Fresh from its triumphant win at this year's International Investment Fund and Product Awards, Axa Isle of Man is not about to rest on its laurels, but instead plans to expand its international operations further. Sarah Godfrey speaks to CEO Kevin Dean to learn more
At last month's International Investment Fund and Product Awards 2008, the twin accolades of Best International Life Group and Best International Life Product went to Axa Isle of Man, established on the island since 1992.
Chief executive Kevin Dean was very pleased with the awards. "It's recognition of all the hard work we've put into product design and service," he says. "You might forget what you see, but you don't forget how it makes you feel.
"Winning the award is a lot to do with how we treat clients. It's also a very big acknowledgement to our staff, and I'm pleased about that because it is the staff who make it happen."
With nearly 100% of its clients based in the UK, Axa is also arguably the least international life group. There are moves afoot to address this, however, with international expansion planned for later this year.
"I want to ensure that wherever we go, we understand that market 100%," says Dean.
"We know the UK, and that is why we have concentrated there. We have the greatest market share, and we have proven ourselves with our products and with the awards we have won. Now it's time to take that experience out - but only when we understand the market, when we are sure our products fit and where we can comply with the full conduct of business rules in that jurisdiction."
The first leg of the expansion will be a new business based in Dublin, which will allow Axa to bring its expat expertise to a European Union market, as well as serving EU nationals working in the UK.
"A European Union contract is better to take back to France, say, than an Isle of Man contract - you wouldn't want an Isle of Man contract for a UK-resident French domicile," says Dean. "So we will sell products back into the UK to non-doms from our Dublin office."
Being part of a big global company aids Axa Isle of Man's international ambitions, as it is able to work with other Axa group businesses serving local national markets around the world, such as Interseguros in Spain, Axa Gulf and Axa China Region, which serves the Hong Kong market. Dean's expat-focused operation is able to use the people already on the ground in those offices to bring its products to a new audience.
"It is small steps for man rather than giant leaps for mankind; we will take it slowly and surely, and maintain our reputation as 'the expert friend'," he says.
With the wheels in motion to start distributing in Europe through Dublin-based Axa Life Europe (though Dean says the European expansion will be gradual rather than going for the whole EU from day one), expansion in the Middle East is also under way, with plans to serve Bahrain (where regulatory permission has already been applied for), Qatar and the United Arab Emirates.
Unlike some of its peers, however, Axa will not be looking to expand its business into local national markets. "We are not branching out into local national markets as the other Axa group businesses already do that," says Dean. "Our expertise is with UK expats."
Getting the products right
Axa Isle of Man's product range centres on its offshore portfolio bond, Evolution, which also doubles as the award-winning Estate Planning Bond (EPB) with a trust wrapper.
"They offer a wide range of funds and the ability to decide when you wish to pay tax, and effectively at what rate, depending on your circumstances and residency," says Dean. "More people are leaving the UK, and it fits with our international expertise to cater for these clients."
Both products are available with a range of 'core' insured funds (mirror funds) or as open architecture, and clients can move from the insured range to open architecture if they choose, though not in the other direction.
The addition of a Regular Investment Account to the range last year underlines the dual nature of the expat market, says Dean."There are two major markets for expats," he explains. "There are retirees, who move overseas with a lump sum, perhaps from a pension or the sale of a business, and they tend never to give up their domicile, so they are still liable to UK taxes, particularly inheritance tax.
"Then there are younger customers - expats who are working abroad - and they have substantial income. When they come back to the UK, they are usually on a lower income and need to supplement it - so they can put away their surplus income and use it as a lump sum to generate an income when they come back."
The need for those retiring abroad to plan for inheritance tax is what underpins the Estate Planning Bond. "An interesting thing we found out is that of every 100 people who retire abroad, 5% come back in the first six months after finding out it was not like they thought when they were on holiday," says Dean.
"Half come back when their partner dies. When the last survivor dies, in the majority of cases, the money comes back to the UK, so they need IHT planning. They need a bond - it allows you to take an income wherever you are, so it is easy for the beneficiaries to take an income back in the UK. It's really an inter-generational planning tool."
The EPB uses a discounted gift trust to allow holders to gift away their assets (under a potentially exempt transfer, with assets falling outside the estate for IHT purposes if the settlor survives for seven years or more), while still taking an income from those assets. "You can have your cake and eat it," says Dean.
New markets, new realities
As well as branching out into new markets for its products, Axa is also adapting to new realities in the market. "You can't have all your eggs in one basket," says Dean. "The world has got smaller; people are moving around more. Our client population has changed, and we are adapting with it."
The changes to the CGT regime also focus the mind on other products, such as QROPS, which Axa is currently considering whether to offer from the Isle of Man or another jurisdiction. "With the number of people retiring abroad, it is advantageous to take their pensions outside the tax net in the UK," says Dean. "QROPS is a product we are actively looking at."
However, Dean believes the market will evolve through adaptations to the current product set, rather than through major innovation. "I don't believe you'll see anything brand new in the market," he says. "I'd love to be wrong, but I think it's about adapting what you've got to suit the clients' circumstances, and ensuring it can be passed on to their beneficiaries."
Dean is quietly confident about the outlook for the rest of the year. "I actually believe our potential market is growing for offshore products. We are on target for what we said we'd do this year."
Relax and enjoy it?
Away from the office, Dean likes to spend time with his grandchildren. "It's more exhaustion than relaxation, but it's a lovely feeling," he says. "I've got two children, and I was working so hard that I really missed them growing up. I still work hard, but I make time for my grandchildren."
This, he says, is a question of individual needs, something that has formed one of the greatest lessons in his working life."No client is the same, and no circumstance is the same," he explains.
"You have to have a personal service, both in how you design products and how you deal with individuals - there is no such thing as 'one size fits all'."
The offshore bond market gives the flexibility to provide that to clients more than any other product offering, because of the wide range of funds, tax-planning opportunities and so on.
"You can get very blase dealing with large sums of money. But £20,000 to one person is just as important as £2m to another, and you must treat them with the same level of care," he concludes.
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