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Monday, January 24, 2022

Life insurance coverage tycoon Calvin Lo on the dynamics of ultra-rich households

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For all times insurance coverage billionaire Calvin Lo, enterprise is private. Usually, very private. His Hong-Kong-based broking firm, RE Lee Worldwide, specialises in insuring the lives of the wealthy and super-rich for something as much as $500m. Every deal is tailor-made to the person and their household.

In an FT interview, the 45-year-old tycoon says the dying of a founding entrepreneur typically leaves the heirs with loads of beneficial belongings: a privately owned working firm, for instance, or prime properties world wide. However, typically, there’s surprisingly little money. “The wealthier you’re, the much less liquidity you’ve,” he says.

Having taken management of a wealth-oriented enterprise prior to now few years, Lo is aware of lots about wealthy folks: RE Lee’s important clientele are “the highest 50 households” in any market. With historic roots within the US, the corporate has a core enterprise in east Asia and rising actions within the Center East and Europe.

Lo explains {that a} life coverage is a helpful means to offer cash to settle payments that come up when the pinnacle of a wealthy household dies, akin to inheritance tax, or money for junior heirs who maybe will now be excluded from the household enterprise.

Some purchasers have extra uncommon calls for. Lo tells of 1 case involving a mature Chinese language businessman — “Let’s name him Mr Chen” — who negotiates a coverage and involves Lo’s workplace to signal it. He arrives within the firm of a younger girl, whom Lo hasn’t seen earlier than, adopted quickly afterwards by a “disgruntled-looking” Mrs Chen. The paperwork are duly signed. Mr Chen and the younger girl go away. As Lo recounts, Mrs Chen then explains: “She is his girlfriend. His mistress. The insurance coverage is for the lady, and in return this lady could have nothing to do with the household enterprise.”

Lo smiles and says: “I’m not right here to evaluate anyone’s morals . . . we provide options to folks’s issues.”

In one other case, a family-run firm is owned by two ageing brothers. They know their households would wrestle to co-operate in operating the enterprise after their dying, says Lo, so that they prepare for the corporate to purchase life insurance coverage insurance policies for every of them. Below these preparations, when one brother dies, management of the enterprise passes to the surviving brother and his heirs; the deceased brother’s household receives the insurance coverage payout. “All the things was clear,” Lo says.

With about 80 workers, RE Lee brokers insurance policies that generate some $1bn a 12 months in premiums. Final 12 months, the pandemic triggered a surge in enterprise that has prolonged nicely into 2021. “Due to Covid, those that had considered doing a little insurance coverage at a while had been calling up and saying, ‘Can we proceed with the proposal now. Now!’ ” says Lo. “Each time some catastrophe strikes, our enterprise appears to do all proper.”

He’s talking through video hyperlink from his mansion in The Peak, an unique neighbourhood of Hong Kong. Heavy gold and brown curtains dangle behind the leather-backed chair during which he sits, neatly wearing a darkish swimsuit with a tie and pocket sq.. Lo is clearly not a type of enterprise individuals who have allowed themselves to go informal in the course of the pandemic. He appears prepared to satisfy his high consumer or signal his subsequent deal.

Enterprise associates converse of Lo’s demanding work ethic and he admits he clocked up 200 days a 12 months of enterprise journey earlier than the pandemic. “There was actually no time for a private life. Now, with Covid, I can take my daughter to highschool and choose her up daily,” he says. Lo is single — his spouse, from whom he was divorced, died final 12 months.

Relaxed or not, he enjoys the trimmings of wealth, with upmarket houses in London, New York, Vancouver and Singapore, along with Hong Kong. For transport, there are three Rolls-Royces, two Bentleys and a non-public jet. Lo additionally owns a world-class assortment of champagne — he confirms he as soon as invested $230m in a single batch. His favorite, he says, is classic Louis Roederer Cristal 1996.

A ardour for advantageous wine is matched by an enthusiasm for motor racing. A fan of System One for almost twenty years, Lo final 12 months established monetary ties to the Williams F1 workforce. “I simply imagine that for any boys and males, automobiles are a giant factor,” he says.

Calvin Lo lifelong love of motor racing lead him to establish financial ties to Williams Racing

Calvin Lo, who has monetary ties to the Williams F1 workforce: ‘I simply imagine that for boys and males, automobiles are a giant factor’ © Alamy

RE Lee was based by Robert Earl Lee, a US insurance coverage entrepreneur and a embellished veteran of the Korean battle, who began the enterprise in Seattle in 1954 and turned it into one of many largest wholesale insurance coverage brokers in North America. Lee developed enterprise hyperlinks with Lo’s mom, Regina Lee (no relation) and ultimately, along with her involvement, established the corporate’s first overseas operation, in Hong Kong in 1979. The Asian enterprise grew quickly and unfold its attain across the area — and past, into Europe.

