the all blacks, the things they have
together, they have icons, believe systems, values, and rituals. black jerseys, rituals, the belief value setters that they can never lose. in religion and business, it has those three things. francine: it is a great analogy. where are you in five years? mark: we have not done the transform phase, we have so much work to do. i enjoyed this industry and i enjoy the impact we have on the uk and on some global economies. francine: do you love london? mark: i do and brexit does not change that, i like living here, to invest here, most people do not realize that the culture of new zealand and london are similar. francine: is it? mark: most people think kiwis cannot fly but they can in business arts and sport. the cultures are remarkably similar, we are close cousins.