(771628299) Global Financial Crisis..David Alexandar

8/20/2019 (771628299) Global Financial Crisis..David Alexandar

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Global financial crisis and

the impact on the InsuranceIndustry

1122thth GlobalGlobal

ConferenceConference of of

ActuariesActuaries

Mumbai,Mumbai, IndiaIndia

18/1918/19 FebruaryFebruary

2121

!a"id!a"id Ale#ander Ale#ander

!irector !irector


2/33

$%iss$%iss &e&e


3/33

&is' (erception is Chan)in)

CSFI asked 403

nsurance e xecutives

from around the

orld about their top

fears

$ource* C$FI and (%C

$lide 2

All Insurers 2009

In"estment

performance

+uity mar'ets

Capital a"ailability

Macro-economic

trends

.oo muchre)ulation

Top Fears of

Insurance Co Execs

All Insurers 2007

1 .oo muchre)ulation

2 atural

catastrophes

0 Mana)ement

uality

Climate chan)e

Mana)in) thepricin) cycle


4/33

.oday3s topics

$tate of the Global Financial Mar'et

Insurance .rends and 4pportunities

Asia

Conclusions

$lide 0


5/33

.he %orld has not seen many

crises li'e the recent one

2008

1998 - 2007

1988 - 1997

1978 - 1987

1968 - 1977

1958 - 1967

1948 - 1957

1825 - 1947

ormal

distribution fit

We are here

2008

$lide 5$ stoc' mar'et, total returns in 6, 182 - 28 $ource* A#a


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Global economy*unemployment

%ill

risefurthe

r in

the7est

inflati


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ne!plo"!en#

5nemployment rosesubstantially in the 5$, muchless in

5

In Continental +urope

unemployment is e#pectedto rise %hen short term

labour pro)rams e#pire

Infla#$on

Inflation %ill remain

"ery lo% or ne)ati"e

ne#t year in most

mar'ets due to lar)e

economic slac'

Mar'et inflatione#pectations shifted

a%ay from a

deflationary scenario to

a lo% inflation scenario

5nemployment rates

1

2

6

1

8 82 8 8: 88 992 9 9: 98 2 : 8

5nited $tates5nited in)domGermany


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;rea'-e"en inflation,

1yr ;onds

>

0>

0>

2>

2>

1>

1>

>

>

1 2 0 : ? 8 9

5$5


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!espite manydifferences in the

underlyin)economies, the;&IC

stoc' mar'ets

ha"e beencorrelated

E!er%$n% &ar'e# In($ces )e#urnInclu($n% )uss$a E!er%$n%

& ' # I ($ ) # E l ($


10/33

2

1

1

;o"espa Inde# 96 10>

$ ote* indices ha"e been rebased to 1 at 01/12/1999

C u n - ?

C u n - 8

! e c - 9 9

C u n -

C u n - 2

C u n - 1

! e c - 1

C u n -

u n - ?

u n - 9


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.oday3s topics



Asia

Conclusions

$lide ?


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.he insurance industry has been

affected by the crisis but %as not the cause

+uity indices, rebased* 1>1>2? D 11

12

subprime crisis E ban'in) crisis E asset crisis E recession

1 -16

8

: $;C boost

loan

pro"isions

Fed and +C;respond to

liuiditysuee@e

;an's announce

;ear $tearnsmer)ed into

( Mor)an

eh!an (efaul#.

-216

2 ;ear $tearnshed)e fund losssi)nificant losses AI/ sae(

an-? Mar-? May-? ul-? $ep-? o"-? an-8 Mar-8 May-8 ul-8 $ep-8 o"-8 an-9 Mar-9 May-9

M$CI 7orld Inde# $( $( 5$ Hife insurance $( 5$ on-Hife insur ance

$lide 8 $ource* ;loomber), $%iss &e +conomic &esearch Consultin)