As Robert Lee grew older, the Lo household steadily purchased out his controlling stake and bought a 100 per cent curiosity, which Regina Lee has not too long ago handed to Lo, her solely baby. Her husband Francis Lo, Calvin’s father, is an entrepreneur in his personal proper. After Robert Lee died in 2015, the corporate moved its headquarters from Seattle to Hong Kong. Regina Lee stays chair, with Calvin Lo as chief govt.

Lo’s upbringing was worldwide: born in Vancouver, he moved to Hong Kong together with his mother and father as a one-year-old, earlier than returning to North America on the age of eight for boarding faculty and college in Canada and the US, ending at Harvard Enterprise College.

On the age of 18 or 20, Lo needed to be an funding banker, “like many individuals”, and had no considered insurance coverage, he says. However, after working in banking in Boston and New York, and a few encouraging conversations with Robert Lee, he turned fascinated by insurance coverage, joined RE Lee in 1999 and climbed the company ladder.

Calvin Lo in his Hong Kong office

Calvin Lo in his Hong Kong workplace © Anthony Kwan

Lo says he’s generally approached by potential buyers wanting to purchase the enterprise and by funding bankers suggesting a inventory market flotation. However he has no such plans, he says. “We wish to preserve issues carefully knit as a result of we imagine in private relationships and the pliability of such relationships,” he provides.

Lo denies there was any influence on RE Lee from latest political upheavals between Hong Kong and mainland China, the place the Communist occasion has been tightening its grip on the territory. “We don’t see any distinction within the final three years by what’s occurred in politics,” he says, giving the diplomatic reply of a person firmly targeted on enterprise.

In addition to Hong Kong and Seattle, RE Lee has operations in Shanghai, Singapore, Dubai and Zurich. Lo says that plans to open in London had been delayed by Covid however will go forward subsequent 12 months.

RE Lee works with huge life insurance coverage corporations, together with Manulife of the US, the UK’s Prudential and Canada-based Solar Life. Rivals are largely different broking corporations, however Lo says RE Lee’s expertise provides it a bonus as a result of “it’s not each firm that has a historical past of household connections on this market”.

The largest deal up to now has been a $480m coverage for a Hong Kong-based firm chairman. Different giant insurance policies have been taken out in Japan, the place inheritance taxes are significantly excessive, making it troublesome to protect household fortunes. Elsewhere in Asia, the place inheritance taxes are usually low, succession planning is usually the important thing demand driver. In Europe, together with the UK, it’s inheritance tax, says Lo.

Lo says that, when he began, the purchasers’ common age when shopping for a coverage was 60. However, with the latest surge in entrepreneurial success in Asia, it has fallen to 43-45, together with purchasers of their thirties. Many older first-generation entrepreneurs stay reluctant to contemplate life insurance coverage till very late. Lo says: “The wealthier they’re, the extra they suppose they’re actually immortal. They arrive into my workplace limping or bringing a strolling stick however they are saying they’re in excellent well being.” RE Lee affords totally different financing choices: the premium may be paid up entrance; or, at a better value, in instalments, say over 10 or 20 years; or with a financial institution mortgage, secured by the coverage.

When he’s not targeted on RE Lee, Lo is creating his different enterprise pursuits, together with property: in 2019, he purchased the Mandarin Oriental luxurious resort in Taipei, Taiwan, for a reported $1.24bn. RE Lee declines to touch upon this deal however says Lo “is continually in search of alternatives”.

Lo makes time for philanthropy, too, constructing a fund he established in 2001 right into a $250m basis targeted on youngsters, the atmosphere and animal welfare. He says it will be significant for donors to not assume they know greatest and as a substitute to hearken to the potential recipients.

He recounts how he organised a big donation of digital video games for an orphanage solely to find on a go to that the presents had been stacked away unused. The director defined that the kids didn’t need such toys however easy issues akin to pencils and rulers. “I realised I used to be silly to not ask, ‘What do you want?’ We should always not suppose we’re so sensible,” Lo says.

Then, there’s Lo’s fascination with F1. Williams Racing introduced in August 2020 that the founding Williams household had offered the enterprise to a US funding administration firm, Dorilton Capital, for $180m, prompting rumours that Lo was the last word investor.

Lo confirms he’s a consumer of Dorilton by RE Lee Octagon, his personal funding firm. He says Dorilton invests cash on his behalf, although he is not going to reveal whether or not the Williams funding is his, saying he has a non-disclosure settlement. However he provides: “We’re working very carefully with the corporate which controls the funding, Dorilton Capital.”

It’s so far as he’ll go in discussing the main points. However Lo leaves no room for doubt about his dedication to motor racing. “Williams is a hidden gem . . . and there are additionally different hidden gems in System One,” he says.

This text is a part of FT Wealth, a bit offering in-depth protection of philanthropy, entrepreneurs, household workplaces, in addition to different and influence funding

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