bmi india insurance report q3 2013

Q3 2013www.businessmonitor.com

INDIAINSURANCE REPORTINCLUDES 5-YEAR FORECASTS TO 2017

ISSN 1750-5674Published by:Business Monitor International

India Insurance Report Q3 2013INCLUDES 5-YEAR FORECASTS TO 2017

Part of BMI’s Industry Report & Forecasts Series

Published by: Business Monitor International

Copy deadline: June 2013

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CONTENTS

BMI Industry View ............................................................................................................... 7Table: Total Premiums, 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

SWOT .................................................................................................................................... 9Insurance ................................................................................................................................................. 9

Business Environment .............................................................................................................................. 12

Economic ............................................................................................................................................... 14

Political ................................................................................................................................................. 16

Industry Forecast .............................................................................................................. 18Life ....................................................................................................................................................... 18

Table: Life Premiums, 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Non Life ................................................................................................................................................. 20Table: Non-Life Premiums, 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Industry Risk Reward Ratings .......................................................................................... 24Table: India's Insurance Risk/Reward Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

India Risk/Reward Rating ....................................................................................................................... 25

Asia-Pacific Industry Risk/Reward Ratings ................................................................................................... 25Table: Asia-Pacific Insurance Risk/Reward Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Market Overview ............................................................................................................... 27Life Sector Update ................................................................................................................................... 27

Non Life Sector Update ............................................................................................................................. 29

Industry Trends And Developments ................................................................................ 31Life Growth Drivers and Risk Management Projections .................................................................................. 31

Population ............................................................................................................................................ 31Table: Insurance Key Drivers, Demographics, 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Non Life Growth Drivers and Risk Management Projections ............................................................................ 32

Macroeconomic Outlook ......................................................................................................................... 32Table: India - Economic Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Political Stability Outlook ........................................................................................................................ 35Table: Asia Pacific Regional Security Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Healthcare Insurance .............................................................................................................................. 38

Epidemiology ........................................................................................................................................ 41Table: Insurance Key Drivers, Disease Adjusted Life Years, 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Motor .................................................................................................................................................. 46Table: Insurance Key Drivers, Autos, 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Competitive Landscape .................................................................................................... 48

Company Profile ................................................................................................................ 53

India Insurance Report Q3 2013

© Business Monitor International

AEGON ................................................................................................................................................. 53

Ageas .................................................................................................................................................... 57

AIA Group ............................................................................................................................................. 61

Allianz ................................................................................................................................................... 68

AXA ...................................................................................................................................................... 72

BNP Paribas Cardif ................................................................................................................................. 76

Fairfax Financial Holdings ....................................................................................................................... 79

ICICI Lombard GIC ................................................................................................................................. 84

Life Insurance Corporation of India ............................................................................................................ 87

MetLife .................................................................................................................................................. 90

Prudential Financial ................................................................................................................................ 94

Prudential plc ......................................................................................................................................... 99

QBE Insurance Group ............................................................................................................................ 105

RSA .................................................................................................................................................... 109

Sun Life Financial ................................................................................................................................. 113

SBI Life ............................................................................................................................................... 116

The New India Assurance Co ................................................................................................................... 120

Regional Overview .......................................................................................................... 124Asia Non Life Sector Overview ................................................................................................................. 124

Table: Asia Pacific's Non-Life Premiums, 2010-2017 (US$mn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

Asia Life Sector Overview ....................................................................................................................... 126Table: Asia Pacific Life Premiums, 2010-2017 (US$mn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126

Demographic Forecast ................................................................................................... 128Table: India's Population By Age Group, 1990-2020 ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

Table: India's Population By Age Group, 1990-2020 (% of total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130

Table: India's Key Population Ratios, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

Table: India's Rural And Urban Population, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131

Methodology .................................................................................................................... 132Insurance Risk/Reward Ratings .............................................................................................................. 133

Table: Insurance Risk/Reward Ratings Indicators And Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

Weighting ........................................................................................................................................... 135Table: Weighting Of Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135



BMI Industry View

Key Insights And Key Risks

As of mid-2013, it remains the case that the strengths and opportunities of the Indian insurance segment

outweigh the weaknesses and the threats. Challenges include an idiosyncratic regulatory regime,

competitive landscapes (in both major segments) that continue to be dominated by state-owned companies

and constraints on the development of micro-insurance. Nevertheless, the growth in the overall economy,

and the development of health insurance, should ensure that the non-life segment achieves respectable

growth over the forecast period. Life insurance has clearly become a preferred conduit for the savings of

those Indian households that are wealthy enough to use it.

As of early 2013, the latest developments indicate that life insurers continue to deal with the clampdown on

the selling of unit-linked insurance plans (ULIPs) by the Insurance Regulatory and Development Authority

(IRDA) - notwithstanding that the regulator has eased the rules slightly. In part because of the move against

the sales of ULIPs, attributable to a more general uncertainty over the regulator's view in relation to single-

premium products and an exodus of agents from the industry, new business premiums shrunk in the year

ending March 2012 (which is identified as 2011 in the tables in this report). Nevertheless, overall life

premiums appear to have risen marginally - and should post single-digit growth in the year ending March

2013.

Most of the wildcards for the life segment over the longer term are positive. It remains to be seen, for

instance, whether the regulator will allow life insurance companies to distribute their products through the

(currently) tied agency network of Life Insurance Corporation of India (LIC) - the state-owned giant that

accounts for about three-quarters of all premiums written in the segment. Reports also suggest IRDA is

looking at ways to promote paperless record keeping - which should be good for the insurance companies

and, probably, their customers. In October 2012, the Ministry of Finance had indicated its in-principle

support for the general concept of banks establishing insurance broking subsidiaries. In early 2012, IRDA

published a report that highlighted that it understands the challenges that need to be overcome if micro-

insurance is to flourish in India.

As of mid-2013, the latest news from the non-life segment indicates that premiums continue to grow

rapidly. The trend of the last three years or so, in which non-life penetration has been falling (if gradually),

appears to have come to an end. It seems that the non-life companies have been able to pass onto their

customers the higher costs incurred in non-motor related lines (such as higher reinsurance premiums).



Within motor-related lines, the wildcard is the abolition of the pool from which compulsory motorists' third-

party liability (CMTPL) claims are paid. In the short term, this has required that the insurers take substantial

write-offs to recognise the increase in claims liability. However, they will have much greater scope to

benefit from efficiency in claims management. Whether or not they will be able to lift rates and premiums

for motor-related insurance remains to be seen. What is certain is that competition remains tough in the non-

life segment, as particular companies pursue premiums and market share ahead of profitability.

Table: Total Premiums, 2010-2017

2010 2011 2012e 2013f 2014f 2015f 2016f 2017f

Total premiums,INRmn

3,395,890 3,525,060 3,792,920 4,162,501 4,594,118 4,981,451 5,405,084 5,959,018

- % change y-o-y 10.0 3.8 7.6 9.7 10.4 8.4 8.5 10.2

- INR per capita 2,773 2,839 3,014 3,264 3,556 3,808 4,081 4,446

- % of GDP 4.7 4.2 4.0 3.9 3.9 3.8 3.7 3.7

Total premiums, US$mn 11,611 75,521 70,997 80,048 90,081 101,662 112,606 124,146

- % change y-o-y -81.8 550.4 -6.0 12.7 12.5 12.9 10.8 10.2

- US$ per capita 9 61 56 63 70 78 85 93

Total premiums,EURmn 8,753 54,332 55,903 59,737 70,930 82,652 93,838 103,455

- % change y-o-y -80.8 520.7 2.9 6.9 18.7 16.5 13.5 10.2

- EUR per capita 7 44 44 47 55 63 71 77

e/f = BMI estimate/forecast. Source: IRDA/BMI



SWOT

Insurance

India Insurance SWOT Analysis

Strengths ■ With around 325mn policies in force, India's life segment is probably the largest in the

world by that measure. This figure shows that life insurance is very well established as

a vehicle for organised savings - even if it is a long way from fulfilling its potential as a

conduit for organised savings.

■ Although new business premiums fell in the year to March 2012, and gross written

premiums achieved single-digit growth, it would be fair to describe the Indian life

segment as underdeveloped and fairly rapidly growing.

■ Life insurance is clearly well established as a conduit for organised savings by

households who are wealthy enough to use it.

■ The non-life segment grew by over one-fifth in the year to March 2012.

■ Many companies can access economies of scale.

Weaknesses ■ The dispute between SEBI and IRDA in 2010 about who should regulate ULIPs shows

that some demarcation lines in India's community of financial regulators are blurred.

■ The new rules governing ULIPs that IRDA introduced implied that consumers had

been paying excessive fees and that the products had perhaps been mis-sold.

■ The short-term impact of the new rules governing ULIPs has been to reduce

profitability and increase the pressure on the insurers to cut costs. Massive

reductions of staff and agents since mid-2010 would not have taken place without

significant demands on the managements of life companies.

■ The new rules for ULIPs have hit the profitability of the life segment hard at a time that

only a small minority of insurers are actually making money.

■ Consequently, the pressure to raise new capital - from an increase in the cap of

inwards foreign participation (currently 26%) or IPOs - has increased.



India Insurance SWOT Analysis - Continued

■ Despite the substantial absolute growth of recent years, there has not been a

meaningful increase in non-life penetration. It appears that much of the growth is

confined to motor-related lines and health insurance. There is no obvious catalyst for

a large expansion in non-life penetration over the forecast period.

■ The latest results for the state-owned non-life companies, in relation to the year to

March 2012, indicate that they have been pursuing growth at the expense of profit. As

with private sector insurers, they had to increase provisions in relation to the pool that

covers payments for CMPTL insurance.

Opportunities ■ One wildcard is that the lower costs, improved features and better selling of ULIPs

may cause sales volumes to surge.

■ Another wildcard is that the private sector gains access to the agency network of LIC

- which accounts for roughly half of the 2.6mn agents across India.

■ Provided that the insurers can develop the right products, there is significant potential

for growth from the number of first-time users of non-life and life insurance.

■ Even if the numbers of motor insurance policies doubled, in relation to CMTPL cover

and voluntary motor insurance (CASCO), there would still be large numbers of

uninsured motorists.

■ The restructuring of the Third Party Motor Pool implies substantial one-off costs and

charges for the insurers. However, it also represents a liberalisation that is positive in

that the insurers will be able to keep the benefits from efficiencies in claim

management.

■ The deal making in and around the healthcare and insurance area indicates that major

international companies are aware of the potential for growth in premiums and profit.

■ Bancassurance deals in the non-life and life segments indicate that insurers are

looking to partner with banks to boost their distribution reach and, in the life segment,

access to the new capital they need.

Threats ■ The proposed Direct Tax Code could adversely affect the attractiveness of shorter

maturity policies or products held by older policyholders.



India Insurance SWOT Analysis - Continued

■ Volatility in India's financial markets would curtail the life insurers' profitability further

and would greatly complicate any IPOs the life companies might want to undertake.

■ As highlighted in the Pre-Launch Survey Report of the Insurance Awareness

Campaign, commissioned by IRDA and released in mid-February 2012, there are a

number of challenges that need to be overcome if micro-insurance is to flourish in

India.



Business Environment

Business Environment SWOT Analysis

Strengths ■ India is now one of the biggest recipients of foreign direct investment (FDI) among

emerging markets, having attracted US$36.5bn of inflows in FY2011/12.

■ An inexpensive but skilled English-speaking labour force can do the jobs of Western

workers for a fraction of the wages paid in North America or Europe.

Weaknesses ■ Despite pockets of excellence, such as the IT sector, overall literacy rates in India

remain far lower than in other Asian and key emerging market nations.

■ India's infrastructure is notoriously inadequate. A 500km road journey can take as

much as 24 hours owing to poor road conditions, congestion and toll booths.

■ The competitiveness of local firms is undermined by reams of official red tape, from

foreign investment restrictions to inflexible labour laws.

■ Intellectual property rights are poorly protected in India. The country remains one of

the 12 countries on the 'priority watch list' for 2012 compiled by the Office of the US

Trade Representative.

Opportunities ■ India could enhance the competitiveness of local industry through further

liberalisation and deregulation.

■ Ongoing infrastructure projects ranging from roads, railways and airports are likely to

provide opportunities for foreign investors for many years to come.

■ Indian Prime Minister Manmohan Singh is eager to reform the banking sector in order

to increase the availability of long-term financing, particularly for large infrastructure

projects.

Threats ■ The arrival of Western players, including management consultants Accenture and

technology giant IBM, is bidding up local wages in the outsourcing sector. India faces

growing challenges from countries such as Vietnam, the Philippines and, potentially,

Bangladesh in a variety of sectors.



Business Environment SWOT Analysis - Continued

■ China still remains a major competitor for FDI flows into India. India has excessive

bureaucracy and poor infrastructure in comparison with China.

■ The November 2008 Mumbai terror attacks demonstrated that security issues will

remain a key investor consideration.



Economic

Economic SWOT Analysis

Strengths ■ India has a very large domestic market, and rising domestic demand is a major driver

of economic growth.

■ A vast supply of inexpensive but skilled labour has turned India into the back office of

the world. Around half of the population is younger than 25.

Weaknesses ■ Despite rapid economic growth, India remains a very poor country. According to BMI

estimates, India's GDP per capita was roughly US$1,600 in 2012, a third of the size of

China's.

■ Agriculture remains inefficient, and poor monsoon rains can slash rural incomes and

consumption. Two-thirds of the population depend on farming for their livelihood.

■ India runs chronic trade and fiscal deficits, both of which are near historic highs. The

government spends a significant part of its revenue on interest payments, subsidies,

salaries and pensions. This limits the amount of money available for infrastructural

improvements.

Opportunities ■ India's emerging middle class will continue to drive demand for new goods and

services. A wealthier society, combined with tax reforms, would serve to boost

revenue receipts, relieving fiscal pressure.

■ The government has implemented some tax reforms. A uniform goods and services

tax to be implemented in the near future should help boost compliance, thereby

raising government revenue.

■ With Chinese labour costs rising aggressively, India may well enjoy a manufacturing

boom in the coming years as multinational look to take advantage of a young,

competitive workforce and major transport network improvements.

Threats ■ India's dependency on oil imports is problematic. This undermines the trade balance

and makes India vulnerable to energy price-driven inflation.



Economic SWOT Analysis - Continued

■ India is at risk of severe environmental problems. Many of its cities' air and rivers are

heavily polluted, raising questions about the sustainability of the economy's rapid

growth.



Political

Political SWOT Analysis

Strengths ■ India is the world's largest democracy. A secular constitution, framed in 1950,

officially guarantees justice, liberty and equality while aiming to promote fraternity

among the citizenry. More than 1,000 political parties registered for the April-May

2009 general elections, competing for the preference of India's 714mn eligible voters.

■ Despite its multitude of problems, India has generally managed to avoid hard

authoritarian rule or military coups, which have happened in many other developing

countries, including India's neighbours Bangladesh, Myanmar and Pakistan.

Weaknesses ■ Large coalition governments complicate policymaking at the centre as coalition

partners and outside parties pursue their own agendas. The competence of state

government varies enormously across India's 35 states and union territories.

■ India's tense relationship with Pakistan still weighs on regional stability. The two

countries have gone to war three times since they were 'partitioned' on independence

from British rule in 1947.

■ Issues such as the ineffectiveness of the executive and judiciary in controlling

underhand practices, the apparent arbitrary allocation of government licences, and

the uneasy influence of special interest groups remain key investor concerns.

Opportunities ■ India has in recent years edged closer to the US in foreign policy. Both the US and

India are democracies and face threats from militant Islamists; this, combined with the

presence of a 2mn-strong affluent Indian diaspora in the US, is bringing the two

countries closer together.

■ Thawing relations with Pakistan has made it easier for the parties to defuse potentially

explosive situations, such as the Mumbai attacks in November 2008, which

Islamabad acknowledges were planned and launched from its territory.

Threats ■ India's growing regional rivalry with China, if unchecked, could lead to a more hostile

regional outlook.



Political SWOT Analysis - Continued

■ India has experienced a series of serious terrorist attacks over the past few years,

perpetrated by radical Islamist and rural Maoist groups. The surge in Naxalite attacks

has also raised the spectre of further violence.



Industry Forecast

Life

Table: Life Premiums, 2010-2017

2010 2011 2012e 2013f 2014f 2015f 2016f 2017f

Total lifepremiums,INRmn 2,865,000 2,870,720 3,014,256 3,270,355 3,574,258 3,825,577 4,097,468 4,478,676

- % changey-o-y 7.9 0.2 5 8.5 9.3 7 7.1 9.3

- INR percapita 2,340 2,312 2,395 2,565 2,767 2,924 3,094 3,341

- % of GDP 4 3.4 3.2 3.1 3 2.9 2.8 2.8

- % of totalpremiums 84.4 81.4 79.5 78.6 77.8 76.8 75.8 75.2

Total lifepremiums,US$mn 62,659 61,502 56,421 62,891 70,083 78,073 85,364 93,306

% changey-o-y 14.3 -8.3 11.5 11.4 11.4 9.3 9.3 -8.3

- US$ percapita 51 50 45 49 54 60 64 70

Total lifepremiums,EURmn 47,238 44,246 44,426 46,934 55,184 63,474 71,137 77,755

- % changey-o-y 20.6 -6.3 0.4 5.6 17.6 15 na na

- EUR percapita 39 36 35 37 43 49 54 58

e/f = BMI estimate/forecast; na = not available. Source: BMI/IRDA

Even as new business premiums have fallen, renewal premiums have been more than sufficient to

compensate. The data and news flow through late 2012 and early 2013 continue to highlight how life

insurance has become well entrenched as a conduit for organised savings of those Indian households who

can afford the premiums.

IRDA's figures indicate that, in the year to the end of March 2012, new business premiums amounted to

INR1,142,232mn, or about 9.2% less than in the corresponding period. The restrictions on the sale of ULIPs

have been the main problem. Over the year, the number of individual single premium policies in force fell

from 5.6mn to 2.8mn. The number of individual non-single premium policies dropped from 42.5mn to



41.4mn. New business premiums for group single premium products rose from INR263,567mn to

INR332,240mn; for group non-single premium products, from INR168,147mn to INR165,056mn.

Nevertheless, as we explain in the profile of SBI Life elsewhere in this report, renewal premiums have been

growing sufficiently rapidly that overall gross written premiums have been able to increase. We remain of

the view that, for the year to March 31 2012 (which is shown as 2011) gross written premiums achieved a

high single-digit rise. This is consistent with an increase in life density from US$51 in the year to March

2011 to US$54 in the year to March 2012. New business premium per new individual in-force policy is

running at around US$300. This suggests to us that, in spite of the problems with the ULIP regulations, and

the lack of financial education generally, life insurance is fairly well entrenched as a conduit for organised

savings among those Indian households who understand its benefits (and who can afford it).

Therefore, we think that it is reasonable to look for continued steady growth in life density through the

forecast period. We currently envisage that density will rise to US$70 per capita in 2017 (ie, the year to

March 31 2018).

A comparison of projected life density with forecast client deposits to the banking system is instructive.

Currently, density is tiny relative to per capita deposits. Notwithstanding that deposits include deposits of

corporate clients, it is fair to say that life insurance in India is a very long way from fulfilling its potential as

a conduit for organised savings. Notwithstanding that nominal premiums should grow significantly more

rapidly than deposits towards the end of the forecast period, this will remain the case in 2017.



Still A (Very) Small Part Of Organised Savings

Per Capita Deposits And Life Density (US$)

LIABILITIES: Client deposits, US$ per capita (LHS)LIFE PREMIUMS: Total life premiums, US$ per capita (RHS)

2010

2011

2012

2013

f

2014

f

2015

f

2016

f

2017

f

0

1,000

2,000

3,000

0

50

100

f = BMI forecast. Source: Reserve Bank of India, BMI, IRDA

Non Life

Table: Non-Life Premiums, 2010-2017

2010 2011 2012e 2013f 2014f 2015f 2016f 2017f

Total non-life premiums,INRmn

530,890 654,340 778,664 892,146 1,019,860 1,155,874 1,307,616 1,480,342

- % change y-o-y 22.3 23.3 19.0 14.6 14.3 13.3 13.1 13.2

- INR per capita 434 527 619 700 789 884 987 1,104

- % of GDP 0.7 0.8 0.8 0.8 0.9 0.9 0.9 0.9

- % of total premiums 15.6 18.6 20.5 21.4 22.2 23.2 24.2 24.8

Total non-life premiums,US$mn 11,611 14,019 14,575 17,157 19,997 23,589 27,242 30,840

- % change y-o-y 29.5 20.7 4.0 17.7 16.6 18.0 15.5 13.2

- US$ per capita 9 11 12 13 15 18 21 23

Total non-life premiums,EURmn 8,753 10,085 11,477 12,803 15,746 19,178 22,702 25,700

- % change y-o-y 36.7 15.2 13.8 11.6 23.0 21.8 18.4 13.2



Non-Life Premiums, 2010-2017 - Continued

2010 2011 2012e 2013f 2014f 2015f 2016f 2017f

- EUR per capita 7 8 9 10 12 15 17 19

e/f = BMI estimate/forecast. Source: IRDA/BMI

Official data indicate that the decline in non-life penetration has ended, which is significant given that many

of the companies in the market have reported that they find competitive conditions challenging.

In spite of mixed economic conditions, general trends remain favourable for India's non-life insurers. The

number of people who are using insurance is increasing. In general, it is reasonable to expect that most

people who use insurance over the coming years will have greater disposable income. Crucially, the

numbers and value of risks that need to be covered are increasing.

Not Driven By Auto-Related Lines

Year-On-Year Growth In Vehicle Sales And Non-Life Premiums %

Vehicle sales, units, % chg y-o-y (LHS)Total non-life premiums, INR, % change y-o-y (RHS)

2010

2011

2012

2013

f

2014

f

2015

f

2016

f

2017

f

0

10

20

30

0

10

20

30

f = BMI forecast. Source: BMI, SIAM, IRDA



This is most obvious from BMI's projections of construction spending in India (covering both building -

residential and non-residential - and non-building infrastructure. We are looking for steady growth in real

terms through the forecast period. After allowing for inflation, this should underpin an increase in premiums

in non-life insurance, which surpasses nominal GDP. We note that, unlike its counterparts in many other

developing countries, India's non-life segment includes a fairly limited number of players, many of which

have scale. Although they are restricted to holding no more than 26% in the joint venture businesses that

they invest in, world-class multinationals can and do play a significant role in the direction of their Indian

businesses. This means that they are well placed to foment the introduction of innovative products and to

ensure discipline in pricing.

Boosting Premium Growth In The Short Term

Year-On-Year Growth In Private Healthcare Spending And Non-Life Premiums %

Private health expenditure, INRbn, % chg y-o-y (LHS)Total non-life premiums, INR, % change y-o-y (RHS)

2010

2011

2012

e

2013

f

2014

f

2015

f

2016

f

2017

f

5

10

15

0

10

20

30

e/f = BMI estimate/forecast. Source: World Health Organization (WHO), BMI, IRDA

Overall, BMI is looking for non-life premiums to grow more rapidly than private healthcare spending. We

would suggest that the development of health premiums will be a contributor to the overall growth of the

non-life segment, but not an overwhelmingly important one. On balance, we expect that prices and rates

will remain reasonably firm in what is a fairly new, and uncrowded, market. Health insurance premiums

should also be boosted by growing numbers of first-time users.



BMI is also looking for motor vehicle sales to increase more slowly than non-life premiums through the

forecast period. In other words, the growth in the numbers of vehicles on the road will not likely be the

main driver of the expansion of non-life insurance. Nevertheless, we are reasonably confident that the non-

life companies will be able (and willing) to increase prices and rates for motor-related lines as the insurers

get better data about the incidence and costs of accidents.

