Does size matter? Evidently the CEOs running Citicorp and Travelers, Deutsche Bank and Bankers Trust, Aegon and Transamerica, and Zurich Group and BA Financial Services think so. Most industries are being buffeted by the twin forces of convergence and globalization-but to insurance, banking, and financial services, it’s a vortex. Just as category killers have become a dominant force in retailing,
With $64.4 billion in revenues in 1998 and $605 billion in assets under management,
A consummate dealmaker, the affable French executive admits he’s got his eye on opportunities in
Although prominent among
Over the next several years he qualified as an actuary and worked in all phases of the company’s operations. During this time he was sent to
After becoming president of Ancienne Mutualles in 1974, he began a series of mergers, which transformed the sleepy company into the
Buying distressed merchandise and restructuring the operations has helped
CLAUDE THE CROCODILE
So about these acquisitions-just how big is big enough?
First of all, in each country you need to have critical mass. And then, even if you have critical mass, but you have very, very big competitors, critical mass goes up, so you need to be even bigger.
The second problem is the globalization of the economy obliges you to be more global. Also, the big advantage of being global is that you spread your risk all around the world. For instance, look at Japanese companies today; they are in trouble because
So the answer to your question is: I don’t know. I know that we have to continue, and I think there are a lot of opportunities all around the world.
What is the difference between your need to be global on a large scale, and what other companies, such as Deutsche Bank or Daimler Chrysler, are doing?
Asset management is a global business, while insurance is mainly a national business. So when you are doing business in a given country, you have to be sufficiently powerful in order to be able to decrease your costs, to be known in the country, to attract good people, to offer a good service to your customers and also be profitable. Secondly, it’s the point of cycles. If you are tied only with one economy and this economy is in trouble, then you are in trouble, even if your economy is a very big one. Look at the
The logic is a little bit different than, for instance, Mercedes. Their market is a global market. When you produce a car, you have cars coming from
In insurance, it’s a little bit different. You need to be strong where you are doing business, and you need to spread your risk all around the world. Asset management more and more is a global business. And as an automobile maker, here too, everybody from everywhere is your competitor, and you need global products to compete.
How do you identify a good practice in Country A and then take that to Country B?
We have what we call synergy groups doing the same business in different countries. And they meet from time to time, once a year, three times a year, if necessary, to exchange practices. So not only with products, but also in IT, for instance, we share the research. In IT, we are building a common architecture in order to be able to exchange everything we are doing in the different countries. And that’s the relationship between people.
Inevitably, comparisons are drawn between you and Hank Greenberg,
We are, in fact, very different, because Hank did a fantastic job with internal growth and by becoming very international in young countries where we were not. But he created businesses. And it was internal growth essentially, except for the last big deal he made in the life business.
And here I think we are different. But Hank is doing very well-better than we do. He is more profitable than we are. So as I said to our people, “As long as we have acquired a company, look at what Hank is doing, and try to do the same thing.”
In contrast to other leading French CEOs, you are said to have an “Anglo-Saxon attitude” about shareholder value. If this is true, how do you operate differently?
Personally I spent some time in
In fact, you are more profit-minded. Because when you look only long-term, it’s very easy to explain bad management or expenses as an investment, which is not always true. So I became profit-minded when I was young. And when I came back to
Are the French investors going to be asking for higher returns?
The French market is changing drastically today-not only the French, but the European market-because the competition is global, and the investors in our countries are mainly Anglo-Saxon. For instance, today in
The new generation of managers, of CEOs, is totally different. They are international. Previously, when you were doing business in
So you have very different conversations with your colleagues these days?
Totally different. We are less French and more international, more global. I have a group of friends, and we meet once each month, roughly. Very often we don’t talk about
Long term, is the euro going to make a difference in the way you run your business?
Yes, but it will take time. It’s tough today. What are the advantages for us immediately? Previously when I have had liabilities in the French francs, I was obliged to have assets in French francs. Today all my liabilities in
About the products, it’s not so clear. Today the products remain very national. The habits are so strong that, for instance, if I want to sell a French product to a German, he would prefer a traditional German product. So that will change eventually.
In our business, in insurance, it will take time, because the laws are different. If I want to insure you in
THE VIRTUAL INSURANCE AGENT
Are you concerned that an Internet-based competitor might do to
Sure. When the market is booming as it is today, when you have a bull market, it’s easy to go directly and to buy directly. You have some assets, some savings, you can go on the Internet and buy. When the market becomes a bear market, and it will happen one day, you might say, “Perhaps it would be better to go and see a financial planner.”
