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Donald Stewart is chairman and CEO, Sun Life Financial. A 138-year-old firm with $14.6 billion in assets under management, it is Canada's largest financial services company. And he has been at the helm during one of its most difficult phases. He spoke to BT Online's Roshni Jayakar on the insurance business, acquisitions in insurance and corporate governance. Excerpts: Q. You have been in the life and pensions business for years, a business that India is just opening up. Any lessons India can draw from jurisdiction overseas? A. From our perspective, the fact that India has put in place a single set of carefully thought out regulations, is a major positive. In fact, overseas regulators can draw some lessons from the Indian regulator -- IRDA --- which has done an excellent job. An obvious comparison is with China, where regulations are a lot less national. China's regulations apply city by city, and only to individual life insurance. The fact that India provides national regulation and allows life insurance to operate in a wide variety of businesses is a major plus. Q How do you see scope for growth in China vis a vis India? A. Because of the city by city limitation in China, growth is less steady and more uneven. If you are in a single city and expand to a second city, you double your potential. In India, we have operations in about a dozen cities. I think both countries have a great deal of potential. We are very optimistic about longer term future in India. At present, there is a great deal of security in a society such as India through family security where people look after each other. Inevitably, societies are becoming more financially driven, where children don't necessarily look after their parents in quite the way they do today in India as they once did in the west. So security that might have been more relationship-driven becomes more financially-driven, and the need for protection and longer terms savings and retirement for young people is going to create huge demand. Q. Sun Life Financial is a leading financial services company. What does it take to be Number One and stay there? A. You see a great deal of consolidation going on around the world in general and Canada in particular. So a Number-One position can in 24 hours become Number Two position as you discover that two large competitors have joined together. What we find is that attention to the fundamentals is crucial. If you take your attention away from fundamentals of the business, you sow the seeds of future loss of market share. Q. You have done three acquisitions in the last one and half years. What would you say was critical in managing the integration of these companies? A. These were different situations. Keyport Life Insurance of the US was a small company; therefore integration of Keyport was much less of an issue. It was really dealing with additional businesses. In case of Clarica Life Insurance, a leading provider of insurance and investment products in the Canadian market, it was a large integration, since Clarica had a larger presence than Sun Life in Canada. It more than doubled Sun Life's business and the integration has been 24 months effort. Most of the work involved switching business from one systems platform to another. Sometime that's not done in integration, and sows the seeds for future problems. We have systematically taken the business from the least capable platform to the most capable platforms. Just by business, retail business has gone from Sun Life to Clarica platform. We switched over half a million policies in March 2003 and another couple of hundred thousands more recently. In two principle group businesses, group protection business and group savings business, we are doing on a month by month basis and by the year end we will have most of the integration complete. Talking of culture, its surprising how two companies, both of which started in 1865 and both focused in Canada, end up with different cultures. Culture has been a challenge, but I think in group businesses, there's much closer commonality, and it's a matter of keeping close attention to the client. On the retail side, different distribution methods tend to have created different perspectives and combining the distribution -- where we have 4,000 independent created advisors tied to the company, plus access to a big brokerage network -- is a longer haul. Q. Coming to corporate governance aspects, much has been written about financial scandals that have destroyed wealth. How has Sun Life managed to retain trust? A. With a little humility, I would say that corporate governance among large Canadian companies has been in better shape internationally. For example, we have always had a substantially independent board where the majority of the directors are independent of the company. Our committees which are important features of corporate governance - audit committee, corporate governance committee, management resources committee and risk review committee -- are entirely staffed by independent directors. For the last several years we have had a lead director who has functioned as a non-executive chairman. We found that we couldn't convince the corporate society that having a lead director was just as effective as having a non-executive chairman, so since June 2003, we made this lead director as non-executive chairman. The reality was in every board meeting there was a close session where only the independent directors raised issues. So the separation of the board and management has been the underpinning of corporate governance and has been in place. Additionally, the directors are assessed every year on their performance. We are among the leaders, as not too many boards do that. This is done through a confidential outside consultant whereby the entire board assesses each other on a scale of 'good', 'not so good', 'needs improvement' and so on. The results are fed back to the individual directors. This is quite a powerful weapon, because it makes the board comply with a report card in the same way the management has to comply with a report card every day. Q. Who typically does this performance assessment? A. These are typically small shops, as it's more of confidence and trust than infrastructure and methodology. The actual process is simple, but it has to be handled in a discreet fashion. Typically, those who do this are one-or-two-person outfits of very senior well-known individuals of standing. Q. Have there been instances of individual directors not being up to performance? A. We have seen in our board a fair amount of change in the last several years. It is difficult in this moving world to correlate all that, and I am not privy to exact correlations because the entire process is confidential. The individual director knows where he or she is lagging. Now, we have moved from having a fairly older board to one where the next person will not retire for at least the next four years. Q. As a CEO, how often do you interact with customers? A. Indeed, I endeavour to keep an open channel with the customer. From time to time, I find myself speaking directly mostly with group customers. So I have been out on group sales calls and once and twice been successful. On the individual side, it's less easy to keep in close touch. Inevitably, we find that some things can go wrong, and I make it my business to read the complaints list. They are not only tabulated but summarized every month. Occasionally, I get the odd phone call from customers and often from distributors. In today's world, one complaint means at least 10 dissatisfied customers. Also, the reality is if a customer is not satisfied, he will tell as many people as possible, whereas someone who is satisfied tells no one. So complaints are a very important index. If you see a pattern, then you can tackle them. I try keep as close I can with what is happening, but within limitations as its a 24x7 world, and there is something happening in some part of the world. Q. How would you describe your style of managing a large financial company? A. My basic management philosophy has always been to find the best possible people and work to enable them to do the job as opposed to supervise them doing the job. One thing very important for any international Canadian company is we are a small country next to the largest economy in the world. We are used to the fact that we have to do business other than the Canadian way. To be successful in the US, we do business the US way, to be successful in India, do business in accordance with local practices, norms and local standards of acceptance.
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