More Buildings And Infrastructure To Cover

Real Growth In Construction Spending And Nominal Growth In Non-Life Premiums %

Construction industry, real growth, % y-o-y (LHS)Total non-life premiums, INR, % change y-o-y (RHS)

2010

2011

2012

e

2013

f

2014

f

2015

f

2016

f

2017

f

6

8

0

10

20

30

e/f = BMI estimate/forecast. Source: Reserve Bank of India, IRDA, BMI



Industry Risk Reward Ratings

Table: India's Insurance Risk/Reward Ratings

Data

Sub-ratingscore,

out of 10

Rating score,

out of 100

Rewards 62.7

Industry rewards 67.5

- Of which non-life 60.0

Non-life premiums, 2012, US$mn 14,620.7 6.0

Non-life premium increase, 2012-2016, US$mn 11,847.3 9.0

Non-life penetration, 2012,% 0.7 2.0

Measure of openness 6.0 6.0

-Life 75.0

Life premiums, 2012, US$mn 83,471.8 9.0

Life premium increase, 2012-2016, US$mn 40,367.0 10.0

Life penetration, 2012,% 4.1 8.0

Measure of openness 4.0 4.0

Country rewards 55.4

GDP per capita, 2012, US$ 1,591.2 3.0

Active population, 2012, % of total 65.3 7.0

Tax regime 25.5 2.5

GDP volatility 1.6 8.0

Financial infrastructure 71.5 7.1

Risks 57.1

Regulatory framework 45.0

Regulatory framework and development 6.0 6.0

Regulatory framework and competitive landscape 3.0 3.0

Country risks 65.2

Long-term financial risk 68.3 6.8

Long-term external risk 56.7 5.7

Long-term policy continuity 80.0 8.0



India's Insurance Risk/Reward Ratings - Continued

Data

Sub-ratingscore,

out of 10

Rating score,

out of 100

Legal framework 65.4 6.5

Bureaucracy 55.3 5.5

Insurance Risk/Reward Rating 61.0

Source: BMI

India Risk/Reward Rating

In terms of its Insurance Risk/Reward Rating (IRRR), India is a middle-ranking country in the context of

the Asia-Pacific. The IRRR is boosted by the absolute size of both the life and the non-life segments.

However, it is constrained by the underdevelopment of insurance (by some metrics). Further, the

challenging regulatory environment and tax regime also serve to lower the IRRR.

Asia-Pacific Industry Risk/Reward Ratings

Since 2008, we have taken a much more systematic approach to assessing current and potential conditions

of the insurance sectors in each of the countries surveyed by BMI. We have calculated the Insurance Risk/

Reward Rating (RRR), which takes into account objective measures of the current state and long-term

potential of both the non-life and the life segments. It also takes into account an assessment of the openness

of each segment to new entrants and economic conditions. Collectively, these measures enable an objective

assessment of the limits to potential returns across all countries and over time.

The rating also incorporates an objective assessment of the risks to the realisation of returns. The risk

assessment is based on BMI's Country Risk ratings. It embodies a subjective assessment of the impact of

the regulatory regime on the development and the competitive landscape of the insurance sector.



Table: Asia-Pacific Insurance Risk/Reward Ratings

Rewards Risks Overall rating

Industry

RewardsNon-

Life - LifeCountry

Rewards RewardsRegulatoryFramework

CountryRisks Risks Rating Rank

Singapore 71.25 67.50 75.00 79.18 74.42 95.00 84.44 88.67 78.69 1

South Korea 81.25 82.50 80.00 77.09 79.58 60.00 78.92 71.35 77.11 2

Hong Kong 70.00 60.00 80.00 79.93 73.97 100.00 66.64 79.98 75.77 3

Taiwan 70.00 65.00 75.00 69.72 69.89 70.00 78.62 75.17 71.47 4

Malaysia 62.50 57.50 67.50 73.11 66.74 75.00 71.86 73.12 68.65 5

New Zealand 43.75 47.50 40.00 82.71 59.33 90.00 87.45 88.47 68.07 6

Australia 56.25 57.50 55.00 63.12 59.00 90.00 81.81 85.08 66.82 7

Thailand 61.25 57.50 65.00 63.59 62.18 70.00 62.11 65.27 63.11 8

China 70.00 67.50 72.50 53.70 63.48 55.00 64.63 60.78 62.67 9

Japan 48.75 45.00 52.50 71.88 58.00 55.00 84.28 72.57 62.37 10

India 67.50 60.00 75.00 55.39 62.65 45.00 65.15 57.09 60.98 11

Philippines 45.00 45.00 45.00 61.52 51.61 75.00 59.37 65.62 55.81 12

Indonesia 56.25 50.00 62.50 48.07 52.98 55.00 56.96 56.17 53.94 13

Vietnam 35.00 37.50 32.50 38.88 36.55 55.00 40.97 46.58 39.56 14

Sri Lanka 21.25 22.50 20.00 51.03 33.16 45.00 47.97 46.78 37.25 15

Pakistan 23.75 25.00 22.50 51.33 34.78 40.00 33.92 36.35 35.25 16

Bangladesh 21.25 20.00 22.50 31.29 25.27 20.00 47.40 36.44 28.62 17

Scores out of 100, with 100 the best. Source: BMI



Market Overview

Life Sector Update

As of mid-2013, the life companies continue to deal with the disruption arising from regulatory changes in

mid-2010 that restricted the sales of unit-linked insurance plans (ULIPs). There are early signs that the life

sector may be moving towards greater Open Architecture, and a new regime in which companies can

distribute their products through the enormous network of agents who are tied to Life Insurance

Corporation of India (LIC).

Goodbye ULIP Woes, Hello Open Architecture?

Many of the developments in India's life segment since May 2010 have been related to regulatory changes

concerning ULIPs, the effects of which have been to slow sales, restrict the growth in premiums and to

increase pressures of life insurance companies to take further steps to cut costs, given that they had already

been shedding staff in 2009.

In October 2010, the regulator imposed a ban on the sale of universal life plans (ULPs), which are

traditional life insurance products whose returns - unlike those of typical endowment products - are not

linked to 'bonuses' announced by the insurer. Because of their flexibility, they had some similarities to the

ULIPs. The ULPs were offered by four private sector insurers - Max New York Life (now Max Life),

Aviva Life, Bharti Axa Life and Reliance Life.

At the end of 2011, the regulator eased the rules governing ULIPs slightly. The insurance companies that

issue ULIPs no longer have to include a guaranteed return that is linked to the reverse repo rate of the

Reserve Bank of India. Instead, they will need to specify a particular return and a policy benefit. Further,

the new rules mean that the ULIPs themselves will be able to invest in risk assets such as equities. Some life

insurance companies think that, under this new regime, it will be easier to develop and sell ULIPs that are

attractive for the insurers (in that they do not guarantee impossibly high returns) and, for the customer, in

that the ULIPs have the capacity to invest in higher-returning assets than previously.

The information made available in late 2011 and through H112 indicate that the life insurance companies

have responded positively and proactively to the sharp drop in new business premiums that has resulted

from the restrictions on ULIPs. Specific examples are outlined elsewhere in this report in the detailed

profile of SBI Life, the joint venture between State Bank of India (SBI) and BNP Paribas Cardif, which

is the largest private sector life company. However, in general, the life insurance companies have sought to:



promote renewal premiums and products that are not affected by the restrictions; innovate in terms of

product development; improve customer service; and develop both new and existing distribution channels.

Several of these initiatives require that the life insurers undertake substantial investment in new Information

Technology systems. As we note below, it appears that, in spite of the disruption caused by the changes to

the regulations governing ULIPs, and a double-digit fall in new business premiums from individual clients,

gross written premiums have continued to grow.

Press reports in mid-2012 indicated that over 300,000 insurance agents had left the industry over the

preceding year or so, with the result that the total had fallen to below 2.38mn. This was partly because

regulations governing the sale of ULIPS and some other products made them more difficult to sell and

partly because regulatory pressure caused the commissions that are paid to agents to drop. Many agents sell

insurance as a sideline to their main job or business and have the flexibility to become agents for credit

cards or other financial products.

A positive wildcard is that, under the direction of IRDA, the life insurance segment moves to (largely)

paperless record-keeping. SBI Life has already taken steps to reduce the paperwork involved with policy

approvals and claims. Press reports in February 2012 have suggested that the IRDA is in the process of

selecting data repositories. Any movement towards paperless record-keeping should reduce the operating

costs of the life insurers and/or make it easier for them to introduce new products.

Another wildcard for the segment is the possibility that IRDA will allow private sector insurers to distribute

their products via the tied agents of LIC. Currently, the insurers work only through tied agents. However,

access to the agency force of LIC, which accounts for about half of all active agents, would give the insurers

much greater scope to distribute their products. At the beginning of October 2012, the Ministry of Finance

indicated that it approves, in principle, the concept of banks acting as insurance brokers. The ministry would

require that the relevant personnel clearly have the requisite training and skills, that the banks who wished

to enter the business acquire the necessary licence and conduct broking activities through a separate

subsidiary established specifically for the purpose.

The bottom line is that India may be moving towards a situation where it becomes possible for any one

insurer to distribute its products through the branch networks of several (unaffiliated) banks or through the

agency network of LIC. From the point of view of the banks (and LIC), there is the possibility of profits

through Open Architecture - the maintenance of relationships with multiple providers of products.



Non Life Sector Update

As of mid-2013, it appears that growth in premiums has been constrained by brutally competitive conditions

in recent months. Further, the profitability of some players has suffered as a result of the restructuring of the

Third Party Motor Pool.

In July 2012, IRDA published provisional premium data for the non-life segment in relation to the fiscal

year to March 2012. Gross written premiums amounted to INR583,565mn, a 23% rise relative to the

INR473,552mn of the previous corresponding period.

As had been in the case in previous years, the business was spread reasonably well over a number of lines.

In the March 2012 fiscal year, the five largest lines in terms of gross written premiums were the following:

health INR133,450mn; voluntary motor (CASCO) INR142,821mn; compulsory motor third-party liability

(CMTPL) INR98,938mn; fire INR55,345mn; and marine INR28,511mn. Between INR10,000mn and

INR23,000mn in gross premiums were written in each of marine cargo, marine hull, engineering, liability

and personal accident insurance.

Meanwhile, absolute growth remains concentrated in relatively few areas. As the figures noted above

indicate, the segment grew in absolute terms by just over INR110,020mn. Compulsory Motor Third Party

Liability alone accounted for INR31,690mn of this. The other three key areas of growth were motor

CASCO (INR25,990mn), health (INR21,000mn) and fire (INR8,990mn).

In broad terms, the competitive landscape remains unchanged. Public sector insurers accounted for

INR341,261mn of gross written premiums of the segment in the year to the end of March 2012. New India

Insurance remains the largest player overall, with gross written premiums in India (ie, as opposed to

outside the country) of INR85,357mn. National Insurance, United India Insurance and Oriental

Insurance wrote premiums of INR77,850mn, INR81,793mn and INR60,440mn respectively. The

premiums written by the Export Credit Guarantee Corp. and the Agricultural Insurance Corporation

amounted to INR10,051mn and INR25,771mn respectively. Of the 18 private sector companies, the five

largest were ICICI Lombard (with premiums of INR51,501mn, including INR15,000mn in health

insurance premiums), Bajaj Allianz (INR33,335mn), IFFCO Tokio (INR20,084mn), HDFC ERGO

(INR18,731mn) and Reliance (INR17,125mn). Tata AIG (INR16,974mn) and Royal Sundaram

(INR14,908mn) followed. Apollo Munich, the largest specialist health insurance provider, wrote

INR11,367mn in premiums.



Comments from the various non-life companies since mid-2012 have highlighted five themes. The growth

in premiums is partly the result of steady growth in the overall economy. However, it is also in part the

consequence of higher tariffs for motor-related lines, as IRDA encourages moves to boost the profitability

and sustainability of motor insurance. This is the second theme that has featured quite prominently in press

commentary in recent months.

Third, General Insurance Corporation (GIC), the state-owned reinsurer through which India's non-life

companies are required to buy at least 10% of their reinsurance cover, has increased its tariffs by 15%. GIC

is acting in a similar manner to its counterparts in the rest of the world, which are passing on the massive

losses incurred as a result of natural catastrophes in 2011. Whether or not the non-life companies are able to

pass on these increases, at a time that India's economy is slowing and the companies are lifting tariffs for

motor insurance, remains to be seen.

Fourth, the restructuring of the Third Party Motor Pool, as mandated by IRDA, is having an adverse impact

on the short-term profitability of non-life insurers. This is because they have to take a substantial charge in

order to reflect increased claims liability. ICICI Lombard, for instance, has made a one-off charge to its

earnings in relation to the March 2012 year. However, the regulator has allowed the insurers to take charge

over three years if they wish. Over the longer term, though, the closure of the Third Party Motor Pool is

positive in that the insurers will have greater scope to benefit from efficiencies in claim management.

Fifthly, conditions remain brutally competitive. The comparatively slow growth of (and comments from)

the private sector players indicate that they are taking a selective approach to the risks that they underwrite.

By contrast, New India Insurance, the largest of the public sector insurers, has suffered substantial

underwriting losses for the second consecutive year. (New India's underwriting outside the country also had

to endure sizeable claims losses). Our impression is that this company has been pursuing growth at the

expense of profitability.



Industry Trends And Developments

Life Growth Drivers and Risk Management Projections

Population

Over the recent past, growth in the life segment has been constrained by the restrictions on the sale of

ULIPs. Nevertheless, it is clear that life insurance plays a key role as a conduit of organised savings by

those Indian households who can afford the premiums. BMI expects that the segment will achieve low

double-digit growth through the forecast period.

Table: Insurance Key Drivers, Demographics, 2010-2017

2010 2011 2012e 2013f 2014f 2015f 2016f 2017f

Population, mn 1,224.61 1,241.49 1,258.35 1,275.14 1,291.78 1,308.22 1,324.44 1,340.42

- % change y-o-y 1.40 1.38 1.36 1.33 1.31 1.27 1.24 1.21

Population, total, male, '000 632,547 641,015 649,474 657,896 666,241 674,475 682,586 690,574

Population, total, female, '000 592,068 600,477 608,877 617,241 625,540 633,746 641,849 649,846

Population by age group, '000

0-4 years 127,979 128,542 128,557 128,198 127,724 127,332 126,888 126,507

5-9 years 123,985 124,261 124,708 125,270 125,801 126,111 126,439 126,548

10-14 years 122,622 122,664 122,736 122,832 122,974 123,199 123,581 124,070

15-19 years 120,369 120,828 121,192 121,467 121,672 121,828 121,946 122,012

20-24 years 114,273 115,503 116,652 117,688 118,569 119,279 119,842 120,238

25-29 years 104,865 106,538 108,244 109,927 111,508 112,941 114,272 115,457

30-34 years 94,561 96,436 98,236 99,977 101,700 103,426 105,181 106,913

35-39 years 82,875 84,712 86,757 88,917 91,048 93,062 94,998 96,817

40-44 years 73,759 75,196 76,604 78,036 79,588 81,314 83,189 85,237

45-49 years 64,181 65,571 67,117 68,755 70,388 71,961 73,417 74,822

50-54 years 55,727 56,767 57,910 59,154 60,491 61,918 63,308 64,833

55-59 years 46,753 48,229 49,424 50,458 51,508 52,675 53,709 54,822

60-64 years 32,385 34,126 36,281 38,623 40,828 42,714 44,113 45,255

65-69 years 23,992 24,484 25,030 25,738 26,765 28,186 29,781 31,722

70-74 years 17,451 17,791 18,123 18,484 18,906 19,411 19,872 20,347

75+ years 18,834 19,843 20,779 21,613 22,310 22,864 23,898 24,820

Dependent and active populations, '000

Dependent population 434,865 437,585 439,933 442,135 444,479 447,103 450,459 454,014



Insurance Key Drivers, Demographics, 2010-2017 - Continued

2010 2011 2012e 2013f 2014f 2015f 2016f 2017f

- % of total working age 55.06 54.43 53.75 53.08 52.46 51.92 51.54 51.22

Active population 789,750 803,907 818,418 833,003 847,301 861,118 873,976 886,407

- % of total 64.49 64.75 65.04 65.33 65.59 65.82 65.99 66.13

Youth and Pensionable populations, '000

Youth population 374,587 375,467 376,001 376,300 376,498 376,641 376,908 377,124


Pensionable population 60,278 62,117 63,932 65,835 67,981 70,462 73,551 76,889


Life expectancy at birth, male,years 62.80 63.13 63.46 63.78 64.11 64.44 64.71 64.98

Life expectancy at birth, female,years 65.73 66.11 66.49 66.86 67.24 67.62 67.93 68.24

Urban popn. % of total 30.00 30.32 30.64 30.96 31.28 31.60 31.98 32.36

Rural popn. % of total 70.00 69.68 69.36 69.04 68.72 68.40 68.02 67.64

Urban popn, total, '000 367,384 376,420 385,559 394,783 404,069 413,398 423,554 433,760

Rural popn, total, '000 857,230 865,072 872,792 880,355 887,711 894,823 900,881 906,660

Source: World Bank/UN/BMI

Non Life Growth Drivers and Risk Management Projections

Macroeconomic Outlook

Growth Upturn To Gain Traction In FY2013/14

BMI View: We remain above consensus on India's economic growth outlook, forecasting headline

expansion of 5.5% and 6.1% for FY2012/13 and FY2013/14 (versus market expectations of 5.3% and 5.5%

respectively). Conditions are sufficiently ripe for investment spending to lead a growth upturn, aided at the

margin by an improving export performance. The government's persistent fiscal failings will prevent a more

pronounced growth recovery, by keeping interest rates high and weighing on overall investor sentiment. A

possible ratings downgrade, while not our core scenario, is arguably the greatest risk to our benign

outlook.



Despite struggling to gain a solid footing in the latter half of 2012, we believe that the Indian economy is

well poised to see an upturn in real GDP growth in the final quarter of FY2012/13 (April-March) and into

FY2013/14. We are forecasting headline expansion of 5.5% and 6.1% for FY2012/13 and FY2013/14,

which makes us more constructive on India's growth story than consensus.

There is an assortment of significant economic data that suggest a growth upturn is already under way.

Firstly, India's manufacturing purchasing managers index (PMI) came in at a six-month high of 54.7 in

December, while the services metric registered a healthy outturn of 55.6. Taken together as a simple

average, these PMI figures would suggest a decent finish to the year for the Indian economy. Secondly, the

OECD's composite leading indicator (CLI) provides further confirmation of a bottoming out of the

economy. Finally, we note the pervasive strength of India's equity market, which, as we have shown in the

past, provides strong leadership for industrial production trends. The benchmark Sensex soared to its

highest level in two years in early January, with cyclical stocks driving market gains (a bullish macro signal,

in our view).

From our perspective, conditions are sufficiently ripe for investment spending to lead an upturn in overall

economic growth. Below, we outline some of the factors underpinning this view.

RBI On The Cusp Of Easing: The recent retreat in price pressures will provide the Reserve Bank of India

(RBI) room to cut rates by at least 50 basis point in the coming months, which should provide a decent

tailwind to investment activity. Wholesale price inflation (WPI) came in at a 36-month low of 7.2% year-

on-year (y-o-y) in December on the back of a retreat in core price pressures (non-food and fuel items

increased by just 5.0% y-o-y). Moreover, when measured on an annualised month-on-month 3mma basis,

wholesale prices actually fell (by 0.5%) for the first time since March 2009. This should provide the RBI

with sufficient comfort to start monetary easing before long, probably in two 25bps instalments. Financial

conditions have already started to ease, with AAA-rate corporate bond yields falling 80bps since September

2012.

Business Confidence Improving: After falling for most of 2012, business confidence readings appear not

only to have stabilised, but also to have exhibited some mild improvements in areas such as sales and profit

outlooks and new orders. And after several years on the defensive, we believe that both local and foreign

firms may look to resume capital spending plans this year. Domestic and external financial conditions are

conducive, return on investment remains attractive, and, crucially, the government has made efforts to

expedite project approvals, liberalise investment regimes, and delay the controversial retrospective tax

legislation on foreign companies. The recent 'Vibrant Gujarat' summit has seen over INR1.6trn (US$29.4bn)



in investment commitments, with Reliance Industries, India's largest conglomerate, pledging INR1trn over

the next three years. We note that foreign direct investment (FDI) has been on an upward trajectory for a

few quarters now, and now stands at all-time highs on a 12-month moving average basis.

Re-Stocking Boost In Order: Even if our expectations of a capex upturn are not forthcoming, Indian

companies will have to invest in new inventory as part of the natural restocking cycle. We have seen three

straight quarters of negative y-o-y growth in stock building for the first time since the 2008-09 global

downturn, and replenishment looks to be well overdue.

Exports To Help At The Margin

Our global outlook has brightened somewhat of late due to upward revisions in our China and US 2013

growth forecasts. This should provide some relief to Indian exporters, who have struggled of late. We note

that India is significantly exposed to the eurozone economy (accounting for roughly a fifth of exports), but

even the currency bloc has seen tail risks soften somewhat and there is a chance that growth could surprise

extremely deflated expectations. India's service exports, meanwhile, stand to do quite well from a potential

pick-up in the US corporate capex cycle. On balance, we believe that net exports will at the very least not

provide a drag to headline growth, and could possible act as a positive tailwind for the first half of

FY2013/14.

Risks To Outlook: Politics As Usual

Despite our sanguine outlook, we are not expecting a particularly forceful recovery in economic growth in

the coming fiscal year. Our FY2013/14 real GDP growth forecast of 6.1% would be well below the 10-year

trend growth rate of 8.0%. While a weaker external climate goes some way to explain this, we believe that

the government's persistent fiscal failings are perhaps the largest impediment to stronger growth. New

Delhi's failure to rein in the fiscal deficit has been a major reason behind India's struggles with stubborn

inflation, historically high interest rates and a record current account shortfall. These factors have, in turn,

exhausted investor patience with India's growth story.

In a worst case scenario, in which the government fails to make any progress on deficit reduction in the

coming months, there is a possibility that India will lose its coveted investment grade status. Fitch Ratings

and Standard & Poor's, two of the 'Big Three' agencies, have already sounded out warnings on this front. A

downgrade to junk would knock any nascent investment rebound off track, and potentially see Indian real

GDP growth languish in the low-to-mid single digits for an extended period.



Table: India - Economic Activity

2010 2011 2012e 2013f 2014f 2015f 2016f 2017f

Nominal GDP,INRbn 1,6 71,574.10 82,326.50 93,331.50 105,508.60 119,022.70 132,510.10 146,861.30 162,883.40

Nominal GDP,US$bn 2,6 1,572.17 1,808.35 1,744.51 2,029.01 2,333.78 2,704.29 3,059.61 3,393.41

Real GDPgrowth, %change y-o-y 3,6 8.4 6.5 5.5 6.1 6.7 6.5 6.6 6.6

GDP per capita,US$ 6 1,284 1,457 1,386 1,591 1,807 2,067 2,310 2,532

Population, mn 7 1,224.60 1,241.50 1,258.40 1,275.10 1,291.80 1,308.20 1,324.40 1,340.40

Industrialproductionindex, % y-o-y,ave 4,6 8.3 3.1 3.5 6.5 8.5 8.8 8 7.5

Unemployment,% of labourforce, eop 5,8 10.8 8 10.5 10.5 9.5 8 8 8

e/f = BMI estimate/forecast. 1 GDP @ Factor Cost, Fiscal years ending March 31 (1990 = 1990/91); 2 2011 = FY2011/12,GDP @ Factor Cost, f = BMI forecast; 3 2011 = FY2011/12, Factor Cost, f = BMI forecast; 4 New series used from2005/06 onwards; 5 No official time series data on Indian unemployment; CIA Factbook offers best alternative proxy.National Sample Survey Organization (NSSO) also calculates unemployment rate, but surveys conducted every five years.Labour bureau published first employment survey. Source: 6 Central Statistics Organisation/BMI; 7 World Bank/UN/BMI;8 CIA World Factbook.

Political Stability Outlook

What Would A Modi Premiership Mean For Investors?

BMI View: Following a comprehensive victory in December's Gujarat state polls, Bharatiya Janata Party

(BJP) heavyweight Narenda Modi is in pole position to lead the opposition bid in the 2014 general

elections. Business-friendly policies and a strong economic track record in Gujarat suggest that a Modi-led

national government would sit well with foreign investors. Still, given that the chief minister remains a

divisive figure and that the opposition has failed to fully capitalise on the ruling Indian National

Congress(INC)'s eroding support base, we believe that the BJP would struggle to win an outright majority

and would therefore see its policy agenda hamstrung by coalition politics in a similar vein to the current

administration.