So that means that we have to develop systems on the Internet. We have already started that, in order to be able to sell to people that are using the Internet. But at the same time, it would be a very big mistake to destroy traditional networks, professional networks; we have to improve the quality of those networks to make them more professional. Because first of all, some people will continue to go to them. Second, even when somebody is playing with the Internet, if he wants to be more sophisticated, he will go to them.
But even those people at one stage or another will come from time to time to a salesman. Look at the banks. The people who play with the Internet, they go more often to a banking agency than other people, because some of them become very interested, more sophisticated.
Do you foresee a virtual insurance company the same way there now exist all-virtual banks?
Yes. Why not? The products we offer in insurance are the same as those banks offer. So if it’s possible for a bank, it’s possible for an insurance company.
Today we are using the Internet, for instance, to tie an agent with a company. An agent who is about to insure you directly, he talks with you, enters that in the machine, and if you agree, poof! you push the button, and everything is done.
So it’s done by an agent today, but tomorrow, you will be able to do the same thing yourself as long as you have a printer with you to get the necessary policy.
So do you anticipate needing fewer agents in the future as a result?
Yes, fewer-but more professional. And it’s exactly what Equitable is doing here when they go for the traditional life insurance agent through the financial patterns. We consider that some of our products will become real commodities, and that the Internet will be sufficient. But on the other side, some sophisticated needs need sophisticated people.
Will there be further consolidation in the industry? Will there be a convergence between insurance and banking? How much further do we have to go?
That is difficult to say. Consolidation is a must and that will continue. Convergence is something else. I’m not convinced at all. It’s very difficult to be involved in too many different businesses. And you see what is occurring in this market. You have Aetna, which is concentrating on one business only, because they consider-and I share their point of view-that when the competition is tougher, you need to be a better professional, and you are a better professional when you are involved in only one business.
So when I say that I am doing insurance and asset management, it’s already a lot of different businesses. I’m not sure that I have to insure everything everywhere in the world. If I add to that commercial banking, which is an entirely different business, where do I go? There will be some convergence, but I’m not sure that will be very successful.
Oh, we are looking and consider that the window is open and will remain open as long as
An investment in
There must be some big bargains out there.
Yes. The problem is finding a good bargain. But for that you have to know exactly if there is a role, how big is the role, and whether you will be allowed to develop the business. If a company is in trouble, it’s very often a problem of management. So you need to put in managers. And in
PATH LESS TRAVELED
You chose not to work your way through the civil service system. What was it that set you on your chosen path?
When I was at the university I was in Ecole Polytechnique, which prepares you to be a civil servant. But I was not interested in becoming a civil servant; I wanted to enter the private business.
It was a little bit unusual. It was considered better to start as a civil servant and enter the private sector after that when you were 35 or 40. I considered it boring to think like that, and I preferred to go directly into the private sector. I found a small mutual company, where a man said to me, “You enter the company as the future boss of the company.” I was 32.
How did this person spot a future leader in someone so young?
He was a special guy. He was a monarchist, and he considered that it was a business, that it was like preparing a king. You have to prepare a CEO like a king, so you take one when he is very young.
You have a reputation for taking your managers to exotic locations, such as a train across
One thing that is very important: if you want to inspire people to give a new idea, the best way is to destabilize them. So when you go into the desert, sleeping in tents, you are destabilized. Your mind is open and you are ready to accept everything, every concept. When I say destabilize, I mean that it obliges people to go out of their logical habits; you put them in a totally different environment, and they are a little lost, so they are open-minded.
When we ran that train and went through
Do you use the Internet?
Yes, yes. I’m not an IT man, but I use a personal computer at home, in my office, and I use the Internet.
How many e-mails do you get a week?
Not so many, because people don’t write to me. I think that the first email I got was from Bill Gates. But the most important thing is people. And the best thing to do if you want to deal with somebody is to talk. I don’t write letters, not so many, so I don’t write a lot of e-mails. I prefer to phone people and talk with them. You dig up lots of common feeling and you understand each other.
You are well known in European leadership circles. Do you have ambitions of pursuing a political career in the new
I was tempted some years ago. It was proposed to me to be minister of finance of
I would want to be involved in politics, not as a politician, but as a counselor, somebody that helps the prince, as Machiavelli would have said. Because to be a politician, you have to be a demagogue. It’s difficult for somebody who has spent a lot of time in business to enter politics.
How would you describe yourself in terms of your economic or political philosophy? Do you have one?
Yes, sure. I’m a classical, market-oriented liberal. I think we need a strong state that defines the rules and then leaves the players to play. They have to check that they play in a fair way, but then they have to leave the players to play. The big mistake in