13/33

(remiums contract in both the life

and non-life sector

1re!$u! $nco!e $n l$fe

$nsurance (ecl$ne( $n

2008-09. !a$nl" (ue #o

fall$n% (e!an( for un$#-

l$n'e( pro(uc#s

Global life and non-life real premium )ro%th, 6

16

16

:6

12C pre!$u! %ro3#h $ssu4(ue( (ue #o #heecono!$c cr$s$s. #hou%hsuppor#e( 4" fron#-loa($n%

of $nfras#ruc#urecons#ruc#$on proec#s

26

-26

-:61991 1990 199 199? 1999 21 20 2 2? 29

on-life Hife

$lide 9 $ource* $%iss &e +conomic &esearch Consultin)


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Globally, life insurers reported

sharp drops in capital and sol"ency

$ol"ency in life insurance drops sharply, >> ne% business temporarily do%n

1J8 *400 n

86 8 6

1J:

1J

1J2

1J

8

:

?6

:6

6

6

06

26

?

:

016

116

-16

86 86

106

?6

-86

06

26

16

6

2

22 20 2 2 2: 2? 28 29 21

16

6

0

2 21 22 20 2 2 2: 2? 28

Gro%th rate


15/33

Insurance capital and profitability

in non-life insurance suffered lesssurance cap$#al an( solenc"

&ebound happened more uic'ly than e#pected

It %ill need time to restore the capital base

Insurers prof$# fro! e##er $n0es#!en# resul#s

&4+s 29 and 21 impro"e compared to 28 due

to better in"estment results

Capital and sol"ency on-life mar'et performance

99 1 2 0 : ? 8 91

(rimary insurersJ capital &einsurersJ capital

(rimariesJ sol"ency K&$L &einsJ sol"ency K&$L

18

1

12

9

:

0

2

1

1

-

-1

-199 1 2 0 : ? 8 9 1

5nder%ritin) result In"estment result

4peratin) result &4+ after ta#

$ource* $%iss &e economic &esearch Consultin) (rimary insurers* based on 8 lar)e mar'ets


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Capital raisin)becamee#tremely

e

#

p

en

s


17/33

a

t

im

e

%

h


18/33

a

n

i

es

ne

e


19/33

m

o

s

t$elected !ebt Issuance by orth American Insurers 2? - 29

7a#e Issuer A!oun#:!

Coupon )a#e ; &a#ur$#"

8 !ec 29 Hincoln ational 0> :>2 1 Feb 2

9 4ct 29 (rotecti"e Hife 0> 8> 1 4ct 2

1 $ep 29 (rudential :> 0>:2 1? $ept 2

1 $ep 29 (rudential 9> >? 1? $ept 2


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*our ce

<*=F$nanc$al

1= Financial data in CA!

2= 4"er uarterly HI;4&


21/33

&ecent Insurance MA/ I(4 Acti"ity&ecent Asian deals ha"e

been at o"er 1 timesboo' "alue and could be

at a "ery substantial

premium to that

&A

n

.he ran)e is %ide M

hat ma'es the

ifference bet%een hi)hnd lo% multiplesN

alue of an e#tra >1 onhe (/;, (/+, (/+O ratio

s material

$lide 10

I>

.ar)et ame Acuirer ame Oalue $tatus (/+ (/; (/+O Histin) !ate Countr

.on) an) Hife n/a 5$! 2?2m Completed A 2># 1>0# 4ct 8th, 29 orea

China (acific on)

Insurance Co> n/a 5$! 0>1bn Completed /A 2>9#P

2>#P

!ec 20rd, 29 on)

.ar)et ame Acuirer ame Oalue $tatus (/+ (/; (/+O Announced Countr

ABA China &e)ion ABA $A A5! ?>?bn

5nder

ne)otiation 2># 2>?# A o" 29 Asia

IG Hife .ai%an Fubon FC 5$! :m Complete A >?1# >9# 4ct 28 .ai%a

&$A Insurance (HC &iyadh ;an' A Complete ?>18# 1>11# A ul 29Great

;ritain

;. Ae)on A+G4 O 5$! 1m Complete >0# >8# A un 29 &omani

$istemi

$anitari $pa Fondiaria $ai $pa A Complete 11>2# 2>09# A Apr 29 Italy

IG Hife Insurance

orea Co> IG Groep >O> 5$! 29>m Complete 2>9# 1>2# A !ec 28 $>ore

A"i"a Australiaational

Australia ;an' A5! ?0m Complete 1:># A 1>1# un 29 Australi

a"a'iQ Insurance

(ublic Co> Htd>ippon'oa

Insurance Co Htd> A Complete 10>1# 1>?# A Mar 29 .hailan


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.oday3s topics



Asia

Conclusions

$lide 1


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A snapshot of

Asian mar'ets at

d

i

f

f e

r


24/33

)