After a hectic 12 months of corruption scandals, coalition fracturing and the revival of reform, 2013 looks

set to be a somewhat quieter year in Indian politics. We forecast a gradual pick-up in real GDP growth amid

moderating inflation pressures, which should help restore public perceptions on the Indian National



Congress (INC)'s management of the economy. Moreover, the state electoral calendar is relatively light

until November, with Karnataka the only major state headed for the ballot box in H113. All eyes, therefore,

will turn to the general elections slated for 2014 in which we foresee a tightly fought contest between the

INC-led and Bharatiya Janata Party (BJP)-led alliances. At this stage, we believe that the BJP holds a slight

edge given the ruling United Progressive Alliance (UPA)'s weak popular standing, a general history of anti-

incumbency in Indian politics and the rise to national prominence of opposition heavyweight Narendra

Modi.

Following a comprehensive victory in the Gujarat state polls, it looks increasingly likely that Narendra

Modi will lead the opposition bid in the 2014 general elections. Modi won his third successive term as chief

minister of Gujarat in December 2012 by securing 115 seats of the 182 on offer (almost double that of the

INC). Furthermore, polling over the past 12 months suggests that Modi's popularity is not just confined to

his home state. According to the India Today-Nielsen 'Mood Of The Nation 2012' survey carried out in

August 2012, 21% of those polled thought that Modi would make the best prime minister, 11 percentage

points higher than his nearest rival, the INC's candidate-in-waiting Rahul Gandhi. While we recognise that

there are other viable contenders, the opposition party will surely look to leverage on his popular standing

and media influence in a bid to regain the centre for the first time in a decade.

Gujarat A Shining Example For India

Business-friendly policies and a strong economic track record in Gujarat suggest that a Modi-led national

government would sit well with foreign investors. To a large extent, Modi's enduring success in Gujarat can

be attributed to the state's formidable economic performance under his watch. Gross state domestic product

(GSDP) for Gujarat has consistently outperformed the national benchmark since 2002, clocking an average

annual clip of 10.5%. This impressive rate of economic expansion has been sustained by generally pro-

business policies, which has also seen Gujarat coined the 'Guangdong of India'. As we noted last year (see

'The State Of The Economy: A Regional Perspective', October 22 2012), Gujarat remains a national

bellwether in terms of economic freedom and ease of conducting business, allowing the state to thrive

despite challenging domestic and external macro conditions. The state's main port at Mundra saw container

traffic increase 16.7% y-o-y in the April-November 2012 period, bucking the falling trend seen in the likes

of Jawaharlal Nehru Port and Chennai. It came as little surprise to us, therefore, that both Ford Motor and

Suzuki Motor Corporation have earmarked the state as a production hub for small cars (see 'Gujarat's

Infrastructure Wins It For Suzuki', December 3 2012). In our view, more multinationals are likely to follow

suit following December's results. With Modi also enjoying strong support from Indian business leaders, a

potential premiership bid would therefore be viewed as a major positive by foreign investors.



New Administration Would Face Familiar Constraints

On balance, we believe that a Modi-led national government would be a net positive for India's

attractiveness as a destination for investment. We are cautious about overplaying the significance of such a

scenario. We see a number of familiar issues that would remain key challenges to India's political landscape

and business environment.

Firstly, Modi is still a hugely divisive figure, both outside and inside of his own party. The chief minister's

reputation remains sullied by a perceived lack of responsiveness during the 2002 Hindu-Muslim riots in

Gujarat, which resulted in widespread violence and a death toll of above 1,000. While investigators have

since cleared him of any wrongdoing, it remains to be seen whether Modi will be able to spearhead a

durable coalition. For instance, Nitish Kumar, who leads the Janata Dal (United), one of the BJP's strongest

allies in parliament, has stated that he would withdraw his party's support should Modi be nominated as its

prime ministerial candidate. Such acrimony is a concern. Divisions within the current UPA government

have played a major role in the lack of reform momentum in recent years.

Secondly, we note that BJP has failed to fully capitalise on the eroding popularity of the INC. The party has

failed to flesh out a cohesive economic policy platform, and is instead defined much more by its pro-Hindu

traditions and anti-incumbent stance. For example, despite originally championing foreign direct investment

(FDI) in multi-brand retail while in power back in 2004, the BJP has fervently opposed the government's

attempts to liberalise the sector this time around. Furthermore, the BJP's frequent parliamentary walkouts

have allowed the government to portray the opposition as an obstructive political force, and this is believed

to have hurt the BJP within some of its core support bases, including the middle classes and urban voters.

Despite its victory in Gujarat, the BJP was replaced by the INC in the Himachal Pradesh state elections last

December.

With these factors in mind, we believe that the BJP would struggle to win an outright majority and would

therefore see its policy agenda hamstrung by coalition politics in a similar vein to the current administration.

The BJP's previous stint in power in 1998/99 was formed on the back of a fractious coalition, and any

success in 2014 would likely occur under a similar scenario. Given the rise to prominence of smaller,

regional parties - all with localised political agendas - it would be difficult for a Modi-led administration to

devise and implement economic policies at a national level. Much of Modi's success in Gujarat can be

attributed to his party's political dominance in the state. A lack of political dominance nationwide would

make it extremely difficult for Modi to replicate his Gujarat growth model across India as a whole.

Ultimately, we believe that investors will continue to require a state-specific strategy towards Indian



investment, as the relative appeal of doing business will depend on the political backdrop and business

environment at a regional level.

Table: Asia Pacific Regional Security Ratings

State Interstate Terrorism Criminal Compositedomestic risk

Regionalrank

Compositesecurity risk Ranking

Singapore 91 87 99 93 1= 92 1

Australia 98 83 92 88 4 91 2=

Japan 90 92 91 91 3 91 2=

Taiwan 71 95 79 87 6= 82 4

South Korea 68 86 88 87 5 81 5

Malaysia 81 84 69 77 8 78 6=

North Korea 48 98 88 93 1= 78 6=

Vietnam 60 98 71 85 6= 76 8

China 80 85 59 72 9 74 9=

Thailand 84 66 71 68 10 74 9=

Indonesia 88 68 52 60 11 69 11

Philippines 84 49 40 45 13 58 12

India 68 47 53 50 12 56 13

Pakistan 46 26 37 31 14 36 14

Scores out of 100, with 100 the highest. The 'Composite security risk' is the principal rating. It comprises 'Interstate' risk -the risk of becoming a primary party to an interstate conflict that threatens significant damage to homeland; 'Terrorism'risk - the risk of terrorist groups (domestic or international) being able to launch a major attack/sustained campaign; and'Criminal' risk the risk of (politically motivated) violence against expatriate workers. Each of the three risks is given equalweighting. The 'Composite domestic risk' rating comprises 'Terrorism' and 'Criminal' risk, each of which is given equalweighting. Each rating (State, Terrorism, Criminal) is assessed subjectively by our analysts within a clearly definedmethodology, incorporating a minimum of six conceptually distinct elements. Source: BMI

Healthcare Insurance

Healthcare Sector

Healthcare services are provided by public and private sectors, the latter having developed in the latest

decades when India embraced privatisation. The Ministry of Health and Family Welfare (MoHFW)

comprises the Department of Health and Family Welfare, the Department of AYUSH, the Department of

Health Research and the Department of AIDS Control, each of which is headed by a Secretary to the

Government of India. The Ministry of Health and Family Welfare is responsible for the implementation of

national health and family welfare programmes, such as the prevention and control of major communicable

diseases, maternal and child health and family planning, as well as the promotion of traditional and



indigenous systems of medicine, and the provision of technical assistance to the states in the prevention and

control of seasonal disease outbreaks and epidemics.

The provision of healthcare services is the responsibility of the state governments. Public healthcare

services include primary healthcare provision through a network of health sub-centres, primary health

centres (PHCs) and community health centres (CHCs). At district level there are civil/district hospitals in

the main district towns with an average of 150 beds, as well as a number of smaller hospitals and

dispensaries spread over other towns and villages.

On the other hand, private healthcare boasts of superior quality and facilities. It accounts for more than 65%

of primary care and more than 40% of hospitals, resulting in personnel shortages in the public sector.

The large geographical size and growing population numbers traditionally have hampered adequate access

to medicines and medical services in the sub-continent. Overcrowded public hospitals are a continuous

problem, and finances remain scarce for providing extra beds and facilities. The situation is perpetuated by

low government spending on health despite the fact that the majority of the population is forced (by low

income) to use public facilities.

In 2007, the Federation of Indian Chambers of Commerce and Industry (FICCI) said it would cost

approximately US$200bn over the next five years to solve the crisis in Indian healthcare. According to a

study conducted by the FICCI, even though 72% of India's population live in rural areas, 80% of doctors,

75% of dispensaries and 60% of hospitals are in urban areas. It is hence almost impossible for the rural

people to receive quality healthcare services. To address the funding shortfall, the federation has proposed a

five-pronged public-private partnership (PPP) model.

The ability to provide care to the poor received a blow in July 2007. The World Bank barred India-based

Nestor Pharmaceuticals and Pure Pharma from pursuing business with the bank for 'collusive practices' and

procurement of pharmaceuticals for a reproductive/child health project in the country. The UK and other

shareholder nations argued that, by halting the loans, the World Bank was only hurting the poor. They

argued that the World Bank should keep the loans flowing to fix the problem.

In June 2012, the Ministry of Health proposed to launch a new initiative under the country's 12th five-year

plan (2012-2017) to supply essential drugs for free at public health facilities in bid to provide affordable

public healthcare services. However, in August 2012, the Planning Commission asked for a reversal of the

health policy, seeking to restrict the government's role to delivering primary healthcare and essential

interventions such as immunisation, antenatal care and disease control programmes. Consequently, we



question the ability of the government to provide healthcare services for its people, and much healthcare

provision will depend on private healthcare players.

Apollo is the largest private healthcare provider in Asia, operating 39 hospitals in India, the UAE, Sri

Lanka, Bangladesh and Oman. Since being formed in 1983, the company has sought to provide high quality

healthcare at competitive prices. In August 2005, Apollo's facility in Delhi became the first hospital on the

sub-continent to be accredited by the Joint Commission International, which defines the gold standard in

medical care. Demonstrating its pre-eminence, Apollo is affiliated with Johns Hopkins University and the

Mayo Clinic.

Apollo also pioneered telemedicine in rural India in 1999, with the company now boasting over 60 centres

across India. In August 2007, the company launched Oman's first private telemedicine centre at its Muscat

hospital. The centre is linked to the group's network of hospitals in India, which include specialist units for

cosmetic surgery, oncology and cardiology.

To boost margins, Apollo started looking at the UK in February 2007. The 22 hospitals under the control of

Capio UK swiftly became the number one target, but they were eventually snapped up by Australian

healthcare major Ramsey Health Care. Not to be deterred, Apollo seems to remain committed to gaining a

foothold in the UK. Moreover, in June 2008, in an effort to expand into South America and Western

Europe, Apollo was evaluating acquisition targets in Peru and Spain. The group has set aside more than

INR1,000 crore (US$236mn) to buy tertiary level facilities in both countries. Apollo is also likely to be

involved in further activities in Oman, following the July 2008 invitation to Indian private hospital chains

by Oman's government to establish large-scale facilities in the southern Dhofar region.

In September 2008, the Indian external affairs minister, Pranab Mukherjee, stated that - as part of its 'Look

East' policy, and its commitment to the 14th South Asian Association for Regional Cooperation (SAARC)

summit - India would execute telemedicine projects in other SAARC countries. The country has already

implemented telemedicine projects in Bhutan and Sri Lanka in association with two super specialty

hospitals. The minister mentioned that the shortage of skilled health workers is a basic problem faced by

countries in South Asia. He also stressed the need for exploring novel methods of project financing to meet

the objective of providing reasonable and accessible healthcare services. The SAARC trade bloc was

formed in 1985 by India, Pakistan, Bangladesh, Sri Lanka, Nepal, the Maldives and Bhutan. In April 2007,

Afghanistan became its eighth member. The telemedicine projects to be implemented by India will play a

significant role in developing SAARC countries over the long term by efficiently addressing the increasing

demand for health services.



Healthcare Insurance

India's vast 1.2bn population generally pays for healthcare out-of-pocket. According to the WHO, the

private sector accounted for nearly three quarters of total healthcare spending in 2007. Of that non-public

expenditure, just 1.1% was directed to prepaid or risk-pooling plans - which BMI uses as a proxy for health

insurance. Therefore, we calculate that India's health insurance market was valued at US$325mn two years

ago.

According to senior executives quoted by The Economic Times, the market was estimated, as of April 2009,

to have a value of INR6,500 crore (US$1.3bn). This valuation is 30% more than the previous year. The

increase in the uptake of policies is being driven by greater consumer awareness and higher demand for

healthcare in the world's second most populous country. Nevertheless, only 2% of the population - mainly

those on high- or upper middle-level incomes - have health insurance.

The number of providers operating in India is very low. There are full-spectrum insurers such as ICICI

Lombard, Iffco Tokio, Bajaj Allianz and Reliance General, as well as specialist firms, such as Apollo DKV,

Max Bupa and Star Health & Allied Insurance. Due to the returns on offer, we expect many more to enter

the market over the near term.

One of the more recent entrants to the rapidly expanding sector is Max Bupa. Formed in July 2008, the

company is a joint venture between UK-based Bupa and domestic player Max India. Using seed capital of

INR100 crore (US$20mn), it intends to have 1mn customers within three years. In June 2009, India-based

Religare Enterprises signed an agreement with Swiss Re to establish a joint venture with an initial

investment of US$100mn. Operations started in 2010. At that time, Swiss Re was already present in the

India health insurance market, holding a 26% stake (the maximum permissible) in TTK Healthcare

Services.

Epidemiology

BMI's Burden of Disease Database (BoDD) shows that non-communicable diseases - such as diabetes and

cancer - have a slightly greater burden in India than non-communicable diseases - such as tuberculosis (TB)

and HIV/AIDS. In 2010, a total of 94,576,455 disability-adjusted life years (DALYs) were lost to

communicable diseases, while 118,910,404 DALYs were lost to non-communicable diseases. By 2030, the

number of DALYs lost to non-communicable disease will have increased by 22% to 144,498,455. Over the

same period of time, the number of DALYs lost to communicable diseases will have dropped by 29% to

67,022,332.



According to the BoDD, diabetes accounted for approximately 3.35mn DALYs in India during 2008,

equating to 1.14% of the country's total disease burden and posing a major drain on resources. Worryingly,

by 2030, this percentage is set to increase by more than 50%. Expanding waistlines on the subcontinent are

becoming increasingly common in middle and upper classes as people ditch traditional, typically vegetarian

diets for Western-style foods that are high in saturated fats. This trend is coupled with reduced physical

activity and a growing awareness for image improvement.

In July 2009, nearly 70mn people in India were re-classified as overweight after the obesity threshold was

lowered in the country. The threshold has been reduced to a body mass index of 23 (overweight) and 25

(obese), compared with the worldwide standards of 25 and 30 respectively. The reductions in the index

come on the back of Indians being found more likely to develop obesity-linked conditions such as heart

disease and type-2 diabetes.

Hypertension is a serious issue on the sub-continent. Driven by changing lifestyles, studies indicate that

prevalence of the disease has risen from under 5% in 1960s to 12-15% in the 1990s.

The World Health Organization (WHO) estimates that by 2020, a staggering 60% of the world's cardiac

patients will be found in India. In the past 50 years, rates of coronary disease among India's city dwellers

have increased from 4% to 11%. Diabetes is also approaching epidemic proportions. Accordingly, the

potential for manufacturers of therapeutics for chronic diseases is enormous.

The Indian antidepressant sector is experiencing robust growth because acceptance of the disease is more

common now, and the growing economy implies that patients are demanding higher-quality healthcare. In

2006, the value of the sector was US$70mn out of a US$8.2bn pharmaceutical market, and the growth rate

was an impressive 12%. In fact, older drugs should be supplanted by modern interventions, and increased

diagnosis of the disease will result in more prescriptions. According to the January 2007 IMS Health data,

the selective serotonin reuptake inhibitor sertraline is the fastest-growing drug in the segment, displaying

40% sales growth for the US innovator Pfizer and a 16% hike for domestic firm Unichem. There are over

10 versions of sertraline on the Indian market, with Pfizer's Daxid and Sun Pharma's Zosert being the most

popular brands.

India registered almost 2mn new TB cases in 2009. The country accounted for 280,000 of the estimated

1.3mn people killed by the disease around the world in 2008. The disease causes about 4,700 deaths every

day, according to the WHO's annual report - Global Tuberculosis Control 2010.



The 2010 AIDS epidemic report by the Joint UN Programme on HIV/AIDS has showed that out of 700,000

people in India requiring life-saving antiretroviral drugs, only 300,000 have access to them. Although the

HIV incidence rate in India recorded a drop of 50% in the previous decade, 120,000 patients became

infected with HIV in 2009 alone, meaning that the total number of patients in the country now stands at

2.4mn.

Smoking is set to cause 1mn deaths a year in India throughout the next decade, according to a study

published in the New England Journal of Medicine. Unlike in a number of countries, Indians still smoke

freely in many public places such as railway stations, sidewalk cafés, children's playgrounds and even

hospitals. The health minister has enacted a number of laws to ban smoking in certain public areas, but most

are routinely ignored. As a sizeable proportion of deaths will be among those that cannot read, it has been

proposed that pictorial warnings on tobacco products - instead of the current written cautions - could be part

of a more effective anti-smoking strategy. In the meantime, smoking cessation remedies and devices should

see a boost in the medium term.

In August 2008, the publication of results from the Indian Genome Variation (IGV) project was set to have

far-reaching implications for drugmakers, clinical research organisations (CROs) and health insurance

companies. Depending on the sub-population within the world's second most populous country, some

pharmaceuticals are metabolised differently and certain diseases have alternate outcomes.

The IGV project looked at 75 genes from nearly 2,000 people from 55 diverse castes, religious groups and

tribal communities. Due to its long history and location at the intersection of several trade routes, India is

essentially a melting pot for free gene flow. However, this heterogeny is tempered by religious barriers to

inter-marriage and varying geography, resulting in several thousand endogamous groups. Thirty genes have

been identified that correlate to extreme complications from the severe form of malaria. Knowing this will

influence the distribution of insecticide-treated mosquito nets.

Moreover, certain Indian populations respond differently to the asthma drug salbutamol, which should be of

interest to pharmaceutical companies that sell this drug. HIV/AIDS may spread faster than usual in India

because the protective CCR5 protein is virtually absent. Due to mutations in the MTHFR gene, there are

increased levels of homocysteine in certain populations throughout India. This is of importance to health

insurance companies because elevated homocysteine is strongly associated with cardiovascular conditions.

Genetic testing for this anomaly in insurance applicants could result in vastly different premiums.

According to figures released by the National Cancer Registry Programme of the Indian Council for

Medical Research in August 2009, more than 2.5mn Indians are reported to be suffering from cancer.



Oncologists are expecting a fivefold increase in cancer cases in the next 10 years. Hemant Malhotra,

secretary of the Indian Society of Medical and Paediatric Oncology, has stated that persistent late diagnoses

pose a potent challenge to addressing the increasing incidences of the disease in the country.

A total of 535,767 deaths due to cancer were registered in India in 2011, compared with 524,911 in 2010,

Minister of State for Health Sudip Bandyopadhyay said. Bandyopadhyay said the level of cancer incidence

is rising in the country. Health minister Ghulam Nabi Azad said the government has introduced a

nationwide programme to monitor the population for fatal diseases such as cancer, cardiovascular diseases,

diabetes and strokes. The screening process will be conducted in phases and is likely to be completed within

the five years.

Table: Insurance Key Drivers, Disease Adjusted Life Years, 2010-2017

2010 2011 2012e 2013f 2014f 2015f 2016f 2017f

Total male DALYs

All diseasesand injuries 133,407,946 133,194,769 133,021,463 132,888,045 132,794,493 132,740,756 132,726,764 132,752,446

Communi- cable,maternal,perinatalandnutritionalconditions 50,922,339 50,081,876 49,275,561 48,503,479 47,765,714 47,062,360 46,393,513 45,759,284

Non-communi- cablediseases 59,475,981 60,025,207 60,583,059 61,149,423 61,724,165 62,307,128 62,898,146 63,497,052

All diseases and injuries, total male DALYs by age group

0-4 years 31,660,223 30,477,862 29,337,450 28,239,443 27,184,205 26,172,021 25,203,100 24,277,586

5-14 years 9,144,247 8,904,837 8,676,404 8,458,549 8,250,960 8,053,396 7,865,681 7,687,695

15-29 years 27,562,904 27,897,167 28,199,107 28,468,331 28,704,542 28,907,555 29,077,303 29,213,847

30-44 years 24,765,044 25,058,433 25,356,287 25,660,148 25,971,231 26,290,432 26,618,342 26,955,261

45-59 years 22,879,361 23,288,703 23,700,083 24,111,434 24,521,008 24,927,343 25,329,243 25,725,745

60-69 years 10,637,274 10,721,128 10,811,558 10,910,073 11,017,998 11,136,481 11,266,519 11,408,978

70+ years 6,758,893 6,846,638 6,940,575 7,040,067 7,144,549 7,253,528 7,366,576 7,483,334

Total female DALYs

All diseasesand injuries 120,550,990 119,387,787 118,319,816 117,347,196 116,470,081 115,688,659 115,003,136 114,413,715

Communi- cable,maternal,perinataland 43,654,116 42,009,935 40,447,427 38,966,624 37,567,558 36,250,253 35,014,727 33,860,985



Insurance Key Drivers, Disease Adjusted Life Years, 2010-2017 - Continued

2010 2011 2012e 2013f 2014f 2015f 2016f 2017fnutritionalconditions


All diseases and injuries, total female DALYs by age group

0-4 years 29,530,703 28,261,745 27,042,574 25,873,604 24,755,135 23,687,360 22,670,378 21,704,198

5-14 years 9,159,306 8,872,259 8,598,986 8,339,105 8,092,330 7,858,456 7,637,341 7,428,902

15-29 years 26,843,584 26,631,470 26,420,703 26,211,090 26,002,517 25,794,947 25,588,415 25,383,022

30-44 years 19,188,461 19,262,019 19,346,074 19,440,906 19,546,676 19,663,439 19,791,158 19,929,710

45-59 years 18,086,190 18,379,694 18,674,100 18,969,529 19,265,999 19,563,450 19,861,748 20,160,694

60-69 years 10,073,166 10,185,114 10,304,858 10,432,615 10,568,777 10,713,882 10,868,594 11,033,681

70+ years 7,669,581 7,795,487 7,932,522 8,080,347 8,238,647 8,407,125 8,585,501 8,773,509

Total DALYs

All Causes 253,958,936 252,582,556 251,341,279 250,235,240 249,264,574 248,429,415 247,729,899 247,166,161

Communi- cable,maternal,perinatalandnutritionalconditions 94,576,455 92,091,811 89,722,988 87,470,103 85,333,272 83,312,612 81,408,239 79,620,270


All diseases and injuries, total DALYs by age group

0-4 years 61,190,926 58,739,606 56,380,024 54,113,047 51,939,340 49,859,381 47,873,478 45,981,785

15-29 years 54,406,488 54,528,638 54,619,810 54,679,420 54,707,059 54,702,502 54,665,718 54,596,869

30-44 years 43,953,505 44,320,452 44,702,361 45,101,054 45,517,907 45,953,871 46,409,500 46,884,971

45-59 years 40,965,550 41,668,397 42,374,183 43,080,963 43,787,007 44,490,794 45,190,991 45,886,439

5-14 years 18,303,553 17,777,096 17,275,390 16,797,654 16,343,291 15,911,852 15,503,022 15,116,596

60-69 years 20,710,440 20,906,242 21,116,416 21,342,688 21,586,774 21,850,363 22,135,113 22,442,658

70+ years 14,428,474 14,642,125 14,873,097 15,120,414 15,383,196 15,660,654 15,952,077 16,256,843

Source: IRDA/BMI



Motor

Although we expect the weakness in the overall new vehicle segment to be sustained until the end of the

financial year, ending March 2013, and have downgraded our forecast accordingly to growth of just 0.4%,

we are more bullish for FY2013/14. This optimism is partly founded on the back of the hiked diesel prices

as a fiscal measure.

The easing of government financial strains should lead to a retreat in price pressures over the medium term,

and a possible rate cut by the RBI in the near future. This will, in turn, boost consumer credit and make it

easier for buyers to get financing to purchase cars. Such a sanguine outlook has caused us to forecast

passenger vehicle sales to grow 4.9% to 2.8mn vehicles in FY2013/14.

