Anbang injects innovation to rescue Vivat

Just one year after China's Anbang Insurance Group bought the Dutch insurer Vivat, it has pulled off a surprise by turning the loss-making entity into a profitable one through effective management and market-centric strategies.

Vivat delivered a record net profit of 578 million euros ($649 million) in the first half of 2016, according to Vivat results released on Aug 31.

Anbang's success is being hailed as a template for a successful post-merger integration that can be followed by other Chinese companies. It comes at a time when Chinese outbound acquisitions are reaching record levels.

Unlike most Chinese acquisitions, which only inject capital and leave business decisions to existing overseas management teams, Anbang became actively involved in Vivat's management and its strategic focus.

Vivat CEO Ron van Oijen says Anbang enhanced Vivat's profitability by abolishing unprofitable businesses, optimizing asset allocation and building up Vivat's core business model in products, service and channel innovation. Anbang also ensured effective implementation of the strategies through optimization of governance, organizational structure and allocation of personnel.

Anbang acquired Vivat in July last year for 150 million euros. Vivat is the former insurance arm of Dutch financial institution SNS Reaal NV. Despite Vivat posting losses at the time, Anbang appreciated its history of more than 100 years and its status as one of the top six insurance companies in the Netherlands.

Howard Yu, a professor of strategic management and innovation at IMD Business School in Switzerland, says Anbang's success with Vivat champions a groundbreaking model in which the Chinese acquirer injects new management expertise into its European target, in contrast to many Chinese outbound acquirers that aim to learn from their Western targets.

"This might well be another indication of Chinese enterprise moving up the value chain," Yu says, adding that Anbang's innovative management of Vivat, with its emphasis on social media marketing and online and mobile distribution, are key to its success. In 2015, Anbang helped Vivat launch a new application in the Apple Store to help users calculate premiums, submit claims and make inquiries about insurance on their smartphones. Users can also obtain support for this service through social media platforms, including Twitter and WhatsApp.

Christopher Bovis, professor of European and international business law at the University of Hull, says Anbang's acquisition of Vivat initially took many by surprise because of Vivat's low profitability and margin erosion due to its diluted and unfocused strategy. He says that was detrimental in the insurance market, which is underpinned by dynamic market currents and influenced by short-term demand fluctuations.

Bovis says the core of Anbang's success lay in three strategies. First, it installed a corporate team at Vivat to implement a customer-centric approach. Second, it made changes to Vivat's cost structure to allow performance optimization. And third, it established an intelligent process that helps with assessing and pricing risk in insurance underwriting.

Anbang brought to Vivat a new understanding of the 21st century insurance market and its needs, which was effectively a makeover of a 100-year-old, traditional company, says Alan Barrell, entrepreneur in residence at the Judge Business School at the University of Cambridge.

Barrell says he expects to see more aging and struggling Western companies invigorated and transformed for extended and profitable lives, thanks to the injection of Chinese innovation and vigor, "not just Chinese money".

cecily.liu@chinadaily.com.cn