Take a look at Carlos Wong-Fupuy's presentation from our recent London briefing. Wong-Fupuy is the Senior Director of Analytics for A.M. Best Asia-Pacific. In this presentation he discusses capital efficiency, plans for expansion into emerging markets and much more.
3. Disclaimer
2015 Insurance Market Briefing - Europe 4 November 2015 6
US Securities Laws explicitly prohibit the issuance or maintenance of a credit rating where a person involved in the
sales or marketing of a product or service of the CRA also participates in determining or monitoring the credit rating, or
developing or approving procedures or methodologies used for determining the credit rating.
No part of this presentation amounts to sales / marketing activity and A.M. Best’s Rating Division employees
are prohibited from participating in commercial discussions.
Any queries of a commercial nature should be directed to A.M. Best’s Market Development function.
4. 2015 Insurance Market Briefing -
Europe
2015 Insurance Market Briefing - Europe 4 November 2015 58
Carlos Wong-Fupuy
Senior Director, Analytics, A.M. Best
European Insurers:
Pressures on Capital Efficiency
and Expansion into Emerging
Markets
5. 0
1
2
3
4
5
6
7
8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: European Central Bank
Italy
Spain
France
Germany
Pressures on capital efficiency
2015 Insurance Market Briefing - Europe 4 November 2015 59
Long-Term Interest Rates for Convergence
Purposes (2000 - September, 2015)
6. Pressures on capital efficiency
2015 Insurance Market Briefing - Europe 4 November 2015 60
-8
-6
-4
-2
0
2
4
6
2008 2009 2010 2011 2012 2013 2014
%
Source: International Monetary Fund, World Economic Outlook Database, April 2015
Western Europe - Percentage Change in GDP for
Selected Countries (2008-2014)
Italy
Spain
France
Germany
UK
7. Pressures on capital efficiency
2015 Insurance Market Briefing - Europe 4 November 2015 61
• Mature markets: penetration
• Regulation
• Complexity / capital intensity
• Competition
• Long-term opportunities:
– Shrinking role of the State
– Ageing populations
– Investment / infrastructure
projects
8. 2015 Insurance Market Briefing - Europe
Pressures on capital efficiency
4 November 2015 62
Country
Gross Domestic
Product
(USD billions)
Real GDP
per Capita
(USD)
Change in
Real GDP
(%)
Insurance Market
Penetration
(%)
France 2,847 44,538 0.36% 9.5%
Germany 3,860 47,590 1.61% 6.6%
Italy 2,148 35,823 -0.42% 9.1%
Spain 1,407 30,278 1.39% 5.1%
United Kingdom 2,945 45,653 2.55% 11.9%
Sources: International Monetary Fund, World Economic Outlook Database, April 2015; Swiss Re, sigma; A.M. Best data and research
9. Pressures on capital efficiency
2015 Insurance Market Briefing - Europe 4 November 2015 63
Country
Total
Premium
2014
(USD billions)
Global
Ranking
Total
Premium
2014
Total
Premium
Growth 2014
(%)
Life Premium
Growth 2014
(%)
Non-Life
Premium
Growth 2014
(%)
Total
Premium
Growth 2013
(%)
France 271 5 5.1% 7.2% 1.6% 6.7%
Germany 255 6 2.8% 3.3% 2.3% 6.6%
Italy 195 7 15.3% 23.1% -2.7% 17.3%
Spain 71 14 -0.7% -2.5% 0.9% 0.7%
United Kingdom 351 3 7.9% 7.4% 8.7% -1.1%
Sources: International Monetary Fund, World Economic Outlook Database, April 2015; Swiss Re, sigma; A.M. Best data and research
10. Strategic actions
2015 Insurance Market Briefing - Europe 4 November 2015 64
• Returning capital to
shareholders, e.g. re-insurers
• Partnering with alternative
capital providers
• Mergers and acquisitions
• Groups’ legal re-structuring
• Re-insurance centralisation
• Cost management
• Gradually riskier investment
portfolios: real assets
and/or
• International expansion
11. 2015 Insurance Market Briefing - Europe
BRICS challenges
4 November 2015 65
• Decoupled from
advanced
economies?
• Sliding currencies
• Sudden capital
flight?