We have a similarly positive outlook for the commercial vehicle (CV) market, which has been

underperforming its passenger car counterpart. Having sat on the sidelines for the best part of two years, we

believe corporate India may finally look to ramp up investment spending given the improving policy

outlook, potential for monetary easing, and better global economic backdrop. As recent foreign direct

investment inflows suggest, we expect to see a significant increase in India's capital stock in FY2013/14

and, in our opinion, this will be positive for CV sales, which we forecast to grow by 8% in the coming fiscal

year to 880,000 units.

Such is the anticipated strength of the domestic CV market that Isuzu Motors has firmed up its choice of

location for its first Indian manufacturing plant in Sri City, Andhra Pradesh. Isuzu will invest INR10bn (US

$188mn) in this plant, which will have an annual capacity of almost 50,000 vehicles. Since production will

only commence in 2015, Isuzu will continue using Hindustan Motors' Chennai plant as well as General

Motor Company (GM)'s facility in Halol in the meantime.

In our opinion, Isuzu's plans to target the small CV and the multi-utility vehicle (MUV) segment in India

bode very well. We forecast CV sales to enjoy an annual average growth of 6.6% over the FY2013-2017

period, to hit 1.1mn vehicles by FY2017.



Table: Insurance Key Drivers, Autos, 2010-2017

2010 2011 2012e 2013f 2014f 2015f 2016f 2017f

Fleet Size

Passenger carfleet, units 17,109,000 19,231,000 21,576,459 24,255,141 27,279,632 30,685,327 34,513,153 38,815,051

Passenger cardensity, vehiclesper 1,000 ofpopulation 14 15 17 19 21 23 26 29

Sales

Vehicles, units,mn 3.2 3.4 3.4 3.6 3.9 4.1 4.3 4.6

- % chg y-o-y 28.4 7.6 0.4 5.6 6.0 6.3 6.1 6.0

Passenger cars,units, mn 2.5 2.6 2.6 2.8 2.9 3.1 3.3 3.5

- % chg y-o-y 28.3 4.7 0.5 4.9 6.0 6.3 6.1 5.9

Motorbikes,units, mn 11.8 13.4 14.1 15.3 16.5 17.8 19.1 20.5

- % chg y-o-y 25.6 14.2 5.0 8.3 8.0 7.6 7.5 7.3

Commercialvehicles, units,mn 0.7 0.8 0.8 0.9 0.9 1.0 1.0 1.1

-% chg y-o-y 28.8 18.2 0.1 8.0 6.0 6.2 6.3 6.4

Source: SIAM/BMI



Competitive Landscape

Although private sector firms and foreign joint ventures have made progress since the partial liberalisation

of India's insurance market, both major segments continue to be dominated by state-owned firms.

The size and diversity of Asia Pacific markets are such that generalisations are harder to formulate than in

other parts of the world. The majority of the multi-nationals have a joint venture (JV) in China - although

not necessarily with a local financial institution. In some cases, associated asset management businesses of a

multinational insurer also have JVs in China. Many of the multi-nationals also have insurance JVs in India.

As in China, the local partner is not necessarily a financial institution.

For some multi-nationals, their presence in the region is limited by specialisation. In some cases this is

because the company's business revolves around particular lines of non-life insurance - QBE and RSA are

good examples. In other cases it is because the company in question has chosen to offer products that

closely resemble those that it provides clients - on a much larger scale - in its home market. Examples

include the Principal Financial Group (offering life products in Hong Kong), Prudential Financial (life

and savings products in Japan, Taiwan and South Korea), MetLife (annuities in various markets), Talanx

(branches in Japan, Hong Kong and Australia), Ageas (life insurance JVs in China, India, Malaysia and

Thailand) and Zurich Insurance Group (serving corporate non-life clients in South East Asia and

operating in the life segment in Australia, Hong Kong and Japan).

A second group of multi-nationals have varied businesses and very broad footprints, which have been

developed over a long period of time. What these companies have in common is that, worldwide, they are

among the largest insurers. Furthermore, within their global businesses, their Asia Pacific operations are

significant relative to the total and very large in absolute terms. In most cases, they have been present in

Asia Pacific for well over 50 years. AIA, which was spun out of AIG in 2010, is the largest (in terms of the

total business that it writes across the region) and perhaps the most obvious example. AIA ranks among the

largest insurers in several of the markets in which it operates (eg, Hong Kong, the Philippines and Taiwan)

and is generally regarded as the largest foreign insurer in China. Alico, previously the other main

international life insurance subsidiary of AIG (and now a part of MetLife) has long maintained a large and

profitable insurance business in Japan. In the non-life segment, AIG has a very broad footprint and is one of

the larger players in many of the markets in which it operates. Japan is one of its key markets in global

terms. HSBC Insurance's history and geography reflect that of its parent bank. Almost a third of HSBC

Insurance's global business comes from Hong Kong, although the rest of the region accounts for only about

5%. Prudential plc is probably the second largest multinational insurance group in the region after AIA and



it regards its Asia Pacific business as one of its four core operations. As is the case with HSBC, Hong Kong

is a key market for Prudential, though it has a significant presence in many other regional markets.

A third group of companies are European multi-nationals whose business in the Asia Pacific is a relatively

small part of their global total, but it is large in absolute terms. These companies have broad ranges of

businesses, but are predominantly focused on life rather than non-life lines. Perhaps the most important

example is AXA, which has divested its businesses in Australia and New Zealand, but has moved to full

ownership of the remaining businesses in the region. Allianz is a major player in life insurance in Taiwan

and South Korea and in non-life insurance in Australia.

There are two Canadian companies with long-standing and significant businesses in Asia. As with Allianz,

the Asian operations account for a minority of these companies' worldwide activities. These are Manulife

and Sun Life Financial.

A number of multinationals, which are enormous in terms of the premiums they write worldwide and are

among the largest insurers in their home countries or in other parts of the world, only have a small presence

in Asia Pacific. Generali, which has one of the largest pan-European businesses - including dominant

market positions in Italy and other countries in or near Europe - is perhaps the best example. Generali has

operations in India, China, Japan, Thailand and the Philippines, as well as a regional headquarters in Hong

Kong. BNP Paribas Cardif and Groupama are other European giants that have a limited presence in Asia

Pacific.

In any discussion of the nature of the competition from local groups across the region, it is probably helpful

to consider Hong Kong and Australia separately. For many companies, Hong Kong is the regional

headquarters and/or a support centre for operations in southern China. Many multinationals also see Hong

Kong as a vibrant market in its own right that in regional terms is too large to be ignored. Bank of China

(International)'s insurance subsidiaries are also notable players in the special administrative region's non-

life and much larger life segment. Hong Kong Life, a JV between Wing Lung Bank and other smaller

banks, is also a notable provider of life, health and savings products. Overall, though, Hong Kong is the

only market in the region in which both the non-life and life segments are dominated by subsidiaries of

multinational groups.

The competitive landscapes of Japan, China, Taiwan and South Korea have many features in common. The

commercial opportunity, especially for life insurance, has been driven by high savings rates, tax incentives

in favour of insurance and/or an absence of alternative ways of laying off risks. The commercial landscape



is dominated by truly massive local firms who in the past - and to a certain extent at present - have been

protected from full-scale foreign competition. The protection comes from gradual deregulation, access to

low-cost capital, opportunities to take advantages of scale economies (even in relation to the largest global

firms), established brands and distribution channels and cultural factors.

In China, the landscape continues to be dominated by former state-owned enterprises (which are now listed

companies in which the government retains substantial stakes) and new, but substantial, private sector firms.

The People's Insurance Company of China (PICC) and China Life account for about 40% of the non-life

segment and the life segment respectively. Ping An and China Pacific are listed public companies with

10-15% shares in each of the two segments. AIA's local operation is the largest foreign insurance JV in the

country.

Local titans dominate the insurance sectors of both Taiwan and South Korea, even though foreign groups

have made more headway than they have in Japan or China. According to the Taiwan Insurance Institute,

Cathay Life has a market share of about 23% in its segment. Fubon Life, Nan Shan Life, Shin Kong and

Chunghwa Post are the next largest players. The non-life segment is more fragmented. Fubon's market

share is 21%. It is followed by Mingtai, Shinkong and Union and Cathay Century. The Korean Life

Insurance Association notes that the combined market share of the 'big three' - Korea Life, Samsung Life

and Kyobo Life - remains in excess of 60%. The foreigners' combined share had risen to 20% or so. The

remainder of the South Korean life segment is accounted for by 'small and medium-sized' insurers such as

Shinhan Life and Tongyang Life. However, with annual premiums of around US$2bn, neither company

would rank as small in most of the countries profiled by BMI. Samsung Fire & Marine accounts for a

little more than one-quarter of gross premiums written in the non-life segment. Hyundai Fire & Marine,

Dongbu and LIG each have market shares of about 6%. The other six South Korean non-life companies are

Meritz, Hanwha, Daehan, Green, First and Heungkuk.

The insurance markets of India and Vietnam continue to be dominated by state-owned enterprises. In this

sense they resemble China rather than South Korea, Japan or Taiwan. In India the public sector firms have

been losing ground but still account for the majority of premiums written in both segments. In the life

segment, former monopoly Life Insurance Company of India still has market share, according to the

Insurance Regulatory and Development Authority (IRDA) in excess of 75%. The IRDA says that in the

non-life segment New India is the largest player and speaks for about 20% of premiums. National

Insurance Company, Oriental Insurance and United India each have market shares of about 15%. The

next largest firms are the ICICI Lombard JV and the Bajaj Allianz JV. There are two purely Indian-

owned private sector firms, Reliance and Cholamandalam, and four other JVs that involve foreign



partners: HDFC Chubb, Royal Sundaram, Tata AIG and IFFCO Tokio. Each of these six companies has

a market share in the low single digits. In Vietnam former state-owned monopoly Bao Viet is by far the

largest insurance company. PJICO, PVIC and PTI are all owned by different state-owned enterprises. Bao

Minh, formerly an element of Bao Viet, has made the transition to being a joint stock company.

Elsewhere in South East Asia, Singapore's Great Eastern Life, a subsidiary of the banking group OCBC,

stands out as a regional giant. Great Eastern has operations in Singapore, Malaysia, Indonesia, Brunei,

Vietnam and China w total assets of around SGD50bn. It has about 3mn customers in Singapore and

Malaysia alone. Its subsidiary OAC operates in Singapore and Indonesia. TM Asia Life, which is active in

Singapore and Malaysia, is a subsidiary of Tokio Marine & Nichido. Elsewhere, whether they operate in

the life segment, the (typically smaller) non-life segment or both, most of the local companies would rank as

small to medium-sized insurers in other countries. Examples include NTUC Income in Singapore; Etiqa (a

JV between Ageas and Maybank), Kurnia (which is being taken over by the local associate of Australia's

IAG) in Malaysia; and Bangkok Life, Dhipaya, Thai Life, Sampanth and Viriyah in Thailand. Perhaps

because of a preference of local business elites to prefer to work with their own - effectively in-house -

insurance operation, there is a plethora of small indigenous companies in Indonesia and the Philippines.

Insular Life and Malayan Insurance stand out in the Philippines, but there are many other examples from

that country. Bumiputra 1912 (in the life segment) and Jasa Indonesia (in non-life) are the two largest

Indonesian insurers. Others include Jasa Raharja, Jiwasraya, Jiwa Sequis Life, Tugu Pratama and

Sinar Mas.

Major Players In India's Insurance Sector

In India, the insurance sector is regulated by the Insurance Regulatory and Development Authority (IRDA).

It describes its mission as to 'protect the interests of the policyholders, to regulate, promote and ensure

orderly growth of the insurance industry and for matters connected therewith or incidental thereto'.

The insurance trade association is the General Insurance Council of India (GIC), a statutory body under the

Indian Insurance Act 1938. Membership of the GIC is 'automatically extended by invitation to all insurance

companies authorised to underwrite non-life insurance business of any class in India'. The corresponding

institution for the life segment is the Life Insurance Council of India.

The outstanding feature of both segments of the Indian insurance sector is the domination of public sector

organisations. Life Insurance Corporation of India (LIC), the former state-owned monopoly, still

accounts for about three-quarters of premiums in the life segment. Most of the 23 private sector life



companies are majority Indian-owned subsidiaries, joint ventures (JVs) or partnerships with major

multinational groups: foreigners may hold no more than 26% of an Indian insurance company. The largest

private sector life companies are SBI Life, a JV between State Bank of India and BNP Paribas Cardif,

and ICICI Prudential, which is the affiliate of Prudential plc, the UK insurance giant with a strong

presence across the Asia Pacific region. Others are affiliates of Standard Life, Allianz, SunLife, Mitsui

Sumitomo Life, AIA (ie, Tata-AIA), Old Mutual, HSBC Life, Aviva, MetLife, ING, AXA, Generali,

Aegon, Ageas (IDBI Federal) and Prudential Financial (DLF Pramerica).

Four public sector owned companies still account for about 60% of the premiums in the non-life segment.

They are the subsidiaries of the General Insurance Corporation of India, which was restructured as a

reinsurance company in 2000. New India is the largest non-life company overall, and accounts for about

15% of all non-life premiums. United India, Oriental Insurance Company and National Insurance

Company each account for 13-14% of total non-life premiums.

Among the 115 private sector non-life insurers, the largest is ICICI Lombard, the JV between Indian

financial group ICICI and Canada's Fairfax Financial Holding. Bajaj Allianz General is the second

largest. Tokio Marine-Nichido is represented through its JV with IFFCO. Tata-AIG is an offshoot of AIA.

RSA's affiliate is Royal Sundaram. Other multinational non-life companies with JVs in India include

ERGO, Generali, AXA, Sompo and QBE.



Company ProfileAEGON

SWOT Analysis

Strengths ■ Massive scale, financial strength and access to capital from global markets.

■ Multi-national diversification, across the United States, the Netherlands, the UK and

other countries.

■ Clear strategy focused on profitability.

■ Broad variety of products.

■ Strong brands.

■ An example of a leading multi-national insurer that can benefit from both the ageing of

populations in rich countries and from the strong growth in demand for long-term

savings products in emerging markets.

• Dominance in particular niches.

Weaknesses ■ Some of the markets in which AEGON operates are mature and/or highly competitive.

■ A small player in (or absent from) some of the most important emerging markets, and

in the Asia Pacific.

■ Impacted, like many insurance companies, by low interest rates.

Opportunities ■ Product innovation.

■ Further expansion by way of acquisitions.

■ Cost savings that are redirected into investment in new technology.

■ Development of alternative distribution channels.



SWOT Analysis - Continued

Threats ■ Potential, but unlikely, turmoil in global financial markets.

■ Robust competition in some markets, from companies that have many of the same

strengths as AEGON.

Company Overview AEGON is a listed Dutch multi-national life insurance company that is based in the

Hague. It was formed in 1983 through the merger of two Dutch insurers, AGO and

Ennia. The predecessor companies date back to the 19th century. Globally, the group

employs over 25,000 people and serves around 47mn customers in over 20 countries.

There are four main businesses: the US (where AEGON operates as Transamerica), the

Netherlands, the UK and 'New Markets'. New Markets includes emerging markets in

Asia, Latin America and Central and Eastern Europe, as well as Spain, where AEGON

has a significant life insurance business. In 2011, AEGON had EUR420bn in revenue-

generating investments.

Recent

DevelopmentsQ113: In relation to its New Markets operations, AEGON noted that underlying pretax

profits in H112 amounted to EUR64mn, or 9% less than in H111. 'Higher earnings from

AEGON Asset Management and Asia were more than offset by lower earnings in Central

& Eastern Europe, Spain and Variable Annuities Europe.'

'Results from AEGON's operations in Asia increased to EUR5mn, mainly as a result of

higher investment income and favourable claim experience.'

'In Asia, new life sales increased to EUR15mn, driven by higher production in China due

to strong performance of new distribution partners in the brokerage channel and

increased sales of universal life products in Hong Kong and Singapore, despite

repricing in the first quarter of 2012…. New premium production from AEGON's

accident & health insurance in CEE and Asia remained level at EUR7mn.'

(Source: Results announcement, August 9 2012.)

Geographical

FootprintIn the Americas, AEGON employs over 12,500 people. Pre-tax profits from the region in

2011 amounted to US$1.82bn. This included US$779mn from Transamerica's Life &

Protection business, US$66mn from Transamerica's Individual Savings & Retirement

business and US$336mn from Transamerica's Employer Solutions & Pensions

business, all of which are centred on the United States. Within the United States,

Transamerica is the seventh largest player in term life and universal life. It is the 10th

largest provider of variable annuities, and 13th ranked company in the pensions market.



In Canada, Transamerica is the fifth largest player in universal life and the seventh

largest in term life. In Brazil, Mongeral AEGON is the 12th largest life insurance

company. In Mexico, Argos AEGON is the ninth largest life company. Both focus on

niches.

In the Asia Pacific, AEGON Direct & Affinity Marketing Services 'is a leading specialist in

the direct marketing of life insurance, personal accident and supplemental health

products.' It operates in the mass markets of Australia, Hong Kong, India, Japan and

Thailand. High net worth and affluent individuals in Hong Kong and Singapore are

catered to by the local operations of Transamerica Life. In China 'AEGON cooperates

with partner CNOOC in provinces along the prosperous eastern coast.' In India, the

AEGON Religare Life Insurance joint venture (JV) currently has 105 branch offices

nationwide. 'In Japan, AEGON has established a JV with Sony Life, which will initially

focus on variable annuities distributed through banks and Sony Life's extensive

'Lifeplanner' network.'

AEGON has been present in Central and Eastern Europe since 1992, when it purchased

the Hungarian state-owned insurance company Alami Biztosito. Today, AEGON has life

insurance operations in the Czech Republic, Poland, Romania, Slovakia and Turkey, as

well as Hungary. Across the region, AEGON is 'investing to expand its distribution

capabilities. This includes the expansion of tied agent networks and the expansion

through bancassurance in Turkey.' The other key markets for the group in Central and

Eastern Europe are Hungary and Poland. Non-life products are being introduced in

Poland and Slovakia. In Hungary, the company is the second largest life company

overall, and also the leading provider of home insurance. In 2011, new life sales across

the region amounted to EUR110mn, and underlying pre-tax earnings were EUR96mn.

Gross written premiums were EUR140mn in Hungary, EUR192mn in Poland, EUR48mn

in the Czech Republic, EUR29mn in Slovakia and EUR13% in Turkey. Romania is a

greenfields operation. AEGON has 15% of the pension market in Hungary and 13% in

Slovakia. It serves nearly 1mn pension clients in Poland, where its market share is 6%.

In the Netherlands, AEGON is the largest provider of group pensions, the sixth largest

player in individual life insurance, and the sixth largest provider of accident and health

cover. It also offers non-life lines, such as mortgages and home insurance. New life

sales amounted to EUR254mn in 2011; underlying profits before tax, to EUR298mn.

In the UK, AEGON 'is a leading provider of life insurance and pensions, and also has a

strong presence in both the asset management and financial advice markets.' Its

operations include AEGON, together with the distributors Origen and Positive Solutions.

It is ranked third in individual pensions, fourth in group pensions, seventh in individual

protection and 11th in annuities. Scottish Equitable, the predecessor company in the

UK, dates back to 1831. In 2011, new life sales in the UK amounted to GBP738mn.

In Spain and France, AEGON achieved new life sales of EUR143mn in 2011. Underlying

pre-tax earnings were EUR88mn. AEGON works in partnership with Spain's savings

banks, and is one of the 10 largest life insurance companies. In France, it is in



partnership with AG2R La Mondiale, a leading French insurance company that has

nearly EUR60bn in assets under management (AUM).

(Source: www.aegon.com and company factsheets, July 23 2012, conference

presentation.)



Ageas

SWOT Analysis

Strengths ■ A multi-national insurer with leadership positions in key markets in Europe and a

significant presence in particular markets in the Asia Pacific.

■ Well capitalised.

■ Ageas is clearly large enough to enjoy economies of scale globally and in particular

markets in which it operates.

■ Clear strategy of partnering with leading local insurers (and/or banks) to achieve a

substantial and profitable position.

■ One of the leading life companies in Hong Kong: junior partner in leading life and non-

life businesses in Thailand and Malaysia.

■ Junior partner in one of China's major life insurers, and in a leading JV in India.

■ Broad range of products and multi-channel distribution.

• Strong brands in key markets.

Weaknesses ■ In the Asia Pacific, Ageas does not have the benefit of controlling subsidiaries that

provide a wide regional footprint.

■ Although Ageas' positions in Malaysia, Thailand, China and (perhaps) India and Hong

Kong are stronger than those of most other multi-national players who have a

presence, it is absent from many of the most important and rapidly growing markets

in the region.'

■ Hampered simultaneously by the changes in rules governing bancassurance in China

and by the new regulations that came into force in India in late 2010.



■ Possible partnerships, especially in non-life insurance.




■ Possible acquisitions and expansion of geographic footprint.

■ Through its holding in Etiqa, a leading player in takaful.

Threats ■ Potential but unlikely turmoil in global financial markets.

■ Robust competition from major multi-national life companies in all of the markets in

which the company operates.

■ Robust competition from leading domestic life companies in China and India and (if to

a lesser extent) Thailand.

Company Overview Formerly known as Fortis, Ageas is a Belgian/Dutch multi-national life insurer 'with a

heritage spanning more than 180 years'. It operates through four distinct segments:

Belgium, United Kingdom, Continental Europe and Asia. In each it has wholly owned

subsidiaries and/or partnerships with local institutions, which often serve as distributes.

'Ageas operates successful partnerships in Belgium, UK, Luxembourg, Italy, Portugal,

Turkey, China, Malaysia, India and Thailand.' Its subsidiaries are in France, Hong Kong

and the UK.

'It is the market leader in Belgium for individual life and employee benefits, as well as a

leading non-life player, through AG Insurance. In the UK, it has a strong presence as the

fourth-largest player in private car insurance and the over 50s market. It employs more

than 13,000 people and has annual inflows of more than EUR17bn.'

Recent

DevelopmentsOn August 6, 2012, Ageas published its results for H112. Among much else, the

company emphasised that its businesses in the Asia Pacific had grown strongly. The

subsidiaries and associates achieved client inflows of EUR4bn, an increase of 23%

relative to H111. 'Life (sales were) marked by very strong renewals from high-quality

regular premium sales combined with good persistency. Non-life (sales were) boosted

by the strong post-flood recovery in the Thai market.'

In spite of the losses associated with the flooding in Thailand, profits for the half year

were up strongly at EUR74mn.

Life insurance operations

Like several of its rivals, Ageas reported strong growth in its Hong Kong life insurance

subsidiary. 'Total inflows … increased by 28% to EUR202mn. New business premiums

increased by 56% following continued strong growth in the IFA channel, the latter

representing now 29% of new business APE. The Agency channel felt the impact of the



worldwide financial turmoil on customers' appetite for larger-ticket unit-linked products,

but managed to maintain its production levels.'

'In China, inflows increased 21% to EUR2.4bn.' Taiping Life is benefiting from focusing

on profitability and improved persistency. 'In general the growth of new business

premiums in the bancassurance channel has not yet fully recovered from the' regulatory

changes.'

'In Thailand, the strong growth trend, observed over the past two years continued, with

inflows up 33% to EUR252mn.' Muang Thai Life benefited from growth in the bank

channel, as well as from an increase in the size and the productivity of the agency force.

Inflows in Malaysia rose by 26% to EUR369mn. New business premiums alone grew by

33% to EUR252mn. 'H112 was marked by a strong revival of bank channel activity,

whereas last year's focus was mostly oriented towards strengthening the bank's

balance sheet and deposit base.'

Inflows in India fell by 15% to EUR55mn.

Overall funds under management rose by 12% through the half year to EUR22.4mn.

This included a 10% rise in the funds under management of the Hong Kong business to

EUR1.7bn.

Non-life operations

At a 100% level, non-life premiums in Thailand rose by 41% to EUR87mn in H112,

'boosted by the post-flood economic recovery.' Even including the impact of the floods,

the combined ratio was 100.1%.

In Malaysia, 'premiums increased 19% to EUR315mn with strong growth in Motor and

MAT.

(Source: press release, August 6 2012.)

Regional Footprint Ageas' operations in the Asia Pacific, its shareholdings in them and the 2011 premiums

are as follows:

China - Taiping Life (24.9%). Life premiums of EUR3,552mn. Taiping Life is a 50.05%

subsidiary of the Hong Kong-listed China Taiping Insurance Holdings Co. Limited

(CTIH). CTIH also holds a 25.1% stake directly in Taiping Life. In 2011, Taiping Life had

a market share of about 3.3%. It had over 46,000 agents nationwide as at the end of the

year: however, it also distributes products through brokers, banks and directly.

