Manulife’s new CEO Roy Gori sets sights on shaking up insurance industry Subscriber content
“Howdy,” Roy Gori calls out, his voice ricocheting off the marble floor and wood-panelled walls of Manulife Financial Corp.’s hushed lobby.
The incoming chief executive officer of the country’s largest life insurer offers up a brisk handshake and projects a casual tone that feels at odds with the formality of the company’s stately headquarters, with its stone columns, immaculate lawns and golden front doors.
It’s not quite the greeting one might expect from a man who is about to take the reins at one of Canada’s most-storied financial services companies. But then the 48-year-old Mr. Gori – who officially becomes Manulife’s CEO on Sunday – isn’t your typical Canadian insurance executive.
For starters, he’s Australian, born and raised by Italian migrant parents in Sydney. And he has spent practically his whole career on the other side of the world in banking, shuttling around the Asia-Pacific region for Citigroup for 28 years before joining Manulife as CEO of its Asian operations in 2015.
His Instagram account – the punny @thegoridetails – features pictures of Manulife meetings and events, to be sure, but it’s also peppered with sweaty selfies, evidence of his life as a self-described fitness fanatic who calls his commitment to daily, early-morning exercise “sort of religious.” There’s even a shot of him doing tai chi on a stage with Prime Minister Justin Trudeau last year.
Ask him about his leadership philosophy, and his mind travels first not to the financial centres of Toronto, New York or London, but to Silicon Valley, where the status quo involves the daily embrace of disruptive technologies.
Now, he’s determined to shake up a 130-year-old, buttoned-down mainstay of this country’s financial establishment – a company whose first president also happened to serve as Canada’s first prime minister. His mission: Drag Manulife into the future.
Mr. Gori is inheriting a company at a turning point. Manulife has spent almost a decade – essentially the full tenure of departing CEO Donald Guloien – trying to move past the overhang of the global financial crisis. The downturn eroded the company’s share price from a high-flying $40 in 2007 to a low of about $10 in 2012. In that time, a large equity raise and warnings from regulators that Manulife’s capital levels were precariously low had an impact on the stock. In the years since, Mr. Guloien has built out the wealth-management operations and the Asian division, with recent help on the latter from Mr. Gori. Now, shareholders expect a return to growth.
It’s a tall order – and Mr. Gori knows it.
“When a ship has been moving in a certain direction for as long as [Manulife] has, to get it to change course is not something that is very easy. It’s very difficult,” he says, settling into a desk chair in a vacant office.
Still a few days away from assuming the top job, he’s already confidently outlining his approach to the role and is not afraid to be critical of the insurance and wealth-management industry, which he’s fond of saying is “stuck in the stone ages.” And those criticisms often include Manulife.
“We need to think of ourselves much more like a technology company,” he says. “Technology’s got to be the way that every single person in this company thinks and operates.
“I do think that, because our industry is so complex, it’s primed for disruption. You’ve seen other industries that have been disrupted by new market entrants who have really been hell-bent on creating a much more simple solution for customers,” he adds.
He speaks quickly, firmly and efficiently. And while he comes off as affable and easy to chat with, he’s not prone to getting carried away and telling stories. Rather, he gets straight to the point. “I think we have to have that insurgent mentality. That real obsession with wanting to do things that are better for the customer,” he says, referring to the type of thinking that disruptive startups possess, unfettered by the pressure to adhere to typical industry standards.
He has five key priorities. First, a review of where the company’s capital is tied up – whether it can sell or restructure some less-profitable businesses. Second is cost cutting and making the business run more efficiently with automation. Third is spurring growth in its wealth- and asset-management and Asia businesses. Fourth is being more obsessed with what customers want than anyone else in the industry. And lastly, changing the company’s culture and putting in place a new leadership team.
In early September, he took the first step. The international executive lineup was shaken up to promote or hire new heads for the company’s major divisions, including in Canada, the United States and Asia, and a new role overseeing wealth and asset management.
“I just wouldn’t underestimate how difficult it is to transform a company, and you just can’t do it overnight,” Mr. Gori says. “We need to have the 35,000 people that work for us, and the 70,000 agents that work for us, as passionate about this journey as I am. And as I said, that is the reason why many companies that are large in scale find it very difficult to embark on this kind of transformation.”
New to the business
Mr. Gori wasn’t always so passionate about overhauling the insurance industry. A few years ago, working for an insurer wasn’t even a consideration.
“When I was first asked to consider [joining Manulife], I sort of wasn’t that interested, if I’m absolutely honest. But then, I did agree to a meeting with Donald Guloien in Hong Kong,” he recalls. Both men were in the city on business, and Mr. Gori, who was running Citi’s retail-banking operations in the region, thought he might be able to help in Manulife’s search for a CEO in Asia. He never imagined the conversation would go further.