e

s

o

f

i

n


25/33

d

e

"e

l

op

m


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ene#ra#

$on20

07

16

126

apan

16

86

:6

$outhorea

.ai%an

on)on)

$in)apore

=2007

*10

n

$

fep

r e!$u!s.

2007

*10n

6 Australi $ .ai%


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Indonesia

India

OietnamIndonesia

(hilippines-26 . $in)apore

-16 -6 6 616 16 26 2606 06 6

A0era%erealpre!$u!

%ro3#h1995-2007

$ $ources* 4#ford +conomics $%iss &e +conomic&esearch Consultin)>


28/33

&is' (erception* Asian insurers ha"e

similar %orries to other insurers

CSFI asked 403

insurance e xecutives

rom around the world

bout their “top f ears”

$ource* C$FI and (%C

$lide 1:

Top Fears of

Insurance Co Execs

All Insurers 2007 All Insurers 2009 &$((le Eas# As$aInsurers 2009

1 .oo muchre)ulation

In"estment

performance+uity mar'ets

2 aturalcatastrophes

+uity mar'ets In"estment

performance

0 Mana)ementuality

Capital a"ailability Capital a"ailability

Climate chan)e Macro-economictrends

Macro-economic

trends

Mana)in) thepricin) cycle

.oo much

re)ulation

Mana)in) costs


29/33

;&IC comparison India has

catch-up

potential in non-

life insurance

on-life

insuranceHife insurance

/71 2009

*7 n

re!$u!s

*7 n

2008

/loal

)an'$n%.

2008

)eal

%ro3#h

2009

)eal

/ro3#h

2010

re!$u!s

*7 n

2008

)

;ra@il180

19>?1

>16 >16 1?>99

&ussia 1002 0?>0 11 -:>96 >6 >:


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.he sub-mar'et of i)h et

7orth also deser"es attention

Asia-(acific i)h et 7orth Indi"iduals by Mar'ets, 2-2?

$lide 18

PP4thers cate)ory is comprised of ei)ht mar'ets* 9a@a'hstan, Malaysia, Myanmar, e% Realand, (a'istan, (hilippines,$ri Han'a and .hailand> $ome historical fi)ures ha"e been restated as the result of additional country-le"el databecomin) a"ailable in 2?> Chart numbers are rounded


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.oday3s topics



Asia

Conclusions

$lide 19


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Conclus$ons<

Asia3s insurance mar'et outloo'

&ecessions in some Asian economies and slo%in) )ro%th in China and India ha"e dampenedinsurance business )ro%th

.he fall in euity mar'ets has reduced consumer interest in in"estment-lin'ed pr oducts

;ancassurance is particularly affected due to reduced sin)le-premium sales

$ome insurers are shiftin) their focus to protection products

Insurance capital declined in most mar'ets particularly in apan> .o)ether %ith a trend of re)ulator s

loo'in) to stren)then sol"ency super"ision, this %ill put pressure on balance sheets and %ill fa"ourthe use of reinsurance

Go"ernment sponsored infrastructure construction proQects in a number of emer)in) Asian mar'ets

could add to (C insurance demand>

Cap$#al

!ana%e!en# $s a'e" $ssue

(ast e#periences su))est possible stron) rebound alon)side economicreco"ery pressure on capital from business )ro%th

Medium to lon) term )ro%th outloo' remains fa"ourable

$lide 2


33/33

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$lide 21

(771628299) Global Financial Crisis..David Alexandar

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