Hong Kong - Ageas (100%). Life premiums of EUR353mn. 'Ageas Insurance Company

(Asia) Limited is one of Hong Kong's largest life insurance companies.' The company

provides a range of financial protection and wealth management products. 'In addition

we provide comprehensive general services in partnership with China Taiping Insurance

(HK) Company Limited and the Asia Insurance Company Limited and MSIG Insurance

(Hong Kong) Limited.' New partnerships have been 'established with BCT and Principal

Trust Company (Asia) Limited, respectively to offer comprehensive Mandatory Provident



Fund (MPF) solutions to businesses, individuals and institutional clients.' There are

2,500 financial consultants. 7% of Ageas' agents in Hong Kong belong to the Million

Dollar Round Table (MDRT).

India - IDBI Federal (26%). Life premiums of EUR116mn. The other main shareholders

are IDBI Bank (48%) and Federal Bank (26%). The company was launched in March

2008. 'The company offers its services through a vast nationwide network across the

branches of IDBI Bank and Federal Bank in addition to a sizeable network of advisors

and partners.' As of the end of June, there were about 400,000 in-force policies with

over INR218.8bn in sum assured.

Malaysia - Etiqa (31%). Life premiums of EUR622mn and Non-Life premiums of

EUR478mn. According to Maybank, the leading financial services group in Malaysia

which is the majority shareholder, 'Etiqa is the brand for Maybank Group's insurance

businesses, which offers all types and classes of life and general conventional

insurance, as well as family and general Takaful plans via a robust agency force of over

21,900 agents complemented by a wide bancassurance and bancatakaful network.'

Reports indicate that, as a Takaful operator, Etiqa accounts for about 40% of all

contributions written in Malaysia.

Thailand - Muang Thai Life (31%). Life premiums of EUR907mn; Muang Thai Non-Life

(12%) - Non-Life premiums of EUR129mn. Muang Thai is a leading local life insurer,

which distributes its through Kasikorn Bank, other banks, brokers and directly. The non-

life business is Muang Thai Insurance PCL, a listed general insurer.

(Source: www.ageas.com, www.maybank.com.my, www.ageas.com.hk,

www.muangthai.co.th, www.idbifederal.com, www.chinainsurance.com,

www.muangthaiinsurance.com, August 10 2012.)

Company Details ■ Ageas

■ Websites: www.ageas.com



AIA Group

SWOT Analysis

Strengths ■ Very large scale by any standard.

■ Strength of capital and access to global financial markets.

■ Strong and growing cash flows.

■ Unique status as the largest independent pan-Asian life insurer, with a footprint that

spans 15 markets.

■ Only foreign company to operate on its own (as opposed to as a JV partner) in China.

■ Leadership, by many metrics, in many of the markets in which AIA operates (and

crushing domination in some of these).

■ Continuing growth in annualised new premiums (ANP), value of new business (VONB)

and VONB margins - across almost all the markets in which AIA operates.

■ Diverse products, for both individual and corporate clients.

■ Multi-channel distribution - complements very strong proprietary agency distribution

channel in most of AIA's markets.

■ Clear strategy to 'deliver quality growth'.

■ Long-standing presence in many of its markets.

• Strong/improving brand in many of its markets.

Weaknesses ■ There are some countries (eg, South Korea, Taiwan and China) where AIA is still, by

many metrics, a relatively minor player.

■ Like all large life companies, AIA is exposed to the challenges that arise from a global

investment environment in which interest rates are, and will likely remain, low.

Opportunities ■ Arguably the leading beneficiary of the growth of organised savings in East and South

East Asia.

■ Clear strategies to boost profitability - as well as premium income.




■ Successful product innovation in many of the markets in which AIA operates.

■ Potential to undertake substantial acquisitions.

■ Well placed to benefit from improving perceptions of risk in emerging markets of

South East Asia.

■ Development of relationship with Nippon Life.

Threats ■ Potential but unlikely turmoil in regional financial markets. However, AIA has plainly

thrived in spite of the Asian financial crisis of 1997-99, the critical phase of the global

financial crisis (2008/09) and the massive financial problems of its previous

shareholder.

■ Given the current structure of AIA's overall business, growth and profitability would

suffer for a time in the event of political and/or economic instability in Thailand.

■ Robust competition, in some markets, from very large multi-national insurers, many of

which share some of AIA's strengths.

■ Robust competition, in some markets, from truly enormous local insurance

companies. (In China and India, the rules governing participation by foreigners

present challenges.)

■ At some stage, the absolute size of AIA alone will mean that it becomes significantly

more difficult to maintain growth in business and profitability at the rates that have

been achieved in recent years.

Company Overview AIA Group (AIA) describes itself as 'the largest independent listed pan-Asian life

insurance group in the world', with a 'broad footprint spanning 15 markets in the Asia-

Pacific'. It is one of the three main insurance companies (the others being ALICO, which

is now a part of MetLife's global operations and AIG) whose origins date back to the

establishment of an insurance agency in Shanghai by Cornelius Vander Starr in 1919.

For a long time, AIA was an important component of American International Group

(AIG). The problems of AIG in the wake of the global financial crisis forced it to look for a

sale. Through much of 2010, Prudential plc sought to purchase AIA, but was unable to



raise the funds that it needed. In late October 2010, AIA was listed in Hong Kong in

what was, at that time, the largest ever initial public offering (IPO).

As of late July 2012, AIG retains an 18.6% stake in AIA, having previously owned one-

third of the Asian life insurance company. At AIG's Annual General Meeting in May

2012, Chief Executive Bob Benmosche said that AIG will look to sell its remaining

shares in AIA in September 2012.

Although AIA offers accident and health products (which we would normally consider as

part of the non-life segment) in some of the markets that it serves, it is - as its self-

description indicates - overwhelmingly a life insurer. The company classifies its wide

range of products in six major groups: protection; savings; investment; retirement;

wealth management; and corporate solutions (employee benefits, credit insurance and

retirement services).

The company's factsheet indicates that, as of late 2010, AIA had: 23mn in-force

policies; 10mn participating members of group products; 120 bancassurance

relationships, providing access to 13,000 branches; over 260,000 tied agents (including

101,000 in India); and over 21,000 employees (including 6,000 in India).

Total weighted premium income in the November 2011 year amounted to US

$14,442mn.

As of mid-2012, AIA was rated AA- by Standard & Poor's and Aa3 by Moody's, in both

cases with stable outlook.

Recent

DevelopmentsAIA announced its results for the six months to the end of May 2012 on July 27 2012.

Financial highlights included: a 28% rise (relative to the previous corresponding period)

in Value of New Business (VONB - AIA's favoured performance metric) of US$512mn; a

9% rise in annualised new premium (ANP) to US$1,187mn; a 6.6 percentage point

improvement in VONB margin to 42.6%; total assets at the end of the period of US

$119,494mn; a US$1,601mn rise in embedded value over the half year, to US

$28,840mn; operating profit of US$1,080mn (up 12%); a solvency ratio, in terms of the

Hong Kong Insurance Companies Ordinance (HKICO) of 456%.

Shareholders' funds increased by 8% over the half year to US$23,012mn.

Total investment assets rose from US$82,284mn at the end of November 2011 to US

$86,690mn at the end of May 2012. Fixed income assets accounted for 86% of the

total; equities, for 10%.

Prior to adjustments for group costs and adjustments to reflect additional capital/

reserving requirements imposed by the Hong Kong regulator, VONB rose by 24%, from

US$452mn in H111 to US$560mn in H112. In South Korea, VONB fell by 21% to US

$33mn. Elsewhere, VONB written in the latest half year, and the increases relative to the

previous corresponding period were as follows: Hong Kong and Macau US$140mn

(+16%); Thailand US$131mn (+30%); Singapore and Brunei US$99mn (+27%); Malaysia



US$31mn (+41%); China US$60mn (+60%); All other markets (Australia, the Philippines,

Indonesia, Vietnam, Taiwan and New Zealand) US$66mn (+50%).

VONB margin improved in each geographic region except Singapore, where it remained

stable at 65% - the highest level for any of AIA's markets.

Of the operating profit (pre-tax) of US$1,309 in H112, Hong Kong and Thailand

accounted for US$386mn and US$298mn respectively. Singapore generated pre-tax

operating profits of US$195mn. The operations in Malaysia, China and South Korea

each produced operating profits of around US$88mn.

In terms of IFRS, total weighted premiums written in the half year amounted to US

$7,305mn, or 8% more than in the previous corresponding period.

The persistency ratio stands at 94.5%, and has been rising gradually.

Strategic priorities identified by the company include:

■ Strengthening of distribution through a 7% rise in the number of agents and theexpansion of the Premier Academy training system. AIA has largest number of MillionDollar Round Table (MDRT) agents in the Asia Pacific. In Indonesia, the number ofactive agents soared by 70%.

■ Broadening of 'profitable partnerships' through a 'focus on profitability',diversification of distribution channels (including bancassurance), growth in the HighNet Worth Individual (HNWI) segment and development of group insurance. InIndonesia, there was 'strong performance from BCA, CIMB and other profitablepartnerships.' In the Philippines, the partnership with BPI more than doubled VONB.

■ Focus on growing both VONB and VONB margin (profitability).■ Improved customer service - leading to higher new business sales.■ Product 'alignment' and innovation. In Hong Kong, for instance, new sales of critical

illness and other protection products in H112 was 32% higher than in H111. Aflagship critical illness product in Singapore has been relaunched. In Malaysia, AIAsuccessfully promoted accident & health products to existing customers. It Takafulproduct in that country is 'gaining traction.' In China, AIA is developing its reputationas the 'protection expert.' New sales in that country from comprehensive protectionproducts were 31% in H112 than in H111. In Thailand, the company launched AIAHealth Lifetime in April 2012 and 'increased rider attachments and higher margins.' InIndonesia, AIA launched new unit-linked products.

(Source: press release and presentation to analysts, July 27 2012.)

Q113: Three important developments were announced by the company in September

and October 2012. At the end of September, AIA announced that it agreed to buy

92.3% of Sri Lanka's Aviva NDB Insurance from the UK's Aviva and the National

Development Bank of that country. 'In addition, AIA has entered into an exclusive

bancassurance agreement with NDB, one of Sri Lanka's largest financial

conglomerates, with a nationwide bank branch network' The remaining 7.7% will remain

listed and traded on the Colombo Stock Exchange, as is required by law. Aviva NDB

Insurance 'is Sri Lanka's second-largest life insurer, with 780 employees and a high-

quality tied agency force of 3,000 agents gained with AIA's Premier Agency strategy.' In

2011, the company wrote gross premiums of about US$81mn, which was split 75:25

between life and non-life business. The company's agency force accounted for over



80% of premiums written. The net consideration paid (including the sale of NDB Aviva

Wealth Management to National Development Bank) is US$109mn.

On October 11 2012, AIA announced that it had reached agreement with ING to buy

that company's insurance subsidiaries in Malaysia for EUR1,336mn. AIA described the

deal as 'a compelling financial investment and one that will immediately boost operating

profitability.' It will move AIA from being the fourth-largest player in the Malaysian life

segment to being the largest. The agency network in Malaysia will grow by 9,200

people. The deal 'broadens AIA's existing bancassurance distribution through the

addition of an exclusive long-term bancassurance arrangement with Public Bank, one of

Malaysia's leading banking groups with over 5mn customers, served through over 250

branches.' ING Malaysia had previously been the third-largest insurer in the country

'serving more than 1.6mn customers and offering a suite of products including life,

general, employee benefits as well as Takaful insurance products through a joint

venture.'

On the same date, AIA noted that it had achieved record VONB in the three months to

the end of August 2012. VONB rose by 22% (relative to the previous corresponding

period) to US$300mn. Annualised new premiums rose by 17% (excluding the

contribution from a single large Australian group scheme written in 2011). This meant

that the VONB margin rose by 11 percentage points to 42.6% in the latest quarter.

'Highlights of the quarter include strong contributions to ANP growth from Singapore,

Indonesia and the Philippines and significant margin improvements in Hong Kong,

Thailand and Malaysia. Consistent margin improvements were seen across agency and

partnership channels, as (AIA) continued to focus on the ongoing review of (its) product

portfolio and the planned shift towards more profitable products.'

'Total Weighted Premium Income increased by 3% to US$3,852mn. The growth rate

reduced in the third quarter compared with the first half of the year as result of foreign

exchange movements, the continued repositioning of (AIA's South) Korean business

and lower-margin shorter-duration products sold in the second half of 2010 … reaching

the end of their premium payment periods.'

(Sources: company press releases.)

Geographic

FootprintAs noted above, AIA has a presence in 15 different countries across the Asia Pacific.

The countries, and the year in which the modern AIA established its presence, are as

follows:

Australia (1972) - AIA provides protection and corporate (employee benefit/group)

products.

Brunei (1957) - 'AIA Brunei is the largest commercial life insurance company in Brunei

with the leading market share in new and renewal premiums.' It distributes a wide range

of individual and group products through banks and agents.



China (1992) - 'AIA was the first foreign organisation to be granted an insurance licence

in China. Today, AIA has operations in Shanghai, Beijing and Shenzhen, and in

Guangdong province and Jiangsu province. As the first insurer to introduce the agency

system to China, AIA has a well established agency force. AIA provides a full line of life,

accident and medical insurance products to customers through a multi-channel

distribution system.' AIA is the only foreign insurance company to operate as a fully

fledged subsidiary - rather than as a partner in an insurance JV.

Hong Kong (1931/1947) - AIA is a leading player in the SAR's life insurance market, with

a full range of individual and corporate products. 'AIA Hong Kong has the largest

agency force in the territory'.

India (JV-2001) - AIA has a 26% stake in Tata AIA Life Insurance Company. The 74%

shareholder is Tata Sons. Based in Mumbai, but with a network of sales offices, 'the

company offers a broad array of insurance products to individuals, associations and

businesses of all sizes. It is one of the major private sector insurers in India offering life,

health and group insurance products.'

Indonesia (1984) - AIA Financial 'is one of the largest life insurance companies in

Indonesia, now serving 1.2mn customers.' It offers a full range of products, through

channels 'including agency, bancassurance, credit life, retail assurance, partnership

distribution, direct marketing/telemarketing, and pension & employee benefits.'

Macau (1982) - AIA was one of the first insurance companies to register in the (then)

colony and has since emerged as a leading player in the life segment.

Malaysia (1938/1948) - 'AIA is one of the country's largest life insurers. AIA Malaysia has

a network of 23 branches nationwide and over 1,000 employees and 10,000 agents. It

provides a complete range of life insurance products' through multiple channels.'

New Zealand (1972) - AIA offers individual protection products and corporate/employee

benefits products.

Philippines (1947) - 'The Philippine American Life and General Insurance Company

(Philam Life) is the largest life insurance company in the Philippines and the market

leader for over 60 years. Phllam Life offers an extensive line of products in the industry

that provides solutions to various financial needs including life protection, health

insurance, savings, education, retirement, investment, group and credit life insurance.

Philam Life has the most extensive network of offices and sales agencies nationwide.'

Singapore (1947) - AIA provides a full range of products and 'is one of the leading life

insurers in Singapore.' It has over 1mn policyholders and 2.8mn in-force policies.

South Korea (1987) - AIA Life Korea has 95 branch offices and telemarketing centres

across the country. It provides protection, savings, investment and retirement products

to individuals. To corporate clients, it also provides employee benefits products.



Taiwan (1990) - To individuals, AIA offers protection, savings and investment products.

It also provides employee benefits products to corporate clients.

Thailand (1938) - With over 6.8mn in-force policies (including 5mn in-force life policies),

and an agency network of 86,000, AIA Thailand is the largest life insurance company in

the country by some metrics. It offers a full range of individual and corporate products.

Vietnam (2000) - AIA Vietnam has over 400 employees and more than 9,000

professional agents. It operates in 23 cities and provinces across Vietnam. 'AIA Vietnam

offers a wide range of life insurance products and services including universal life,

savings, education and protection, each designed to meet the needs and demands of

individuals, corporates and banks customers.'

(Source: www.aia.com and corporate factsheet, August 9 2012.)



Allianz

SWOT Analysis

Strengths ■ Massive scale and capitalisation as one of the largest multi-national composite

insurers.

■ Global diversification in terms of geographic footprint.

■ Diversity of businesses. The company describes itself as: the world's leading property

& casualty insurer globally; one of the world's top-five life insurers; the worldwide

leader in credit insurance; and one of the leading asset managers globally.

■ Leadership positions in many of the markets in which it operates.

■ Low cost of capital that comes from being one of the largest and strongest financial

institutions in Germany.

■ Strong brands.

■ Substantial presence in many emerging markets.

■ A leading regional player in non-life insurance in Latin America.

• A substantial regional composite insurer across the Asia Pacific if the region includes

Australia. Otherwise, it could be categorised as one of the larger multi-national life

companies, with non-life businesses in particular national markets.

Weaknesses ■ Many of the markets in which Allianz operates are relatively mature.

■ For all its enormous strengths, Allianz's operations would suffer as a result of

widespread financial volatility and/or a sharp recession as a result of the financial

crisis in the periphery of the euro area.

■ Like all large life companies, Allianz is exposed to the challenges that arise from a

global investment environment in which interest rates are, and will likely remain, low.

■ Allianz is a relatively small player in some of the markets in which it operates across

the Asia Pacific.




Opportunities ■ Ideally placed to benefit from the growth of organised savings in emerging markets

around the world.

■ A significant beneficiary of the general improvement over time in perceptions of risk

associated with emerging markets.

■ As one of the largest underwriters of non-life risks, a natural beneficiary of the growth

in emerging markets.

■ Product innovation in the developed world.


■ Potential but unlikely repeat of massive catastrophe losses in 2012 and 2013 in

relation to which the resultant increases in reinsurance costs cannot be passed on to

customers.

■ Robust competition, in some markets, from very large local players. However, very

few insurance companies can match the overall global strengths of Allianz.

Company Overview Allianz describes itself as 'one of the integrated financial services providers worldwide.'

Relative to other companies that would see themselves similarly, we would describe

Allianz as a massive, globally diversified, listed, composite insurer with leadership in

many of the world's more important markets. Additional strengths, as noted above,

include its capitalisation and strong brands - and access to additional funding at low

cost.

The company notes that it has about 142,000 employees worldwide, serving around

78mn customers in over 70 countries. 'On the insurance side, Allianz is the market

leader in the German market and has a strong international presence. In fiscal 2011, the

Allianz Group achieved total revenues of over EUR103.6bn. Allianz is also one of the

world's largest asset managers, with third-party assets of EUR1,281bn under

management at year end 2011.'

The company's top brands include Allianz, Allianz Global Investors, Allianz Global

Corporate & Speciality, PIMCO, Euler Hermes (credit insurance) and Allianz Global

Assistance.

In the Asia Pacific region, Allianz is primarily a life/health insurer. Across the region as a

whole, gross written life/health premiums slipped from EUR2,684mn in H111 to



EUR2,392mn in H112. Premiums rose from EUR854mn to EUR905mn in South Korea.

They soared from EUR248mn to EUR 424mn in Indonesia. In Malaysia, they increased

from EUR130mn to EUR155mn. However, they slipped from EUR816mn to EUR503mn

in Taiwan. In other countries where Allianz has a presence as a life/health insurer,

premiums grew from EUR291mn to EUR344mn. Allianz is a leading health insurer in

Pakistan. It is also active as a provider of life/health products in Singapore and Thailand

as well as through its joint ventures in India and China. Elsewhere, Allianz offers life

products in Australia.

Property and casualty premiums written by Allianz's operations in Australia rose from

EUR1,184mn in H111 to EUR1,412mn in H112. Elsewhere in the region, they increased

from EUR250mn to EUR300mn. (NB These figures do not include premiums written by

Allianz Global Corporate & Specialty in Hong Kong and elsewhere.) Allianz has property

& casualty operations in Indonesia, Malaysia, Japan, New Zealand, Brunei, India

(through its Bajaj Allianz JV) and Laos.

(Sources: www.allianz.com, August 9 2012, corporate factsheet and interim report for

H112.)

Recent

DevelopmentsQ113: As of October 2012, the latest comment on the company's operational

performance in the region pertained to H112. For the property and casualty businesses,

the combined ratio improved in Australia (from100.8 in H111 to 97.1% in H112), but

deteriorated slightly in the rest of the region (from 89.0 to 90.0). In the life businesses,

operating profits in the region soared from EUR37mn to EUR120mn.

Highlights of Q212 included the development of the property & casualty business in

Australia. For the quarter, 'gross premiums amounted to EUR737mn, including

EUR46mn of favourable currency translation effects. (Allianz) achieved strong growth of

7.2% thanks to both volume and price increases in our property business through agent

and broker distribution channels. The positive price effect was approximately 5.2%.'

Elsewhere in the region, higher volumes in the Malaysian motor insurance business

were a key driver of growth in Q212.

Allianz is deliberately scaling back its activities in some of the regional life markets. In

Q212, premiums 'decreased by 9.5%, or EUR121mn … to EUR1,228mn. This result

was mainly affected by the discontinuation of new sales in Japan and slower sales in

Taiwan. Consequently, premiums dropped by EUR204mn in Taiwan and by EUR141mn

in Japan. The decrease in Taiwan was mainly due to the declining unit-linked business

without guarantees through agency and bancassurance channels, as competitors

offered what (Allianz) believe were unsustainable guaranteed product benefits. In South

Korea and Indonesia, (Allianz) saw strong growth in the single premium investment-

oriented business.'

(Source: Group Management Report H112.)

On October 26, 2012, Allianz announced that it had signed a 10-year exclusive life

insurance distribution agreement with HSBC. Under the terms of the bancassurance



agreement, Allianz products 'will be distributed by HSBC in China, Indonesia, Malaysia,

Australia, Sri Lanka and Taiwan. Life insurance products will be provided by strategic

partners of Allianz in Brunei and the Philippines. The upfront cash consideration (paid by

Allianz to HSBC) amounts to US$100.5mn.'

According to Allianz, the deal will allow it 'to enlarge its bancassurance distribution

reach to an additional segment of retail banking customers in its major growth markets

in the Asia Pacific. Bancassurance is a significant distribution channel for Allianz life

insurance in Asia. In 2011, around 40% of gross written premiums in life insurance

derived from this channel.'

'Allianz Group has been a Preferred Strategic Partner globally for HSBC since 2008.

Allianz has a wide range of partnerships with HSBC in Asia, including life & health

insurance, credit insurance as well as asset management.'

'As a part of the overall … partnership, the assets and liabilities, other than the statutory

deposits of approximately US$10mn of HSBC Life (International), Taiwan branch, will be

transferred to Allianz Taiwan Life Insurance for a consideration of US$18mn.'

(Source: Press Release of October 26, 2012.)



AXA

SWOT Analysis

Strengths ■ Massive scale and capitalisation, as one of the largest multi-national composite

insurers.

■ Global diversification in terms of geographic footprint. This includes a Japanese life

business that is substantial in absolute (if not relative) terms.

■ Diversity of businesses.

■ Leadership positions in many of the markets in which it operates. This includes

assistance and art insurance.


institutions in France.

• Substantial presence in many emerging markets.

Weaknesses ■ Many of the markets in which AXA operates are relatively mature.

■ For all its enormous strengths, AXA's operations would suffer as a result of

widespread financial volatility and/or a sharp recession as a result of the financial

crisis in the periphery of the euro area.

■ Like all large life companies, AXA is exposed to the challenges that arise from a global

investment environment in which interest rates are, and will likely remain, low.

■ In the Asia Pacific, AXA is a relatively minor player in many of the markets in which it

competes.

Opportunities ■ Well placed to benefit from the growth of organised savings in emerging markets

around the world.



■ As one of the largest underwriters of non-life risks, a natural beneficiary of the growth

in emerging markets.






■ Potential but unlikely repeat of massive catastrophe losses in 2012 and 2013 in

relation to which the resultant increases in reinsurance costs cannot be passed on to

customers.

■ Robust competition, in some markets, from very large local players. However, very

few insurance companies can match the overall global strengths of AXA.