• Globalised capital
markets
Brazil
Russia
India
China
South Africa
-10
-5
0
5
10
15
2008 2009 2010 2011 2012 2013 2014
%
Percentage Change in GDP (2008-2014)
Source: International Monetary Fund, World Economic Outlook Database, April 2015
12. BRICS challenges
2015 Insurance Market Briefing - Europe 4 November 2015 66
• Fiscal imbalances
• Heavy commodity reliance
Credit ratings downgrades
• High unemployment
• Economic recession
• Unstable government
• Low oil prices
• High inflation / devaluation
• International sanctions
• Foreign investment flight
• Geopolitical tensions
• Stock market turmoil
• Yuan devaluation
• Decrease in exports
• Shift from infrastructure
investments to domestic
consumption
• Less dependence on
China
• Oil importer
• Fragile banking system /
bad debts
• Rigid labour laws
• State level legislation• Smallest of all BRICS
• Lagged behind during
commodity boom
• High unemployment
• Poor energy infrastructure
• Underinvestment in state
owned utilities
13. Selective growth
2015 Insurance Market Briefing - Europe 4 November 2015 67
• Key territories:
Asia Pacific, Lat Am,
Eastern Europe, Turkey
• Exit or downsizing in particular
areas:
– Russia:
Allianz, Zurich - GI retail
– India:
RSA - GI, ING – Life
• Development costs or corrective
actions in place:
– Turkey:
Ergo, AXA – Motor
– Brazil:
Allianz, Zurich
• Regulatory changes (ownership)
/ political sanctions
14. Volatile emerging markets
2015 Insurance Market Briefing - Europe 4 November 2015 68
Sources: International Monetary Fund, World Economic Outlook Database, April 2015; Swiss Re, sigma; A.M. Best data and research
Country
Gross Domestic
Product
(USD billions)
Real GDP
per Capita
(USD)
Change in
Real GDP
(%)
Insurance Market
Penetration
(%)
Brazil 2,353 11,604 0.15% 3.6%
Chile 258 14,477 1.84% 4.2%
China 10,380 7,589 7.36% 3.2%
Colombia 385 8,076 4.55% 2.5%
India 2,050 1,627 7.17% 3.4%
Mexico 1,283 10,715 2.13% 2.1%
Poland 547 14,379 3.30% 3.2%
Russia 1,857 12,926 0.62% 1.4%
Turkey 806 10,482 2.90% 1.4%
15. Volatile emerging markets
2015 Insurance Market Briefing - Europe 4 November 2015 69
Sources: International Monetary Fund, World Economic Outlook Database, April 2015; Swiss Re, sigma; A.M. Best data and research
Country
Total
Premium
2014
(USD billions)
Global
Ranking
Total
Premium
2014
Total
Premium
Growth 2014
(%)
Life Premium
Growth 2014
(%)
Non-Life
Premium
Growth 2014
(%)
Total
Premium
Growth 2013
(%)
Brazil 85 13 3.3% 2.8% 3.8% 0.5%
Chile 11 40 -6.8% -8.4% -4.5% 4.2%
China 328 4 17.3% 15.4% 19.5% 14.1%
Colombia 10 41 -5.6% -21.2% 3.2% 13.4%
India 70 15 7.2% 6.4% 10.4% -1.0%
Mexico 27 25 -0.4% 1.0% -1.7% 13.9%
Poland 17 33 -4.7% -11.0% 0.7% -6.0%
Russia 26 27 -9.4% 6.1% -11.0% 9.2%
Turkey 12 39 -6.9% -16.2% -5.4% 14.6%
16. Significant growth in emerging
markets (examples)
2015 Insurance Market Briefing - Europe 704 November 2015
0%
50%
100%
150%
200%
250%
300%
350%
Mapfre Talanx Pru
0%
20%
40%
60%
80%
2004 2009 2014
Mapfre (Intl) Talanx (Int) Pru (Asia)
Growth in key areas
(percentage of total premiums)
Total assets 2014 / 2004
(percentage)
17. Expansion becoming more
selective
2015 Insurance Market Briefing - Europe 4 November 2015 71
1: Out of EUR 30bn, international business was EUR 4bn from six countries (namely European countries and Japan). Source: Company accounts, A.M.Best data and research
Rank Company
Country of
Domicile
Gross Premium
Written (2014)
(EUR millions)
Asia
Pacific
Central
Eastern
Europe
Latin
America Turkey
1 AXA S.A. France 86,267
2 Allianz SE Germany 73,883
3 Assicurazioni Generali S.p.A. Italy 66,236
4 Zurich Insurance Group Ltd. Switzerland 45,068
5 Prudential plc UK 41,959
6 CNP Assurances France 30,643
7 Credit Agricole Assurances1
France 29,377
8 Talanx AG Germany 27,903
9 Aviva plc UK 27,694
10 MAPFRE S.A. Spain 22,401
18. Potentially higher margins but not
without some challenges
2015 Insurance Market Briefing - Europe 4 November 2015 72
HGM: High Growth Markets. Based on 2014 year figures Source: Company accounts, A.M.Best data and research
Company
P/C
Share
HGM (%)
Combined
Ratio
HGM (%)
Combined
Ratio
Total (%)
Life
Share
HGM (%)
Life
Margin
HGM (%)
Life
Margin
Total (%)
AXA S.A. 16.0% 98.7% 97.6% 17.5% 49.0% 34.0%
Allianz SE 9.0% 111.3% 94.3% 15.1% 3.6% 2.4%
Generali S.p.A. 14.8% 96.9% 93.8% 5.9% 21.9% 24.0%
Zurich Insurance Group Ltd. 12.3% 104.6% 97.3% 33.2% 26.5% 22.1%
Prudential plc n/a n/a n/a 48.1% 52.0% 46.0%
CNP Assurances n/a n/a n/a 14.7% 32.1% 11.9%
Credit Agricole Assurances n/a n/a n/a n/a n/a n/a
Talanx AG 34.4% 96.4% 101.7% 18.6% 6.9% 1.9%
Aviva plc 10.2% 7.6% 4.1%
MAPFRE S.A. 48.8% 95.3% 95.7% 47.7% 17.7% 12.0%
19. Emerging Markets Challenges
2015 Insurance Market Briefing - Europe 4 November 2015 73
• Lack of scale/
fragmented regions
• Dominance of compulsory
lines
• Dependence on regulation
• Ownership and investment
restrictions
• Loss leader behaviour/
focus on market share
• Underperformance/
management and
integration issues
• Difficult target company
valuations/
private ownership
20. Conclusions
2015 Insurance Market Briefing - Europe 4 November 2015 74
• Focus on efficient re-deploying
of capital
• Expansion is becoming more
selective
• Increased efforts in turning
around existing businesses
• Groups have moved to a more
centralised approach to manage
their risks.
21. Q & A
2015 Insurance Market Briefing - Europe 4 November 2015 75
Carlos Wong-Fupuy
Senior Director, Analytics, A.M. Best
European Insurers:
Pressures on Capital Efficiency
and Expansion into Emerging
Markets