His early dismissals of Manulife – and other financial institutions that sought him out – was based on a deep loyalty. After working for Citi since the age of 17 and being sponsored by the bank through his undergraduate and MBA studies, he had all but abandoned the idea of ever leaving. “I’d been with Citi for 28 years – I’d known Citi for longer than I’d known my wife,” he says.
That first meeting with Mr. Guloien didn’t sell him on the idea. But it did spark a curiosity about the insurance business.
“I thought: The other industries, like banking, for example, have already been through a large part of their transformation. There’s still a lot to do in that space, but they’ve already made some significant steps. And I saw this as an industry that had a long way to go, but a tremendous opportunity where the needs of consumers weren’t really being met.”
After some more coaxing and several conversations with Manulife executives, Mr. Gori was convinced to come aboard in March, 2015, as CEO of the company’s Asia business, moving with his wife and three children to Hong Kong.
For him, it was the right place at the right time – an outsider’s inside track at the company. Manulife has operated in Asia since 1897, when it sold its first policy in Shanghai, and now has a position in both developed markets such as Hong Kong and Singapore, and emerging markets such as Cambodia. Today, Manulife Asia accounts for roughly a third of Manulife’s earnings, with eight million customers and $100-billion in assets under management. Mr. Gori’s tenure as head of Asia was brief but profitable, leading an ambitious quest for growth in the region.
When Mr. Gori was appointed Manulife’s new president this year, BMO Nesbitt Burns analyst Tom MacKinnon took stock of Mr. Gori’s progress in the region and found he had bested the insurer’s main competitors with double-digit compound-annual-growth-rate increases in sales, earnings and new-business value. “Gori was able to increase margins in Japan and did not hesitate to pull weaker or poorer-performing products quickly from the shelf,” he wrote.
Now, as the incoming CEO, Mr. Gori keeps coming back to the problem that originally piqued his interest in the company and the industry.
“Anything you want to do today pretty much can be done with your mobile phone and with a few clicks of a button,” he says, plucking his iPhone off the desk and waggling it around. “Our industry has not evolved at all and has not embraced that transformation. If anything, we are as complex, or more complex, than we were 15 years ago,” he continues, pointing to industry-standard insurance applications, which are still typically 16 pages long and involve 128 questions.
Changing this may be the key to reaching the next generation of insurance customers. North American millennials are reaching the “life events” that typically trigger insurance sales later than their parents did, and some industry reports indicate this group is delaying the purchase of life insurance a result. Digital sales are also low. The Canadian Life and Health Insurance Association’s 2017 fact book shows that Canadians primarily buy life insurance on an individual basis through a sales agent or financial adviser; products sold by direct mail or online still only account for 1 per cent of individual premiums, although this is on the rise.
Mr. Gori says Manulife should embrace technology that will allow it to focus on simple, intuitive customer experiences.
For advice, he turned to a company famous for doing just that: Apple Inc. On a recent trip to Cupertino, Calif., he probed Apple’s senior-executive team about how to manage a business challenge that fascinates him: How do you build a stable company with scale, while still maintaining the mindset of a startup in your industry?
Apple’s crew told him the tone has to be set at the top. That means more time spent looking at new apps that will improve service and less doing administrative work in the background.
Manulife’s employees need to feel the urgency of this culture change right from the executive team, Mr. Gori says, boiling it down to this: “Are you spending time approving paper clips or internal invoices for stationery? Or are you spending time on the customer experience?”
Still, he’s the first to concede that this goal is easier to talk about than it is to execute.
Manulife is not the only company talking about technology as the future of financial services. Insurance peers are rolling out a barrage of new apps, claims-processing platforms and digital sales tools. Canadian banks have been trying to ward off Apple and Google Inc. with a flurry of investments in mobile payments and innovation labs in the past few years. Brian Porter, CEO of Bank of Nova Scotia, said last summer that the lender was “in the technology business” – that banking is just a product delivered through technology.
So far, none have found a technological panacea for attracting new customers. But Manulife and competitors such as Sun Life Financial Inc. have been implementing new systems that promise to trim the notoriously lengthy application process for life insurance from days to hours and improve customers’ employee-benefit programs and wealth-management sales. That includes using new internal data analytics to reduce invasive testing for new policies, meaning many new applicants won’t have to provide blood or urine samples and won’t be denied coverage for occasional marijuana use.
Manulife also turned to wearable fitness trackers a couple of years ago and offered rate reductions and incentives to customers who demonstrate they’re focused on health – from annual checkups and flu shots to frequent gym visits. The goal? To connect with customers more often, amass more data and spur sales in a sluggish category.
But this progress is “on the fringe” of the company, Mr. Gori says, and doesn’t constitute the kind of wholesale change that gets him excited.