Company Overview AXA is one of the largest global composite insurers. It is a listed company. Gross

revenues in 2011 amounted to around EUR90bn. Underlying earnings were about

EUR4bn. Assets under management (AUM) amounted to a little below EUR1,000bn;

shareholders' equity, to around EUR40bn. In terms of underlying earnings, property &

casualty lines accounted for about 46% of the business in 2011. Protection and health

lines accounted for another 34%, while savings products (which BMI would class as life

insurance) and asset management generated the remaining 20%. In terms of gross

revenues, Northern Central and Eastern Europe is the most important area, accounting

for 31% of the business in 2011. France was the second most important geographic

area, accounting for 24% of the total. The next four most important areas were:

Mediterranean & Latin America (15% of revenues); United States (12%); Asia (10%) and

UK/Ireland (5%).

Globally, AXA employs 163,000 people. It serves 101mn clients. Proprietary distribution

channels (tied agents, salaried sales personnel and direct sales) account for about half

of the global premiums written; non-proprietary channels (brokers, banks, Independent

Financial Advisors and partnerships) for the remainder.

(Source: company factsheet, July 23 2012.)

Global Presence Key subsidiaries include: GIE AXA (group management services); AXA Assistance,

serving travellers in over 30 countries, on five continents; AXA Bank Europe; AXA

Corporate Solutions (providing 'property-casualty insurance to large European

corporations and marine and aviation insurance to corporate clients worldwide'); AXA

Group Solutions; AXA Liabilities Managers (a company 'specialising in non-life

(re)insurance legacy business acquisition and management' running around EUR4bn in



liabilities); AXA Technology Services; and Maxis, which provides 'multinational

companies with international employee benefit solutions' in conjunction with MetLife.

In Sub-Saharan Africa, AXA offers insurance in Algeria, Cameroon, Gabon, Côte

d'Ivoire, Morocco and Senegal. It also provides assistance services in Mauritius.

Having sold its Canadian non-life operations to Intact Financial Services, AXA is still

providing art insurance (through its specialist subsidiary AXA ART) and reinsurance

(through AXA Re). AXA ART, AXA Global structured products and, as discussed below,

AXA Financial are the main operations in the United States. The company also provides

assistance services in both Canada and the United States.

AXA is a substantial composite insurer in Mexico (bolstered by the recent purchase of

HSBC's non-life business in that country). Elsewhere in Latin America, it provides

assistance services in Argentina, Brazil, Chile, Colombia and Panama, as well as in

Mexico.

AXA has a large footprint in the Asia Pacific. In China, it has a presence through the

ICBC-AXA Life JV, as well as representative offices in Shanghai and Beijing. Following

the recent purchase of HSBC's non-life insurance businesses in a number of countries,

it is a leading player in Hong Kong's non-life segment. A number of other subsidiaries,

such as AXA ART, are also present in the special administrative region. In India, AXA

has two joint ventures - Bharti AXA General Insurance Company Limited and Bharti AXA

Life. In Indonesia, it has a presence in both main segments through PT Asuransi AXA

Indonesia, PT AXA Financial Indonesia, PT AXA Life Indonesia, PT AXA Mandiri

Financial Services and PT Mandiri AXA General Insurance. Japanese subsidiaries

include AXA General Insurance, AXA Life Insurance and NEXTIA Life Insurance. AXA

provides life and non-life products in Singapore: other subsidiaries are also present. In

South Korea, the main insurance operation is AXA Direct Korea. AXA Philippines offers

life insurance products in that country, through its own branch network, 1,500 exclusive

financial advisors and a bancassurance partnership with Metrobank. AXA Insurance

PCL and Krungthai AXA Life are the non-life and life operations in Thailand. AXA-Affin, a

JV with Affin Holdings Bhd., is effectively a composite operation in Malaysia. The

company has a representative office in Vietnam. Across the region, AXA provides

assistance services in some countries.

As noted above, AXA has very large operations in France, Germany and the UK. Other

Western European countries in which the group is present as an insurer include Austria,

Belgium, Finland, Ireland, Italy, Luxembourg, Monaco, Portugal, Spain, Switzerland and

the Netherlands.

In Central and Eastern Europe, AXA's insurance operations are in Azerbaijan, Czech

Republic, Greece, Hungary, Poland, Romania, Serbia, Slovakia, Turkey and Ukraine.

The company also provides assistance services in many countries in Western and

Central and Eastern Europe.



AXA Insurance Gulf is the main (non-life) insurance operation in the Middle East. It

transacts business in the UAE, Saudi Arabia, Oman, Lebanon and Bahrain. AXA

Insurance Gulf also provides asset management and financial services in Qatar.

(Source: www.axa-equitable.com, July 23 2012.)

Recent

DevelopmentsQ113: On July 19 2012, the company announced the launch of a new life insurance joint

venture (JV) in China. ICBC-AXA Life succeeds AXA-Minmetals Assurance (AXA-

Minmetals), established in 1999. Following an agreement by Industrial & Commercial

Bank of China (ICBC) and Minmetals, ICBC owns 60% of the JV. AXA owns 27.5%;

Minmetals, 12.5%. The JV is based in Shanghai and hubs in that city, Beijing and

Guangzhou. The JV operates in 23 provinces and cities. According to AXA, 'ICBC-AXA

Life will leverage ICBC's strong customer base of 282mn individual customers and

4.12mn corporate clients, complete service network and rich experience.' For its part,

AXA 'will provide product development and risk management support'.

(Source: press release, July 19 2012.)

As of early November, the latest results published by AXA pertained to the first nine

months of 2012. Within the Asia Pacific, new business APE for life insurance operations

in Japan 'was up 13% to EUR418mn, mainly due to an increase in unit-linked, mainly

driven by GMxB Variable Annuity products, reflecting a higher number of bank

distributors, as well as strong growth in G/A protection and health. Excluding GMxB

Variable Annuity products, APE grew by 7%, mainly from strong sales of Term Rider

and Long Term Protection products.' However, the NBV margin was down 13 basis

points, relative to the previous corresponding period, at 63%, thanks in part to the

impact of lower interest rates on the profitability of GMxB Variable Annuity products.

'Hong Kong new business APE was up 10% to EUR295mn, due to G/A Protection &

Health driven by strong agency sales supported by a marketing campaign, partly offset

by higher expenses, mainly in marketing.'

'South-East Asia, India and China new business APE was up 20% to EUR304mn,

reflecting strong sales of unit-linked products, as well as good momentum of G/A

Protection and Health, notably in Thailand. NBV margin was down 2 points to 38%

driven by a negative country mix.'

Property & casualty premiums that were written in Asia amounted to EUR391mn in the

first nine months of 2012. On a comparable basis, they were 12% higher than they had

been in the previous corresponding period.

(Source: press release, October 25 2012.)



BNP Paribas Cardif

SWOT Analysis

Strengths ■ Strong capital position and strength that comes from its ownership by one of

Europe's largest banking and financial services groups.

■ Leadership position in France's insurance sector.

■ Very clear strategy of focusing on distribution partnerships - and not just

bancassurance deals with banks.

■ Absolute scale and global reach.

■ Proven capability to expand via deal making.

• Focus on, and leadership in, protection products and creditor insurance in the

selected markets across the Asia Pacific.

Weaknesses ■ Some of the markets in which BNP Paribas Cardif operates are mature and/or highly

competitive.

■ Exposure to the economic and financial problems of the periphery of the euro area.


■ Contracting sales of savings products.

■ Absent from some of the largest and most important markets in the region, including

Hong Kong.



■ Cost savings that are redirected into investment in new technology.

■ Further development of new and existing distribution partnerships.

■ Further growth in demand for BNP Paribas Cardif's protection products.





Company Overview BNP Paribas Cardif is the 'life, property & casualty insurance subsidiary of BNP Paribas.

It develops savings and protection products and services, which are distributed via

diverse channels. Present in 36 countries, and with a diversified geographic footprint,

BNP Paribas Cardif has strong positions in Europe, Latin America and Asia.'

BNP Paribas Cardif has been rated AA- by Standard & Poor's. It is one of the 10 largest

European insurers. In 2011, gross written premiums amounted to EUR23.3mn: of this,

53% were generated outside France.

Since 2009, BNP Paribas Cardif has had the strategic objective of 'being a global leader

in providing insurance cover through partnerships with distributors.'

(Source: press release, March 22 2012.)

Recent

DevelopmentsAs of mid-2012, the latest financial data pertained to 2011.

Outside France, BNP Paribas wrote a total of 12.3bn in premiums during the year. This

included EUR8.2bn in savings products and EUR4.1bn. A 14% rise in protection

premiums more than offset the 5% decline in savings premiums, relative to 2010.

A key development in Turkey was a new bancassurance partnership with TEB and the

purchase of 100% of Fortis Emeklilik ve Hayat.

At the end of last year, assets under management amounted to EUR151bn, or 2% more

than at the end of 2010.

Global premiums written by the Retail Banking channel, which includes BNP Paribas'

retail banking networks in France and elsewhere, amounted to EUR12.1bn, or 12% less

than in 2010. The decrease was driven by a contraction in sales of savings products.

Global premiums written by the Partnerships channel rose by 1% to EUR6.6bn. A 10%

fall in savings products was more than offset by a rise in protection products' sales. The

Partnerships channel works with: banks other than the BNP Paribas group; other

financial institutions including BNP Paribas Personal Finance and car makers' credit

subsidiaries; and large retail chains.

Similarly, falling sales of savings products also contributed to the 8% decline in global

premiums written by the Digital & Brokers channel (to EUR4.4bn).

(Source: press release, March 22 2012.)



Regionial Footprint BNP Paribas Cardif aims to be 'one of the top three players in bancassurance across

the region. It is present in seven countries across the region. In 2010, BNP Paribas

Cardif wrote EUR3.2bn in premium. It was the leading provider of creditor insurance in

Japan and Taiwan and the second largest private insurer in India.

China - the company has had a representative office in Beijing since 2003.

India - Since 2001, BNP Paribas Cardif has been involved with a joint venture with the

State Bank of India 'operating under the SBI Life banner. It mainly offers individual and

corporate insurance products such as individual protection and creditor insurance, as

well as investment funds for savings.' The company highlights three protection products

and five savings products. SBI Life is profiled in detail elsewhere in this report.

Japan - the company has been present in Japan since 2000. 'It mainly offers individual

and corporate insurance products such as individual protection and creditor insurance.'

South Korea - 'From 2002 to 2009, the company was involved in a joint venture (JV)

with Shinhan Bank, SH&C Life Insurance. In 2009, SH&C Life Insurance changed its

name and became Cardif. 'It has offered a full range of savings products and services,

and distributes its products via bancassurance channel through nearly 2,000 branches

of partners, including six commercial banks and two securities firms.' The company

also provides protection products.

Taiwan - The company has had a presence since 1998. 'It mainly offers individual and

corporate insurance products such as individual protection and creditor insurance, as

well as investment funds for savings.' TCoB is BNP Paribas Cardif's main

bancassurance partner.

Thailand - In 2002, the company established itself in Thailand through a JV - Thai Cardif

Life Assurance - with Thai Life. The company has since become a leading provider of

creditor insurance. Channels include bancassurance and telemarketing. Individual

protection products are also offered.

Vietnam - Having opened a representative office in Vietnam in 2005, the company

established VCLI, a joint venture with Vietcombank and SeAbank ikn 2009.



Fairfax Financial Holdings

SWOT Analysis

Strengths ■ Scale and access to global capital markets.

■ Very broad geographic diversification, with substantial businesses in Canada, the US,

the UK and all emerging markets regions.

■ Diversification by business, dealing with many different non-life (re)insurance lines.

■ Very clear and proven strategy, focused on the identification and execution of

acquisitions of investee businesses.

■ Leadership positions in some of the markets in which Fairfax's various subsidiaries

operate.

■ A good example of a company that is leveraged to the overall growth of non-life

insurance, in both developed and emerging markets.

• Proven capacity to endure years of massive natural disasters.

Weaknesses ■ Some of the markets in which Fairfax's subsidiaries operate are mature and/or highly

competitive.

■ In some cases, Fairfax's subsidiaries are small by international standards and/or

relatively minor players in the markets in which they operate.



■ A natural beneficiary of the relatively strong growth of emerging markets in Asia (and

elsewhere).

■ Frequently competing in geographic regions and markets where Fairfax has (far)

greater experience and competitive advantage in underwriting risks than do other

local insurers, some of which are larger by many metrics than Fairfax's local

subsidiaries.

■ Improvement in global (re)insurance prices.




Threats ■ Low interest rates, which represent a challenge for most (re)insurers.

■ Robust competition in some of the markets in which Fairfax's subsidiaries operate.

■ Volatility in financial markets over the long term. (NB: As of Q112, the company's

investment portfolio was positioned defensively).

■ Exposure to slippage in global (re)insurance prices at some time in the future.

Company Overview Originally founded in 1985 by the chairman, V Prem Watsa, Fairfax Financial Holdings is

a Canada-based financial services holding company with extensive interests in

property/casualty insurance, reinsurance and investment management, within Canada

and outside the country. Fairfax is listed on the Toronto Stock Exchange. 'Fairfax's

insurance and reinsurance companies operate on a decentralised basis, with

autonomous management teams applying a focused underwriting strategy to their

markets. Fairfax subsidiaries provide a full range of property and casualty products,

maintaining a diversified portfolio of risks across all classes of business, geographic

regions, and types of insureds.' The in-house investment management operation is

Hamblin Watsa Investment Counsel Inc., a fully owned subsidiary.

Canadian Operations

Northbridge Financial is a Toronto-based fully owned subsidiary of Fairfax. It has

regional offices across Canada, where it is one of the largest commercial insurance

companies. Premiums in 2011 amounted to about CAD1,3bn. This property and

casualty group has two market facing brands - Northbridge Insurance and Federated

Insurance. Further details are available at www.nbfc.com.

Hamblin Watsa Investment Counsel. As noted above, this 'provides investment

management services exclusively to the insurance and reinsurance subsidiaries of the

Fairfax Group.' Further details are available at www.hwic.ca.

Non-Canadian Operations

Advent is a UK based fully owned subsidiary of Fairfax. It is a reinsurance and direct

insurance company, which, in 2011, wrote net premiums of US$192mn. It operates

through Advent Syndicate 780 at Lloyds. Further details are available at

www.adventgroup.co.uk.



Fairfax owns 20% of Alliance Insurance PSC, a listed insurance company based in

Dubai, UAE. The company's net written premiums in 2011 amounted to AED140mn.

Further details are available at www.alliance-uae.com.

Fairfax has a 14.95% stake in China's Alltrust Insurance Company. Based in Shanghai,

'Alltrust provides a full spectrum of primary insurance products and services in China,

including property insurance, liability insurance, surety bonds, short-term health

insurance, accident insurance, motor insurance and reinsurance.' 2011 gross written

premiums amounted to CNY5.2bn.

Based in Morristown, NJ, Crum & Forster Holdings (C&F) is a fully owned subsidiary of

Fairfax. It 'writes commercial property and casualty insurance in the United States

offering a broad range of coverage including specialty, standard and excess and

surplus lines.' Net written premiums in 2011 amounted to US$1,077mn. Brands include

the Seneca Companies, First Mercury Insurance, First Mercury Financial Corporation

and Cover X.

Fairfax Brasil Seguros Corporativos is a small, fully owned, subsidiary of Fairfax that is

based in São Paulo. It was established in 2009. Its primary focus is 'property, casualty,

surety, marine, financial lines, special risks, hull and aviation.'

Falcon Insurance Company (Hong Kong) is a small fully owned subsidiary that serves

niche markets in the Special Administrative Region for corporate clients. Net premiums

in 2011 amounted to HKD419mn.

Falcon Insurance Company PCL is a Bangkok-based joint venture (JV) with Thailand's

Navakij Insurance PCL. Net written premiums in 2011 amounted to about THB308mn.

The company is involved with motor, personal accident, fire and marine lines.

First Capital is a Singapore-based 98% subsidiary of Fairfax. Net premiums written in

2011 amounted to SGD157mn. Lines written include fire, engineering, marine cargo,

marine hull, bond, professional indemnity, workers' compensation, personal accident

and miscellaneous accident. 'First Capital is a leading underwriter of Marine Hull

insurance in the Asia Pacific region and this class of business forms a significant

segment of the company's well balanced overall business portfolio.'

Group Re consists of two operations - CRC Reinsurance and Wentworth Insurance -

both of which are fully owned subsidiaries of Fairfax. Net premiums written by Group

Re, which is based in Barbados, amounted to US$181mn in 2011. The companies

provide treaty and facultative reinsurance on a global basis.

Fairfax owns 41% of Kuwait-based Gulf Insurance, which is run as a JV with Gulf

Insurance's largest shareholder, KIPCO. 'Gulf Insurance was established in 1962 and is

currently the largest insurance company in Kuwait in terms of written and retained

premiums. Gulf Insurance covers a variety of risks related to: motor; marine & aviation;

property and casualty; and life and health insurance. Net premiums in 2010 amounted

to KWD60mn. Its regional subsidiaries include: Bahrain Kuwait Insurance Co. (Bahrain);

Arab Misr Insurance Group (Egypt); Arab Orient Insurance Co. (Jordan); Fajr Al-Gulf



Insurance & Reinsurance Company (Lebanon); Syrian Kuwaiti Insurance Company

(Syria); and Buruj Cooperative Insurance (Saudi Arabia).

ICICI Lombard is a JV with India's ICICI Bank in which Fairfax has a 26% stake. This is

the largest private sector non-life company in India. It wrote gross written premiums of

US$821mn in the year to March 2010. It offers a wide range of non-life lines.

Odyssey Re is based in Stamford CT. It writes treaty and facultative reinsurance, as well

as specialty lines (as a direct insurer). Its principal locations are the US, Toronto,

London, Paris, Singapore and Latin America. Net premiums written in 2011 were US

$2,090mn. Shareholders equity at the end of that year exceeded US$3bn. Brands

include Odyssey Re, Hudson Insurance Group and Newline Group. Further details are

available at www.odysseyre.com.

Pacific Insurance is a Malaysian non-life insurance company that became a subsidiary

of Fairfax in March 2011. Although it writes a wide variety of business in Malaysia, it is

'known for being a leading and a quality provider of medical insurance'. Net premiums

during 2011 amounted to MYR140mn.

Polish Re is a Warsaw-based wholly owned subsidiary of Fairfax. Net premiums written

across Central and Eastern Europe amounted to PLN260mn in 2011. The company was

established in 1996 and has over 200 clients in 42 markets. It was bought by Fairfax in

2009.

Based in Manchester, NH, but with operations in the UK as well, 'RiverStone provides a

broad range of complementary run-off services and management support.' The

combined equity of RiverStone's various operations amounted to US$2,591mn at the

end of 2011.

Fairfax has a 27.2% stake in Singapore Re. This is 'the island republic's only active

indigenous reinsurer, serving the insurers in Singapore as well as those in the Asian

region and beyond. The company operates as a general reinsurance company and

underwrites property, liability, miscellaneous accident and maritime classes on a

facultative and treaty basis.' Further details are available at www.singre.com.sg.

Zenith National Insurance Corp. is a wholly owned subsidiary of Fairfax that is based in

Woodland Hills CA. It is primarily active in workers' compensation business and is

active across the entire US. Net premiums in 2011 amounted to US$496mn. Zenith

Insurance Company and ZNAT Insurance Company are the two main operating

subsidiaries. Further details are available at www.thezenith.com.

(Source: www.fairfax.ca, July 13 2012.)

Recent

DevelopmentsQ113: Since the beginning of 2012, Fairfax has announced a number of acquisitions. In

January 2012, the company reached agreement to buy 25% of Thai Reinsurance PCL

(Thai Re) for around US$70mn. This company is based in Bangkok and provides

'reinsurance coverage for property, casualty, engineering, marine and life customers.' In



May 2012, Fairfax reached agreement with Thomas Cook Group plc, one of the world's

leading travel groups, to buy the company's 77% stake in Thomas Cook (India) Limited

for around INR8,174mn (US$150mn). In mid-June 2012, RiverStone agreed to pay

around US$300mn to acquire Brit Insurance Limited, a UK (re)insurance company that

is in run-off. The gross and net reserves of Brit were around CAD1.9bn and CAD1.3bn

respectively.

In March 2012, Fairfax successfully raised CAD237.5mn in new capital through an issue

of preferred shares. The company noted that it 'intends to use the net proceeds of the

offering to augment its cash position, to increase short-term investments and

marketable securities held at the holding company, to retire outstanding debt and other

corporate obligations from time to time and for general corporate purposes.'

At the beginning of May 2012, Fairfax announced its results for Q112. Tshere was a net

loss of US$1.3mn, which compared with a net loss of US$241mn in the previous

corresponding period. According to Chairman Prem Watsa, the company 'had a much

improved underwriting result on increased premiums, but (the) defensive investment

position through (the) hedging strategy resulted in a small unrealised investment loss as

the markets moved higher in Q112.' At the end of the period, the company remained

defensively positioned. The holding company had hedged its exposure to equity

markets and retained cash and marketable securities of around US$1bn. At the end of

the period, group investment assets amounted to US$23,261mn. Total assets

amounted to US$33,873mn. As of the end of June 2012, total assets had risen to US

$33,865mn, including investments of US$23,362mn. The company was still defensively

positioned.

(Sources: Company reports.)



ICICI Lombard GIC

SWOT Analysis

Strengths ■ Largest of the private sector non-life insurers, and fifth largest overall.

■ Backing of ICICI Bank, the largest private sector bank in India and Canada's Fairfax

Financial Holding.

■ Substantial opportunities for economies of scale. ICICI Lombard would rank as a

reasonably large non-life player in most countries.

■ Large distribution network and widespread recognition for good customer service.

■ Variety of products, with particular expertise in selling to corporate clients of all sizes.

■ Track record of innovation, both in terms of product development and customer

service.

■ Capital strength.

• Improving profitability.

Weaknesses ■ ICICI Lombard is competing with massive and entrenched companies whose public

sector status affords them some privileges and advantages.

■ Like all non-life insurance companies, has suffered as a result of IRDA's ruling that

provisioning for third-party motor claims be increased substantially.

Opportunities ■ Development of new products.

■ Further development of superior customer service.

■ Further development of bancassurance and alternative distribution channels.

■ Possible acquisitions.

■ More efficient pricing and underwriting of motor business following the dismantling of

the Third Party Pool.




Threats ■ Potential, but unlikely, financial crisis affecting India. ICICI Lombard reinsures (in part)

through the global market, but is basically a domestic operation. It is also a

substantial institutional investor.

■ Regulatory changes that have an unintended, but adverse, impact.

Company Overview ICICI Lombard GIC is a joint venture between ICICI Bank and Fairfax Financial Holding.

ICICI Bank is India's second largest bank, with assets of US$91bn as at the end of

March 2012. Fairfax Financial Holdings is a Canadian insurance holding company,

which is profiled separately in this report. Fairfax Financial Holdings' stake in ICICI

Lombard GIC is 26%. ICICI Lombard was established in 2002.

ICICI Lombard is the largest private sector non-life insurance company in India, and the

fifth largest overall. It has a market share of around 10%. Its product range is

comprehensive and includes: Business Solutions (industrial all-risk, machinery, fidelity

insurance etc.); Project Solutions (contractor' plant, contractors' liability, performance

guarantee etc.); Liability Solutions (workmen's compensation, event insurance,

Directors' & Officers' liability etc; Export Solutions (export credit insurance etc; Rural

Solutions (weather insurance, crop insurance etc.); Personal Solutions (accident &

health etc.); Travel Insurance; Motor Insurance (for both two- and four-wheelers); and

Home Insurance.

ICICI Lombard seeks to differentiate itself through its customer service, and has won a

number of industry awards.

As of the end of March 2012, there were 7,208 employees and 311 branches across

India. The ratings agency ICRA has given the company a rating of iAAA.

Among much else, the company is an innovator in terms of the development of new

products - such as the Weather Based Crop Insurance Scheme (WBCIS). 'This scheme

has been successfully adopted in 11 states, covering up to 3mn farmers.'

The company has distributed through bancassurance arrangements since 2003/04.

The company introduced an e-channel, which enables customers to buy insurance

online and to monitor their insurance transactions in 2005/06.

The company pays 96% of its commissions through electronic funds transfer.

(Source: www.icicilombard.com, August 12 2012 and Annual Report for year to March

31 2012.)



Recent

DevelopmentsQ113: ICICI Lombard GIC published its results for the March 2012 fiscal year on May 3

2012. Gross written premiums rose by 22% to INR53,580mn. The number of policies

issued grew by 34% to 7.6mn.

