Mark Norbom: There's billions under the mattress, but the Pru will get Chinese savers out of bed

The chief of Prudential Corporation Asia is going after a huge but untapped investment market, he tells Sam Dunn in Hong Kong

On gleaming floors occupied by the Pru in the International Finance Centre - a complex that throws up Hong Kong island's tallest tower - there is a conspicuous absence of any commercial activity. Empty "meeting rooms", vacant corridors and immaculate staff in sleek tunics standing behind a giant, dazzling white reception desk lend an air of the clinical - even surgical. It feels more like a beauty technician's laboratory than a corporate HQ.

Norbom, indeed, looks as if he has just emerged from a grooming makeover here: the genial, softly spoken 47-year old American is extraordinarily well spruced, boasting a pencil-thin figure that easily squeezes into a snappy suit.

Yet the eerie calm that reigns as Pru staff settle into their new base belies a frenzied expansion to tap into Asia's burgeoning insurance and retail fund management market.

This is particularly the case in China, whose 1.3 billion inhabitants have one of the world's highest concentration of savings either idling in bank accounts that barely match inflation, or stashed under mattresses. The amount of yuan squirreled away in savings equates to 41 per cent of gross domestic product - more than two and a half times UK levels.

From an office on the Pru's 13th floor, Norbom - in charge of 171,000 staff and sales agents across 12 target countries - is mulling over this mind-boggling growth potential.

Superstitious staff have no need to be concerned about the number 13, though: in Hong Kong, number four is associated with death and the fourth floor is missing from the new building. However, this very fear of death is helping to flex the Pru's Asia insurance arm, with sales of basic life cover, cancer cover and annuities on the rise.

Figures are buoyant across its target countries. Premiums from insurance policies were up by more than a quarter to £313m in the first half of 2005, according to a standard industry measure calculated as the new business annual premium equivalent (NBAPE). This tots up all regular premiums and one-off payments.

Profit margins on the insurance business are robust too: at 49 per cent, they're higher than in the UK or US, says Norbom.

Of course, insurance sales will only grow where the Pru has a licence to go into new cities. Thanks to its joint venture with Citic, a state-owned financial behemoth, this is just what it has been able to do in China over the past five years. "We now have 10 city licences and, over the next three to five years, would like to open between 20 and 25 offices," says Norbom.

"Each city we go to will typically have between two million and 15 million people, so each time it really is a significant customer base. It's now the job of local regulators to grow business in their province - and I think [we have] good operations."

With its 10 offices, he points out that the Pru has two more than its nearest Western rival, American Insurance Group, the world's largest insurer. That said, the Pru trails AIG in its NBAPE share of the market by a foreign insurer: 14 per cent compared to 66 per cent.

Although Citic-Prudential Life only sold premiums worth £16m last year , it's China's potential that puts a gleam in Norbom's eye. "Savings rates are high but penetration of products is low. People have a lot of cash on deposit - the opportunity is to get that money."

Penetration might be the wrong word. Negligible dent is perhaps a better choice as barely 2 to 3 per cent of the population have taken out any sort of insurance policy.

From 1949 to 1979, cover wasn't allowed to be sold - and it wasn't until 1982 that the state-owned PICC could offer life insurance. Local firms followed, the biggest of which included China Life and Ping An; today, they dominate the market.

As a foreign insurer, the Pru believes it can make inroads here through 10,000, mainly tied, selling agents and greater use of "general agency" advisers - not dissimilar to independent financial advisers in the UK. Compared to the glut of diverse financial products available in the UK and US, China's cupboards are bare - and overseas firms are rushing to sign joint deals to fill them.

Last week, the tempo picked up: jockeying for position were Standard Chartered, taking a 19.9 per cent stake in Bohai bank; and China Life, the country's biggest domestic insurer, which is in talks to bring an overseas investor on board.

Fund management is also a key growth target. Norbom says: "We'll be looking to sell equity-linked and fixed-income funds, and offshore [funds] too". The problem is, consumer awareness of mutual funds is even less than that for life policies; it only started as an industry in 1998.

Nonetheless, the market has grown to be worth 420bn yuan (£28bn) today, and the Pru has just completed a deal to sell retail funds across the country, in another joint venture with Citic (bringing to nine the total of Prudential fund management businesses across Asia).

While the Chinese market is dominated by local firms - the biggest is Southern managing 52.8bn yuan - joint ventures like the Pru's look set to swell foreign numbers. Already, rivals include Invesco (with Great Wall), CSFB (with Industrial Commercial Bank of China) and ABN Amro (with Xiang Cai).

As always, securing a channel that gets the funds to the mass market will be vital, and Citic-Prudential Fund Management is looking at a possible partnership with Agricultural Bank of China to do just this.

With potential demand on an almost unimaginable scale, it's not difficult to see why the Pru is so keen to make sure it is ready to capitalise on a country that is changing attitudes at breakneck speed.

But despite China's progress towards a market economy, a report from the Organisation for Economic Co-operation and Development (OECD) on Thursday suggested that the government still had much ground to make up - with a strong need to instil better corporate governance, weed out corruption and improve its banking practices.

Norbom is keenly aware of such factors and becomes visibly agitated about a related concern that, he says, poses the biggest risk to the Pru's expansion: compliance and fear of mis-selling.

"Compliance is the biggest risk to us; it's not just the regulator, it's the customer [and the loss of trust]. Recently in Beijing, we missed an [administrative] step and the regulator closed us down for a couple of weeks."

What Asia holds for the Pru is on hold, pending group chief executive Mark Tucker's review next month. But more money for investment seems likely, with branding high on the agenda.

In Hong Kong, the company now pays $1m to splash its neon logo on a waterfront skyscraper belonging to China's tax authorities. Such brash determination to broadcast its presence seems, so far, to be working.

BIOGRAPHY

Born: 1958, Washington DC.

Education: graduated from Pennsylvania State University with a degree in economics, 1980.

Career (1980-2004): joined General Electric. After a stint in the US, roles included president and chief executive for GE Japan. He also worked for GE Capital in Taiwan, Indonesia, Thailand and Japan.

January 2004 to now: chief executive, Prudential Corporation Asia.