Holding Manulife back is its legacy technology architecture, he says. It relies on traditional software-development processes that often do not result in mobile-friendly applications. The key is to move to more agile and flexible software-development systems called “microservices,” which can speed up the design, testing and deployment of mobile apps and which Mr. Gori says will allow customers to interact with the company in a more intuitive way.
While acknowledging that customers are doing more online, he isn’t willing to say his plans will mean cuts to the 70,000-strong adviser force, most of whom are in Asia. Instead, the advisers are getting iPads and other digital tools to integrate with the apps Manulife is building.
That said, he plans to make each distribution channel – agents, bancassurance partners and direct-sales forces – prove that they’re providing value in the equation. “There’s going to be much more transparency in the new world. And each element of the value equation needs to be able to justify why they are there.” He also says Manulife needs to automate more of its internal processes.
Making these changes is going to take some cash. Mr. Gori points out that the insurer is already spending more than $1-billion a year on technology improvements – it’s not underspending. But a lot of that is going toward marginal improvements to expensive legacy platforms – not to change customer experiences. That money could be better spent. “We need to look at ways through which we can take cost and waste out of the system,” he says.
Out with the old
There are other parts of Manulife that also need attention.
Mr. Gori has promised shareholders that he will prioritize making the business more cost-efficient, accelerating the already fast-growing Asia and wealth- and asset-management groups and perhaps, most crucially, dealing with some capital-intensive legacy business lines that aren’t earning acceptable returns.
These themes are top of mind for Bernard Gauthier, a portfolio manager of Canadian equities at Jarislowsky Fraser. The firm has been a long-time shareholder in Manulife, suffering through the stock-price collapse in 2008 and rough subsequent years. Mr. Gauthier recently met Mr. Gori at an event and heard the technology pitch, which he says will be difficult to measure.
“If you look at the growth numbers coming out of Asia, they’re absolutely outstanding. That’s the really positive part. It’s rare that we have a Canadian company that’s so well positioned in a high-growth area like Manulife is. So that’s their strong competitive advantage,” he says.
On the other hand, he points out the market isn’t too fond of some of the company’s aforementioned legacy business lines such as closed annuity books and, in particular, long-term care insurance.
“It’s 40-year business where it’s very difficult to determine the emergence of new diseases and medication,” he says, adding that this is likely an overhang on the stock and adds to earnings volatility.
Mr. Gori recently appointed Naveed Irshad, a 20-year Manulife veteran who had been CEO of Manulife Singapore, to manage these problem children as head of North America legacy business.
“We generate returns from those legacy businesses which are less than what we believe to be acceptable,” Mr. Gori says. “Our shareholders are expecting a better return for our capital.”
Analysts forecast this could lead to some improved disclosure, not only for the legacy book, but also for other parts of the wealth and insurance business. Mr. Gori thinks that could be a good idea, though he doesn’t have a timeline or plan for such an action yet.
“One of the things that I would like to do is to be more transparent with the information we share. And I think that will help analysts and shareholders understand better what our focus is and whether we’re making progress or not,” he says.
The company’s stock does get a lift based on the expectations that growth in some areas of the business will continue, analysts say, as well as its tendency to benefit from a rising-interest-rate environment.
“In our experience, investors have always been positively disposed to the growth profile of Manulife – the problems have been risk management and volatility in performance,” says Sumit Malhotra, a financial services analyst at Scotia Capital. “I think 2017 has been a good template for Roy in terms of what the market wants to see from Manulife: a strong contribution from the growth engines of the company, Asia and wealth and asset management and less ‘noise’ from the legacy businesses that are less important going forward.”
In the meantime, Mr. Guloien expects that crafting Manulife’s image will be one of Mr. Gori’s strengths as a leader.
“Roy has the energy and the experience to really make this stuff happen and, I think, frankly, can do more around customer centricity than I could do,” Mr. Guloien said in a recent interview from his office. Mr. Gori can do more, he said, because “he’s got different experience with digital experiments that Citibank, his former employer, did throughout Asia that he was a big part of. And he’s got a very strong marketing mindset.”
Dick DeWolfe, chair of the company’s board of directors, praised Mr. Gori’s “enormous energy, enthusiasm and leadership skill, which we think is of critical importance to achieving our transformation and continued success at Manulife.”
For the new CEO, the changes are just beginning. He’s still gearing up for his first Canadian winter. He’s training for the 2018 Mont-Tremblant Half Ironman triathlon. And, in putting down new roots in Toronto, he finally made good on a long-standing promise to buy his children a puppy – the new velvety-eared golden Labrador named Monty is adorable, but it’s practically like having a new baby, Mr. Gori says with a laugh.
In moving from old to new customer-service technologies, and pushing capital from low- to higher-growth businesses, Manulife’s transformation effort is also just getting under way. Mr. Gori is feeling the pressure to prove that Manulife is ready for that change.
“A huge set of variables that will ultimately drive success,” he says. “I’d say it starts from the top, and responsibility lies first and foremost with me.”