In early 2012, the IRDA required the non-life companies to absorb additional claim

liabilities as a part of the process whereby the Motor Pool was dismantled. ICICI

Lombard's management decided to absorb the liabilities in total in the March 2012

fiscal year. This reduced profit before tax by INR6,850mn. Prior to this one-off item,

profit before tax amounted to INR2,900mn (or 53% higher than in the March 2011 fiscal

year). According to Bhargav Dasgupta, the CEO of ICICI Lombard: 'going forward, the

Third Party Motor Pool has been dismantled and the Declined Risk Pool has been

formed. This would enable individual insurers to leverage on their own claims

efficiencies. We will continue to invest in robust underwriting, cost-effective distribution

and scalable service architecture, while building a long-term franchise.'

Excluding the Motor Pool, ICICI Lombard reduced its combined ratio from 105.3% in

the March 2011 fiscal year to 99.9% in the latest fiscal year.

In the latest fiscal year, 'the Group invested significant time and effort on process

enhancement, which in turn resulted in increasing the size of the portfolios. Effective

and engaging employee training modules helped… Consolidated and profitable

acquisitions further helped to accomplish more than 16% growth of the corporate

business.'

As at the end of March 2012, the company's investment portfolio amounted to

INR52bn.

(Source: press release, May 3 2012, and annual report for year to March 31 2012.)



Life Insurance Corporation of India

SWOT Analysis

Strengths ■ Former state-owned monopoly that still accounts for over two-thirds of all activity in

the Indian life insurance segment.

■ Backing of the government of India.

■ There are massive potential for economies of scale: LIC is an enormous insurer by

any standards.

■ Strong brand and enormous nationwide distribution network.

■ Variety of products.

• Of the world's largest insurers, one of the least vulnerable to volatility in global

financial markets.

Weaknesses ■ LIC has been losing market share to new private sector competitors, some of which

have access to the know-how and produce innovation that can be provided by major

multi-nationals.

■ To a greater extent than its competitors (and broadly comparable former state-owned

monopolies), LIC is required to serve multiple stakeholders and non-commercial

objectives.

Opportunities ■ Improvement to productivity of agency force.

■ Development of new products.

■ Further development of overseas subsidiaries.


■ Possible (but very unlikely) full privatisation.

Threats ■ Potential, but unlikely, financial crisis affecting India. LIC is one of the largest

institutional investors.




■ Continual erosion of market share by competitors who have the understanding and

ability to deliver a better value proposition to individual clients.

■ Regulatory changes that have an unintended, but adverse, impact on LIC's business.

Company Overview Life Insurance Corporation of India (LIC) dates from 1956, when the government of India

nationalised the entire life insurance industry. From that date until the (partial)

liberalisation of the life insurance segment, LIC was essentially a state-owned

monopoly. It still accounts for about 70% of the activity in the life insurance segment.

Based in Mumbai, it had eight zonal offices, around 100 divisional offices, about 2,100

branch offices and 1,337,064 agents as at the end of March 2011. There were

1,293,816 active agents. Both the total number of agents and the number of active

agents had been falling through the March 2011 fiscal year.

The number of employees (as opposed to agents) was more or less constant through

the March 2011 fiscal year at 115,362.

Its website indicates that its varied products can be considered in five groups: individual

life insurance plans; pension plans; unit plans; special plans; and group schemes.

LIC has international operations in a number of countries that have (or have had)

substantial numbers of Indian expatriates. There are subsidiaries in Fiji, Mauritius,

Nepal, Sri Lanka and the UK. Kenindia Assurance is the affiliate in Kenya. LIC

(International) BSC is based in Bahrain. It has branches or chief agencies in Bahrain,

Dubai, Abu Dhabi, Kuwait and Oman.

Other subsidiaries include: LIC Housing Finance ('the housing finance institution with

the widest marketing network in India'); LIC HFL Care Homes (aged care facilities); LIC

Nomura Mutual Fund Asset Management Company (a mutual fund company

established in 1989 and finalised as a JV - in which Nomura has a 35% stake - in early

2011); LIC Cards Services (credit cards); and LIC Pension Fund.

Saudi Indian Company for Cooperative Insurance is a JV in Saudi Arabia between LIC,

LIC (International), New India Insurance Co., Al Hokair Group and other investors.

(Source: annual report for year to March 31 2011.)

Recent

DevelopmentsIn the year to March 31 2011, total premiums rose by 9.3% to INR2,033.6bn. This

included renewal premiums for individual products of INR974.8bn. Initial first-year



premiums rose by 14.9% to INR217.6bn. Group insurance and group superannuation

premiums were INR243.4bn and INR149.6bn respectively.

Total investments at the end of the period amounted to INR12,665bn.

Marketing initiatives highlighted in the Annual Report for the March 2011 fiscal year

included:

Bancassurance and Alternative Channels: Bancassurance and corporate agents

accounted for nearly 700,000 policies (1.9% of the total) and INR12.8bn in first-year

premium (2.91% of the total) during the year. Of these amounts, banks accounted for

55% of the policies and 84% of the first-year premiums. First-year premium during this

channel grew by 13%.

Microinsurance: There were 2.95mn micro-insurance policies sold (up 49% relative to

the March 2010 fiscal year) accounting for INR440mn in first year premium.

Health insurance: There were 68,000 policies sold for a premium income of INR580mn.

Direct marketing: This channel accounted for 51,000 policies and INR1.4bn in first-

year premiums.

(Source: annual report for year to March 31 2011.)

In the year to March 2012, LIC accounted for 71.36% of all new business premiums

written in the life segment. LIC spoke for 84.88% of group single premiums, and

63.08% of individual non-single premiums. For individual single premiums, its market

share was 72.74%.

(Source: SBI Life Annual Report for 2011-12.)



MetLife

SWOT Analysis

Strengths ■ Massive scale and capitalisation, as one of the largest multi-national life insurers.

■ Global diversification in terms of geographic footprint - across the Americas, Europe,

Middle East and Japan.


■ Enormous diversity of products and distribution channels. MetLife has expertise in

bancassurance, broker, direct and face-to-face sales.


institutions in the USA.

■ Strong brands.


■ By some measures, MetLife ALICO is a top 10 life company in Japan.

■ Risk management expertise - illustrated in the 2010 purchase of ALICO in spite of the

lingering effects of the global financial crisis.

• Prepared to exit businesses that do not meet long-term objectives: examples include

long-term care (2010); certain businesses in the Caribbean and Taiwan (2011); and

certain blocks in the UK (2011).

Weaknesses ■ Many of the markets in which MetLife operates are relatively mature.

■ Like all large life companies, MetLife is exposed to the challenges that arise from a

global investment environment in which interest rates are, and will likely remain, low.

However, MetLife started to buy hedges against low interest rates as early as 2004,

when rates were much higher.

Opportunities ■ Ideally placed to benefit from the growth of organised savings in emerging markets

outside the Asia Pacific.




■ Able to leverage experience in accident and health insurance in China and Japan to

sell into other developing markets in Latin America and elsewhere.





■ Robust competition, in some markets, from very large local players. However, not

many life insurance companies can match the overall global strengths of MetLife.

Company Overview MetLife describes itself as 'a leading global provider of insurance, annuities and

employee benefit programs serving 90mn customers. Through its subsidiaries and

affiliates, MetLife holds leading market positions in the USA, Japan, Latin America, Asia,

Europe the Middle East and Africa.' This self-description needs some explanation.

Having developed a very strong position as a provider of life insurance and employee

benefit products in the US and some other countries, MetLife transformed its global

footprint with the November 2010 acquisition, for US$16.4bn, of American Life

Insurance Company (ALICO) from AIG. ALICO's footprint included Japan, where it had

been the first foreign insurance company licensed to sell life insurance, Europe and

various emerging markets outside the Asia Pacific. AIG's key operations in the emerging

markets of the Asia Pacific were conducted through its AIA business, which was sold by

way of an initial public offering (IPO) in Hong Kong in October 2010.

In a management presentation of May 2012, the company noted that it was: the largest

US life insurer; the leader in US employee benefits, being the largest company in terms

of group life policies that are in force and in terms of commercial dental policies; the

largest company in terms of US annuity sales; and the largest company in terms of

structured settlement sales in the USA. Perhaps a better description of MetLife would

be that it has - among other things - also become one of the largest multi-national life

companies in the richer countries of the Asia-Pacific. We note, though, that it also has a

significant presence in South Asia.

Across the Asia Pacific, the company has a presence in eight countries.



In Australia, it 'provides life, credit, disability and accident and health insurance

solutions to groups and individuals through superannuation funds and direct marketing

channels.'

In Bangladesh, the company has nearly 1mn customers, to whom it sells 'a range of

individual and group insurance products.'

In China, MetLife is an investor in two life insurance joint ventures (JVs). Since 2003, it

has been an investor in Sino-US MetLife Insurance Co. Limited. This offers life and

accident and health products to individuals in Beijing, Chongqing, Guangzhou,

Shenzhen, Shenyang and Dalian through a variety of channels. The partner is Capital

Airport Holding Company. United MetLife Insurance Company Limited is a JV with

Shanghai Alliance Investment Limited. It dates from 2005. It offers life, accident and

savings products to individual customers in Shanghai, Nanjing, Hangzhou, Ningbo and

Wuxi 'through a career agency distribution system.'

MetLife has had a presence in Hong Kong since 1995. It offers 'life investment-linked

insurance plan and accident and health insurance products through bank partners and

direct marketing channels.'

MetLife India Insurance Company is a JV in that country with other investors of which

the most important are The Jammu & Kashmir Bank and M Pallonji and Co. 'MetLife is

one of the fastest growing life insurance companies in the country.' It distributes to both

individual and group companies via its bank partners and company-owned offices. In

addition, MetLife employs over 55,000 Financial Advisors across India.

In South Korea, MetLife's local operation, which was established in 1989, offers 'life,

accident and health insurance and retirement savings products to individuals and

companies.' It operates through its own agency force and bank partners. MetLife is the

largest foreign life company in South Korea. Globally, South Korea is the fourth largest

national market for MetLife. The company considers that the demographic profile of the

company is favourable for growth in demand for its accident and health products.

MetLife ALICO was the first foreign company to receive a licence to sell life and

accident insurance in Nepal, in 2002.

By far the most important market in the region, though, is Japan. Together, the legacy

operations of MetLife, and the ALICO businesses that were purchased from AIG,

constitute the second largest national market for the MetLife group after the United

States. MetLife highlights its 'strong growth in high-margin products, in spite of a

challenging environment.' In terms of statutory premium income, MetLife ALICO is the

third largest foreign life insurance company in Japan. It is also the second largest

provider of accident and health products.

Across the Asia Pacific as a whole, the company generated premiums, fees and other

income of US$8.7bn. Operating earnings amounted to US$867mn.

(Source: www.metlife.com and corporate presentation, May 2012.)



Recent

DevelopmentsQ113 As of mid-2012, the latest comment on the company's operational performance in

the region pertained to Q112. Highlights included: operating earnings of US$1.5bn, or

11% more than in Q111; 7% growth in premiums, fees and other revenues to US

$11.6bn (which reflected 'strong growth in all three geographic regions - the Americas,

Asia and EMEA); and net investment income of US$5.1bn, up 6% over Q111.'

In relation to its operations in the Asia Pacific, the company noted that operating

earnings in Q112 amounted to US$297mn, or 33% more than in Q111. This was 'due to

growth in the business- particularly in Japan - as well as expense efficiency. Premiums,

fees and other revenues in Asia were US$2.3bn, up 8% due to business growth in

Japan, Korea and Australia, as well as improved persistency in both Japan and Korea.

Total sales for the region grew 15%, driven by increases in Japan, China and Australia.'

The company expects to achieve operating earnings of between US$1,110mn and US

$1,210mn for calendar 2012 as a whole.

(Source: Q1 results press release, April 26 2012.)

At the beginning of August, MetLife released its results for Q212. For that three-month

period, 'operating earnings in Asia were US$275mn, up 61% primarily due to growth in

the business in Japan and strong net investment income. The prior year period was

negatively impacted by the March 2011 tsunami and earthquake in Japan.' Thanks to

the development of the business in Japan and Australia, premiums, fees and revenues

in the quarter were US$2.3bn, or 6% more than in Q211. 'Total sales for the region grew

13%, driven by higher life sales in Japan, increased accident & health sales in China

and growth in group sales in Australia.'

(Source: Q2 results press release, August 1 2012.)

Company Details ■ Website: www.metlife.com



Prudential Financial

SWOT Analysis


Prudential Financial is one of the largest life insurance companies worldwide.

■ Leadership positions in a wide variety of individual and group savings products in the

United States.

■ Diversity of products enables the company to serve a suitably diverse range of clients.

■ One of the largest life insurers in Japan, by some metrics, following the acquisition of

AIG Star and AIG Edison.

■ By some margin the largest foreign life insurance company in Japan.

■ Strong brands.

■ Clear strategy of international expansion, with demonstrable track record of success -

which includes the execution of very substantial acquisitions.

■ Par excellence an example of a world-class multinational financial services company

that is well placed to exploit the ageing of world populations and growth in demand

for innovative long-term savings solutions.

• One of the largest institutional asset management companies worldwide. The Asset

Management business of Prudential Financial has a global footprint.

Weaknesses ■ Some of the markets in which Prudential Financial operates are highly competitive.

■ To date, Prudential Financial has relatively little presence in Europe, a part of the

world where the demographics and overall income levels might suit its strategy.







■ Synergies from integration of AIG Star and AIG Edison with the legacy operations in

Japan.

■ Diversification of products and distribution channels in Japan.


■ Robust competition in some markets, from companies that have some of the same

strengths as Prudential Financial.

Company Overview Originally founded in Newark NJ in 1875, Prudential Financial is today a listed company

that rightly describes itself as one of the world's largest financial institutions. In the

United States, Prudential Financial is one of the largest life insurance companies. The

company operates through four major divisions: US Retirement Solutions and

Investment Management; US Individual Life and Group Insurance; International

Insurance; and Corporate and Other. There is also a Closed Block Business, which

includes in-force traditional and annuity products that pre-date the company's

demutualisation (and the assets that support those policies).

As of mid-2012, the company had US$943bn in assets under management (AUM).

Gross life insurance policies in-force worldwide amounted to US$3,600bn or so.

Globally, the company employs 51,100 staff and sales associates. Prudential Financial

is the second-largest life insurer in the United States in terms of total admitted assets: it

is the fifth largest individual life insurance company in the country in terms of statutory

net written premiums. It is the 10th largest seller of individual life insurance in the United

States in terms of recurring premiums. Globally, Prudential Financial is the 10th largest

asset manager in terms of AUM.

US Retirement Solutions and Investment Management Division

This division has three segments. The Asset Management segment 'provides a broad

array of investment management and advisory services, mutual funds and other

structured products'. The Individual Annuities segment 'manufactures and distributes

individual variable and fixed annuity products, primarily to the US mass affluent market.'

The Retirement segment 'provides retirement investment and income products and

services' to organisations.

US Individual Life and Group Insurance Division

This division has two segments. The Individual Life segment 'manufactures and

distributes individual variable life, term life and universal life insurance products.' The

Group Insurance segment provides 'a full range of group' products to corporate and



'institutional clients primarily for use in connection with employee and membership

benefit plans.'

International Insurance Division

The main activity of the division is the 'manufacture and distribution of individual life

insurance products to the mass affluent and affluent markets in Japan, Korea and other

countries through its Life Planner operations.' In Japan, similar products are offered to

the 'broad middle income market' through the Life Advisors or Gibraltar Life operations:

these are associated with Gibraltar Life Insurance company, which was acquired in

2001.

In February 2011, Prudential Financial purchased AIG Star Life Insurance Co. Limited

and AIG Edison Life Insurance Company from American International Group, Inc. 'The

Star and Edison businesses primarily distribute individual life insurance, fixed annuities,

and certain health products with fixed benefits through captive agents, independent

agents and banks. The addition of these operations … will increase its scale in the

Japanese insurance market and provide complementary distribution opportunities.' The

legal merger with the existing Gibraltar Life operation was completed at the beginning of

2012.

Prudential Financial entered Japan and South Korea in 1988 and 1991 respectively.

Other countries where its Life Planner operations have a presence include: Taiwan (from

1990), Italy (1990), Brazil (1998), Argentina (1999), Poland (2000) and Mexico (2006).

Prudential Financial's Indian life insurance joint venture (JV) commenced operations in

2008. Prudential Financial has a representative office in China.

In addition, the company offers 'proprietary and non-proprietary asset management,

investment advice, and services to retail and institutional clients in selected international

markets.' These services are marketed through Prudential Financial's own, and third

party, distribution networks.

(Source: company factsheet and, July 19 2012.)

Recent

DevelopmentsAs of mid-2012, the latest financial data pertained to Prudential Financial's operations in

Q112.

US/Global

At the end of March 2012, the value of Individual Annuity accounts outstanding

amounted to US$124bn, or 9% more than at the end of March 2011. Gross sales of

Individual Annuities amounted to US$5.0bn; net sales, for US$3.2bn.

Retirement account values were nearly US$240bn at the end of March 2012, or 12%

more than they had been a year previously. Gross and net sales/deposits received

were, respectively, US$9.0bn and US$404mn during the quarter.



Asset Management segment AUM amounted to US$637bn, or 12% more than at the

end of Q111.

Individual Life annualised new business premiums during the quarter amounted to US

$79mn, or 22% more than in Q111. Group Insurance annualised new business

premiums amounted to US$313mn. International Insurance constant dollar basis

annualised new business premiums written during the quarter were US$819mn, or 24%

more than in Q111.

Chief Executive Officer John Strangfeld noted that new record highs were achieved

during the quarter for: annuity and retirement account values; AUM of the Asset

Management business; and sales in the International Insurance business.

(Source: Q112 earnings release, May 2 2012.)

Japan

In late May 2012, the company highlighted certain aspects of its International

businesses at the Financial Strength Symposium. The overall strategy is to concentrate

on 'a limited number of attractive countries'. Whereas Prudential Financial has targeted

affluent and mass affluent customers in the past, it is now looking to broaden its

customer base. In addition, it is diversifying its products and distribution channels,

having traditionally emphasised proprietary distribution.

The combination of AIG Star and AIG Edison with Prudential Financial's existing

operations in Japan builds on what was already a very substantial business by any

standard. As at the end of March 2012, the company had 10.18mn in-force policies in

Japan. There were 15,384 captive agents and 58 relationships with bank distributors.

As of mid-2012, the process of integration was proceeding smoothly. Over five years,

Prudential Financial expects to incur pre-tax integration costs of US$500mn. However,

the company is looking to achieve annual cost savings of US$250mn.

In terms of new business written in Japan in the final nine months of calendar 2011,

Prudential (including AIG Star and AIG Edison) was the third largest life company in

Japan overall with a market share of 10.4%. Nippon Life and Dai-ichi, with market

shares of 12.7% and 10.9% respectively, were the largest two players. T&D Financial

and Meiji Yasuda were, by this measure, slightly smaller, with market shares of 10.3%

and 9.6% respectively. These were followed by Sony (market share of 6.5%); Sumitomo

Life (6.1%); the Japanese operations of MetLife Alico (5.5%); the life operations of NKSJ

Holding (4.6%); and the life operations of MS& AD Group (3.8%).

(Source: presentation - Financial Strength Symposium, May 24 2012.)

In Q212, the international insurance business of Prudential Financial achieved adjusted

operating income of US$681mn, a significant increase relative to the US$500mn in

Q211. Earnings were boosted mainly by three factors in Japan: the absence of claims

and expenses relating to the earthquake and tsunami of March 2011; the integration of



AIG Star and AIG Edison; and 'business growth across all channels, and approximately

US$40mn in cost savings resulting from synergy benefits.'

(Source: corporate press release, August 1 2012.)



Prudential plc

SWOT Analysis


■ Multinational diversification, across Asia, the United States, the UK and through M&G

and Eastspring Investments.


■ Huge variety of products and distribution channels.

■ Strong brands.

■ Par excellence an example of a leading multi-national insurer that can benefit from

both the ageing of populations in rich countries and from the strong growth in

demand for long-term savings products in emerging markets.

■ Proven capability to undertake successful acquisitions - of which the SRLC deal in

the US is the latest example.

• Clear and proven strategy.

Weaknesses ■ Some of the markets in which Prudential operates are mature and/or highly

competitive.

■ A small player in (or absent from) some of the most important emerging markets in

Asia.




■ Further growth in agency force in Asia.

■ Further growth in agent productivity in Asia.

■ A natural beneficiary of the relatively strong growth of emerging markets in Asia.




■ Further development of Eastspring Investments' business.



strengths as Prudential plc.

Company Overview Originally founded in 1848, Prudential plc is one of the world's largest and financially

strongest listed multi-national life insurance companies.

Globally, it has AUM of over GBP351bn. It serves 26mn customers and is listed in

London, New York, Singapore and Hong Kong. Around the world, Prudential plc has

over 26,000 employees.

There are four main business units: Prudential Corporation Asia; Jackson National Life

Insurance Company; Prudential UK; and M&G, the group's principal asset management

operation. In terms of APE new business premiums, around 45% of Prudential plc's

overall business is derived from Prudential Corporation Asia. Jackson and the UK

account for around 35% and 20% respectively. In relation to new business profits, the

corresponding figures are 50%, 38% and 12%.

Prudential Corporation Asia 'is a leading international life insurer in Asia with operations

in 12 markets.' It has 'more market leading positions than any other life insurer in the

region and the region's largest onshore mutual fund manager.' It provides regular

premium savings and protection products, through agents and a growing number of

bancassurance partners. Across the region, there are over 350,000 agents and 12mn

clients.

In February 2012, the asset management operation of Prudential Corporation Asia was

rebranded as Eastspring Investments. It operates in 11 markets across the region (and,

from July 2012, in the United States). It has 2,000 employees and, as of the end of

Q112, AUM of US$85bn. About half of its total AUM comes from third party clients.

Eastspring is 'the largest multinational onshore mutual fund manager in the region.'

Jackson 'is one of the largest life insurance companies in the United States, providing

retirement savings and income solutions with over 2.9mn policies and contracts in

force.' Jackson is one of the three largest providers of variable and total annuities.

Prudential UK is 'a leading life and pensions provider to approximately seven million

customers in the UK.' It has expertise in areas such as longevity, risk management and

multi-asset management' along with 'financial strength and a highly respected brand.'



Founded over 80 years ago, 'M&G is Prudential's UK and European fund management

business with total assets under management (AUM) of GBP201bn as at December 31,

2011.'

(Sources: company factsheet, July 23 2012, and Eastspring press release, June 11

2012.)

Prudential Corporation Asia

As is discussed below, Prudential Corporation Asia is one of the leading pan-Asian life

insurance companies, with presence in 12 markets - China, Hong Kong, India,

Indonesia, Japan, South Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand

and Vietnam.

Eastspring Investments, Prudential Corporation Asia's fund management business,

manages assets for Prudential Corporation Asia and for Prudential plc. It also handles

significant AUM for third party investors. It is 'one of the largest by measure of Asia-

sourced AUM'. As at the end of 2011, Eastspring Investments' AUM amounted to

GBP50.3bn. It has asset management operations in 11 locations - China, Hong Kong,

India, Indonesia, Japan, South Korea, Malaysia, Taiwan, Vietnam and the UAE.

Across the region, Prudential Corporation Asia identifies six businesses: life insurance;

fund management; consumer finance (in Vietnam); retirement planning; health solutions;

and Islamic financial products (in Malaysia, Indonesia and the Gulf).

Prudential Corporation Asia's operations across the region, and their date of

establishment, are as follows:

Hong Kong (1964) is the regional head office. Prudential Corporation Asia is a leading

life company and, through Eastspring Investments, asset manager. Its JV with Bank of

China International provides administrative services for Mandatory Provident Fund

(MPF) schemes.

China (2000) - Prudential Corporation has life insurance and asset management JVs

with the CITIC group.

India - The company's JVs with ICICI Bank are the largest private sector life insurer and

the largest fund manager in the country.

Indonesia (1995) - Prudential Corporation Asia has grown to be the market leader in the

Indonesian life segment. Eastspring Investments is also present in the country.

Japan - PCA Life and Eastspring are active respectively as life insurer and asset

manager.

South Korea - PCA Life and Eastspring are active respectively as life insurer and asset

manager.



Malaysia (1924) - Prudential Corporation Asia is one of the largest life companies in

Malaysia. It has a family takaful JV with Bank Simpanan Nasional. Eastspring

Investments is also present as asset manager and Islamic asset manager.

Philippines (1996) - Pru Life (UK) provides insurance products.

Singapore (1931) - Prudential Corporation Asia has substantial life insurance and asset

management operations in the city-state.

Taiwan - PCA Life and Eastspring are active respectively as life insurer and asset

manager.

Vietnam - The company is one of the leading life insurance companies in Vietnam. It has

been a provider of consumer finance since 2007. It is also active as an asset manager.

Eastspring Investments also has an asset management operation in Dubai, where it

distributed funds.

(Source: www.prudentialcorporation-asia.com as at August 10, 2012.)

In early July 2012, the government of Cambodia gave its in-principle approval for

Prudential Corporation Asia to establish an operation in that country.

(Source: press release, July 2 2012.)

Recent

DevelopmentsPrudential plc's results for H112, which were published on August 10, 2012, highlighted

how Prudential Corporation Asia is a key driver of growth for the group as a whole. In

H112: Asia life insurance profit was GBP409mn (up 26%) in terms of IFRS; Asia EEV

new business profit of GBP547mn was up 18% relative to H111; Asia life insurance

business operating profit (in terms of Embedded Value) was 18% higher at GBP872mn;

and the net cash remittance from the Asian operation to Prudential plc was GBP126mn,

or 20% more than in the previous corresponding period.

Prudential plc commented on the Financial Advisory Industry Review in Singapore as 'a

good example of regulators reviewing industry practices to ensure that customers are

receiving good value.' It also noted that 'some major European players and looking to

make strategic disposals in the region.'

Other features included:

■ Internal rates of return of over 20% across all Asian businesses.■ Prudential Corporation Asia is on track to achieve GBP1.4bn in new business in profit

and GBP930mn in IFRS operating profit by 2013 (representing a doubling in relationto the levels of 2009).

■ Continued innovation. There is 'a particular focus on regular premium savings andprotection. Health and protection products contributed 32% of APE sales and 93% ofAPE sales came from regular premium business.'

■ Multi-distribution model. 'Agency remains our largest channel and, despite oursuccess to date there remains an opportunity to continue to increase both the scaleand productivity of our agency force. Bancassurance is expanding as we develop our



capabilities across the region, and we are seeing significant growth across all of ourmajor partnerships.'

■ Strong performance across all regional markets. 'The growth in new business profitwas driven by Indonesia (up 49%) and Malaysia (up 27%), while sales benefited fromstrong contributions in Singapore (up 37%), Indonesia (up 30%) and Taiwan (up49%).'

■ Over the half year, the AUM of Eastspring Investments rose from GBP50.3bn toGBP53.8bn. The latter amount included GBP19.6bn of external assets.

■ Growth in the agency force. Excluding India, active agency manpower rose by 12%.(In India, the various regulatory changes of September 1 2010 have required arestructuring of the business, which continues.)

■ China: Prudential plc's 50% share of the JV's APE new business fell by 6% toGBP33mn. The challenges have included: the slowing economy, lower case size inthe agency channel and lower sales through bancassurance because of the CBRC'stightening of regulations.

■ Hong Kong: Prudential plc's APE new business rose by 17% to GBP177mn.'Prudential remains the only leading player in Hong Kong to have material agency andbank distribution. Both channels contributed to the growth. Sales through StandardChartered Bank accounted for nearly half of APE new business.

■ India: Prudential plc's 26% share of the JV's APE new business rose by 13% toGBP53mn. Business volumes are still lower than they were when the regulatorychanges came into effect.

■ Indonesia: Prudential plc's APE new business rose by 30% to GBP206mn. There arenow over 180,000 agents, and productivity has been improving. Bancassurance APEnew business soared by 162% 'with strong contributions from UOB, BII, Citibank andPermata.'

■ South Korea: Prudential plc's APE new business fell by 18% to GBP45mn. Thecompany does 'not compete in the low margin, capital intensive guaranteed returnsegment of the market. … Sales via banks and brokers declined as consumerscontinue to focus on interest rate sensitive products, which we do not offer as theeconomics of these products are unattractive.'

■ Malaysia: Prudential plc's APE new business rose by 8% to GBP98mn. The companyis growing its agency force in the country. 'Our focus in H112 on health andprotection has driven a 2% increase in APE for this product line … We havecontinued to expand in the Takaful sector, where we remain market leaders. Newbusiness sales from our bank partners UOB and SCB were up 75%.

■ Singapore: Prudential plc's APE new business rose by 37% to GBP141mn. Theagency channel is one of the most productive of any life insurer's in Singapore.Bancassurance sales (with UOB, SCB, Maybank and Singpost) are growing strongly.

■ Taiwan: Prudential plc's APE new business rose by 49% to GBP88mn. 'Taiwan ismainly focused on bank distribution through our partnership with E.Sun and SCB,supplemented by a direct marketing and worksite marketing activities, which aregrowing fast.' There were 'particularly strong results from SCB driven by new productlaunches.'

■ Others - Philippines, Thailand and Vietnam: Prudential plc's APE new business roseby 32% to GBP58mn. 'In Vietnam, challenging economic conditions are reflected inlower agency activity rates. In Thailand, where we are a relatively small player withmarket share of 2%, new business APE was 73% higher than last year and we areencouraged by the prospects of our developing distribution capabilities. ThePhilippines delivered excellent growth of 50% driven by successes with partnershipdistribution and increased agency activity and productivity.'

■ Eastspring Investments: 'Net third party inflows of GBP426mn were driven by inflowsto new funds in India and Taiwan, as well as higher net inflows in Singapore.



Specifically, strong fund raising was seen in India for its fixed maturity plan range,while the Taiwan business saw the successful launch of the Emerging Asian LocalFixed Income Fund. In Singapore, Eastspring Investments' Monthly Income Plancontinued to be one of the top-three best selling funds in the local onshore mutualfunds market. The positive net flows were partly offset by redemptions from aninstitutional client in South Korea.'

(Source: H1 results press release, August 10 2012.)

Company Details ■ Prudential plc

■ Laurence Pountney HillLondon

EC4R 0HH

UK

■ Website: www.prudential.co.uk



QBE Insurance Group

SWOT Analysis

Strengths ■ Large scale and capital strength.


Middle East and Asia Pacific.


■ Low cost of capital. Strong brands.


■ A leading regional player in property & casualty insurance in Latin America.

■ Proven capability to undertake successful acquisitions.


Weaknesses ■ Some of the markets in which QBE operates are mature and/or highly competitive.

■ A small player in (or absent from) some of the largest emerging markets.


Opportunities ■ A significant beneficiary of the general improvement over time in perceptions of risk


■ Product innovation.


■ A natural beneficiary of the relatively strong growth of emerging markets.


■ Robust competition, in some markets, from very large local players. However, in the

emerging markets, there are not many local property and casualty companies that

can match QBE's overall strengths.



Company Overview QBE is 'Australia's largest international general insurance and reinsurance group and

one of the top 20 insurers and reinsurers worldwide as measured by net earned

premium, with operations in all key insurance markets. QBE is an Australian listed

company with a Group Head Office based in Sydney, and has operations in 49

countries with over 14,000 employees worldwide.'

QBE exercises discretion in terms of the lines and geographic markets in which it

operates. It is this approach, along with its overall diversification of businesses that is a

key feature of its business strategy. The company looks 'where possible, to be a lead

underwriter for selected lines of business, setting rates and conditions in the markets in

which we operate.'

The company has undertaken 135 acquisitions since its first deal in 1982. In 2011,

gross written and net earned premiums of US$18.3bn and US$15.4bn.

In its home market of Australia, QBE is one of the leading non-life insurers, and provides

a wide range of property and casualty product. Personal lines include insurance for

boats, cars, caravans, compulsory third party motor liability (in NSW and Queensland),

home insurance, landlords insurance and travel insurance. Corporate lines include

aviation, builder's warranty, commercial compulsory third party liability, surety, farm,

marine, accident & health, trade credit and workers' compensation.

Elsewhere in the region, QBE Asia has a presence in 10 countries.

Singapore - QBE has been present in the market for over a century. It offers personal

accident & health, domestic property and travel insurance. It also provides a wide

variety of business lines.

Malaysia - QBE offers boat, fire, medical, private motor and accident insurance to

personal clients. It also offers a comprehensive variety of business lines.

Hong Kong - QBE provides specialist solutions directly in Hong Kong. It also operates

through the QBE-HKSI joint venture with China Construction Bank. As is noted below,

QBE has purchased the non-life insurance business of Hang Seng Bank in Hong Kong

and mainland China. QBE-HKSI offers a broad range of both personal and business

lines in Hong Kong.

Macau - QBE has become a leading provider of property & casualty insurance in

Macau, having entered the market in 1985. QBE 'offers a broad range of solutions for

the insurance needs of individuals and businesses, particularly small- to medium-sized

enterprises.

Thailand - originally established as a JV in 1989, the subsidiary provides general

insurance lines and 'has developed specialist expertise in marine, professional

indemnity, directors' & officers' liability and contract works insurance.'

Vietnam - QBE originally set up a representative office in 1994. It then formed a JV,

before buying another licensed company in late 2005. With offices in both Hanoi and Ho



Chi Minh City, 'QBE Vietnam focuses on providing business insurance solutions to the

corporate sector.'

China - QBE has had a representative office in Guangzhou since 1998.

Philippines - a JV was formed in 1999. It has 'particular expertise in marine, professional

risks, liability and commercial property and packaged insurance.'

India - QBE is present via the Raheja QBE JV with the Rajan Raheja Group.

Indonesia - 'PT Asuransi QBE Pool Indonesia is a JV between QBE and PT Pool Advista

Indonesia Tbk.' It was founded in 1994. The company has a nationwide branch network

and offers a broad range of personal and commercial lines.

(Source: company websites via www.qbe.com, August 9 2012.)

Recent

DevelopmentsQ113: QBE was upbeat about the performance of its operations across 16 countries in

the Asia Pacific (not including Australia and New Zealand) in H112. Highlights included:

a 13% rise in gross written premium to US$265mn; net earned premiums that were

more or less unchanged at US$182mn; a rise in the combined operating ratio to 91.2%

(from 79.8% in H111) thanks to higher catastrophe reinsurance costs; slippage in the

insurance profit margin from 25.7% in the previous corresponding period to 10.4%; and

the finalisation of the purchase of Hang Seng's general insurance business in Hong

Kong in July 2012, which 'is expected to deliver US$75mn in gross written premium in

its first year'. As a part of the purchase deal, QBE has an exclusive 10-year

bancassurance deal with Hang Seng Bank in Hong Kong and mainland China.

Premium rates have been fairly flat in most of the markets in which QBE operates,

thanks to competitive conditions. 'The major exception is Thailand, where we are seeing

significant rate increases in response to the massive flood losses incurred in late 2011.

We are either excluding or substantially reducing flood coverage in Thailand through a

combination of higher deductibles and policy sub-limits and, consistent with this

approach, we have reviewed and reduced our potential flood exposures across the rest

of the Asia-Pacific operations.' Premium income was also boosted by new business

written in Hong Kong and the Philippines. QBE expects that premium rates in the region

will firm in the coming months: this is because of higher reinsurance costs and

deductibles following the massive catastrophes of 2011.

Investment returns were lower in H112 than they had been in H111.

The commissions and expense ratio rose from 39.3% in H111 to 44.5% in H112. This

was due to 'increased commissions on additional premium from broker-led business.'

In relation to gross earned premiums of US$243mn, the main lines in H112 were marine

(23%), property (19%), motor (15%), workers' compensation (13%), accident & health

(7%) and liability (6%).

QBE expects that total gross written premiums of its Asia-Pacific operations will amount

to US$570mn in calendar 2012, or 22% more than in 2011. 'We will continue to



maintain a strong focus on underwriting fundamentals, and target increased market

penetration through our intermediary networks to further build our successful

businesses. … Our Indian joint venture is expected to continue to write new business

on a very selective basis given the ultra-competitive conditions in that market.' With the

exception of Thailand, 'we expect markets to remain competitive in the near term, with

premium rates expected to remain stable.'

(Source: QBE Half Yearly Report for H112.)



RSA

SWOT Analysis

Strengths ■ Large scale and capital strength.


Middle East and Asia Pacific.


■ Low cost of capital. Strong brands.


■ A leading regional player in property & casualty insurance in Latin America.

■ Proven capability to undertake successful acquisitions.


Weaknesses ■ Some of the markets in which RSA operates are mature and/or highly competitive.

■ A small player in (or absent from) some of the largest emerging markets.


Opportunities ■ A significant beneficiary of the general improvement over time in perceptions of risk


■ Product innovation.


■ A natural beneficiary of the relatively strong growth of emerging markets.


■ Robust competition, in some markets, from very large local players. However, in the

emerging markets, there are not many local property and casualty companies that

can match RSA's overall strengths.



Company Overview RSA is one of the largest (and oldest) international non-life companies. Net written

premiums in 2011 amounted to GBP8,138mn. It is a listed public company. At the end

of the year, investments amounted to GBP14.5bn. There were 23,000 employees

globally. Following a reorganisation in early 2012, the company's structure emphasises

four regions: Scandinavia; Canada; the UK & Western Europe, and emerging markets. In

2011, the net written premiums from the four regions were respectively GBP1,824mn,

GBP1,483mn, GBP3,701mn and GBP1,103mn.

RSA seeks diversity in terms of portfolio and geographic exposure. It also seeks 'to

create leading positions in all its chosen markets'.

In Scandinavia, the company is the third largest insurer in Denmark and Sweden

through Codan and Trygg-Hansa (respectively). It also has a growing business in

Norway. Within the region, RSA has 'leading positions in renewable energy, personal

accident and marine.'

RSA is the third largest general insurer in Canada, where it has been operating since

1845. As recently as 2005, RSA was the 10th largest company. It is also the second

largest affinity writer (through Johnson) and a leading marine insurer.

RSA's predecessor company began operating in the UK in 1710. It is the UK's largest

commercial lines insurer and the fourth largest personal lines insurer in that country.

RSA is also the second-largest general insurer and the largest direct insurer (through

123 Money) in Ireland. In Italy, RSA has a 'small, fully intermediated operation' that is

focused on motor lines.

In emerging markets, RSA operates in about 20 countries. Its main focus is 'specialty,

motor, SME and affinity' business.

RSA's Latin American businesses are the largest component of its operations in

emerging markets globally. RSA is the largest general insurer in Chile, the largest private

insurer in Uruguay and a leading marine insurer in Brazil. RSA is also present in

Argentina, Mexico, Colombia and the Netherlands Antilles.

In Central and Eastern Europe, the company operates as Lietuvos Draudimas in

Lithuania, Balta in Latvia, RSA in Estonia, Link4 in Poland, InTouch in Russia and Direct

Pojišťovna in the Czech Republic. RSA is the largest non-life company in the Baltic

states. It is 'a leading direct insurer in Poland, Russia and the Czech Republic', covering

over 40,000 vehicles in the three countries.

RSA is present in seven countries across Asia and the Middle East. It operates as RSA

in China, Hong Kong, Singapore, the UAE and Bahrain. It operates as Al-Alamiya in

Saudi Arabia and as Al-Ahlia in Oman. It is 'a leading international insurer in the Middle

East and the second largest insurer in Oman.' Commercial lines hubs are located in

Hong Kong, Singapore and mainland China. Its associate in India, Royal Sundaram, is

one of the fastest growing private insurers in that country.



(Source: RSA Annual Report, June 25 2012.)

Recent

DevelopmentsQ113: As of late 2012, the latest comment on the company pertained to H112. Relative

to H111, net written premiums were 2% higher, at GBP4.3bn. (On a constant exchange

rate basis, they would have risen by 4%). The combined operating ratio of 95.2% was 2

percentage points higher than it had been in the previous corresponding period. 'Strong

performances in Scandinavia and Canada were partially offset by adverse weather in

the UK and earthquakes in Italy.' Investment income was GBP267mn; operating profit,

GBP316mn. IGD surplus was GBP1.2bn: coverage remains strong at 1.9 times. In

February 2012, S&P upgraded its rating of RSA to A+.

The company made 'good progress (with its) strategic priorities' during the half year.

There was 'continued strong performance in Canada with double digit growth in

Commercial led by Large and Specialty. (The) acquisition of L'Union Canadienne will

consolidate (RSA's number) three position and bolster its footprint in Quebec.' In the

UK, personal motor premiums were down 19% relative to H111 'as a result of ongoing

management actions, which deliver a sub-100% COR for the first time in four years.'

RSA's business in Emerging Markets 'again (posted) double-digit growth. Bolt-on

acquisitions will position RSA as a top-five general insurer in Argentina.' Conversely, the

Czech operation was closed 'as (it would be) unable to achieve scale within a

reasonable timeframe.' Global Specialty lines expanded by 6-7%.

Net premiums in RSA's Emerging Markets business rose by 13% to GBP585mn. 'Latin

America delivered another excellent top line performance. Premiums of GBP343mn

were up by 15% (20% at constant exchange) with double digit growth in Chile due to

Property and Commercial Motor, in Mexico driven by Commercial and in Argentina due

to Motor. In Argentina, (RSA) recently acquired El Comercio and Aseguradora de

Créditos y Garantías, which together double (its) market share and transform us into the

number five general insurer in the country. These deals are expected to deliver around

GBP100mn of net written premiums in their first full year.'

'In Asia and the Middle East, premiums of GBP129mn are up by 12% (9% at constant

exchange) with growth of 38% in Oman due to Commercial Motor and 31% in

Singapore, where both Motor and Specialty performed strongly, partially offset by the

impact on the comparative of large project-related Commercial wins in Hong Kong in

the second quarter of 2011. (RSA's) associates in India and Thailand grew by 6% to

GBP152mn (13% at constant exchange) mainly due to Motor.'

'In Central and Eastern Europe, premiums of GBP113mn grew by 6% (14% at constant

exchange). Across the Baltics, (RSA has) maintained the market leading position and

premiums are up by 6% (11% at constant exchange) to GBP69mn with Estonia growing

strongly as a result of its affinity distribution with SEB Bank, Lithuania up by 5% and

Latvian premiums flat compared with the prior year. (RSA's) Direct businesses grew by

5% (19% at constant exchange) to GBP44mn with good growth in Poland and Russia.'



Total investments of the RSA group amounted to GBP14,067mn at the end of H112.

(Source: Half Year Financial Report for H112, released on August 2 2012.)



Sun Life Financial

SWOT Analysis


■ A leading North American life insurance company, with international presence through

SLF Asia and SLF UK and, globally, through MFS.


■ Huge variety of products and distribution channels - including the largest force of

career agents in Canada.

■ Strong brands.


Weaknesses ■ Some of the markets in which Sun Life Financial operates are mature and/or highly

competitive.

■ A small player in (or absent from) some of the most important emerging markets in

Asia.




■ A potential major beneficiary of the relatively strong growth of emerging markets in

Asia.



strengths as Sun Life Financial.



Company Overview Originally founded in 1865, Sun Life Financial is one of the world's largest and

financially strongest listed international life insurers. It describes its main product

offerings as including life and disability insurance, savings, investment management,

retirement and pension products and services. It works with both individual and

corporate clients.

Around 35% of the company's Value of New Business comes from protection products

- wealth management products account for the remainder. SLF Canada accounts for

43% of Sun Life Financial's overall revenue. SLF US is almost as large, accounting for

another 37%. There are three other business units. MFS, the group's asset

management business, generates a further 9% of revenues. SLF Asia and SLF UK

produce 6% and 5% respectively.

SLF US includes three elements - Employee Benefits Group (EBG), Individual Insurance

and Annuities. 'EBG provides group protection solutions, including group life, disability,

medical stop-loss and dental insurance products to primarily small-to-medium sized

employers and their employees. Individual Insurance consists of a closed block of

domestic individual life insurance products, including participating whole life, universal

life, corporate-owned and bank-owned life insurance. The Annuities business unit

includes a closed block of domestic variable and fixed annuity products, as well as

investment management services. SLF US continues to provide international high net

worth clients with insurance and investment products, the results of which are reported

in the Individual Insurance and Annuities business units.'

As of 2011, Sun Life Financial's overall capital resources were 211% of the amounts

required. Total assets under management (AUM), including amounts handled for

external clients by MFS, amounted to CAD466bn. The company employs around 15,000

people worldwide. Including its joint ventures in India, China and the Philippines, it also

employs over 155,000 advisors: of these, 139,000 work with the JV in India.

In its Q112 profile, the company highlights four aspects of its growth strategy:

becoming the best performing life insurer in Canada; strengthening its leadership

position in US Group insurance and attaining a top five position in voluntary benefits in

the US; expanding the asset management businesses globally; and developing SLF

Asia so that it is a more significant part of Sun Life Financial's overall results.

SLF Asia 'operates in five markets - the Philippines, Hong Kong, Indonesia, India and

China - through subsidiaries, joint ventures and strategic investments.' The company's

goal is to 'gain scale in each of the markets where (it) operates and develop into a

significant long-term revenue and earnings growth operation.'

In 2010, SLF was the second largest life company in the Philippines in terms of total

premiums written. It was the fourth largest insurer in India in terms of assets under



management (AUM) and the sixth largest in terms of first year premiums in the year to

March 2012. In terms of gross premiums in 2011, it was the 14th largest player in China.

SLF Asia's regional head office is in Hong Kong. The various operations include: Sun

Life Everbright Life Insurance (JV - China); Sun Life Hong Kong Limited; Birla Sun life

Insurance Company Limited and Birla Sun Life Asset Management Company Limited

(JVs - India); PT Sun Life Financial Indonesia and PT CIMB Sun Life; Sun Life

(Philippines).

As at the end of 2011, employees across the region included the following: India - 835;

the Philippines - 680; Hong Kong - 635; Indonesia - 350; and China - 5. The numbers of

advisors (agents) in the five territories were respectively: 139,000; 5,210; 1,210; 4,460;

and 3,045.

(Source: corporate fact sheets.)

Recent

DevelopmentsQ113: Sun Life Financial published its results for Q212 on August 8 2012. Like other

large insurers, profits were adversely affected by low/declining interest rates and volatile

equity markets.

During the quarter, SLF Asia reached an agreement with PVI Holdings to form a JV in

Vietnam: this business will commence operations prior to the end of calendar 2012. SLF

Asia also noted that, according to the regulator's data, its subsidiary in the Philippines

had become the largest life insurer in that country in terms of total premiums written.

'In China, Sun Life Everbright Insurance Company marked its 10th anniversary … with

continued strong growth in sales and distribution that serves more than 8.5mn

customers in approximately 100 locations. Reported sales for individual insurance

products grew more than 80% during H112 compared to the previous year.'

'Individual live sales in Q212 fell marginally compared with the same period last year.

Sales increases, measured in local currency, in the Philippines, China and Indonesia

were offset by declines in other geographies. Sales were up 66% in the Philippines from

agency expansion and the launch of Sun Life Grepa Financial in October 2011 and 26%

in China, due to continued distribution growth.'

(Source: press release, August 8 2012.)

Company Details ■ Website: www.sunlife.com



SBI Life

SWOT Analysis

Strengths ■ The largest private sector life insurance company.

■ Backing of State Bank of India (SBI), the company's largest, as well as BNP Paribas

Cardif. The company is well capitalised.

■ There are substantial possibilities for economies of scale. SBI Life would rank as a

(very) large insurer in most developing countries.


■ Variety of products and multi-channel distribution.

■ More or less invulnerable to turmoil in global financial markets.

■ A clear innovator. Positive initiatives to improve customer service appear to have had

positive results.

■ Shrinkage in new business premiums has been more than offset by growth in renewal

premiums.

• Virtually all metrics have been moving in the right direction (in some cases - such as

profit - spectacularly so) over the last five years.

Weaknesses ■ SBI Life has coped very well with a somewhat challenging business environment over

the last year or so. However, it still remains exposed to adverse regulatory decisions.

■ Although it is the leading private sector life company, SBI Life is required to serve

multiple stakeholders and non-commercial objectives.




■ Further improvements to client service.




Threats ■ Potential, but unlikely, financial crisis affecting India. SBI Life is a substantial

institutional investor.

■ Competition from other substantial private sector life companies that have many of

SBI Life's strengths and advantages.

■ Regulatory changes that have an unintended, but adverse, impact on SBI Life's

business.

Company Overview SBI Life Insurance is a joint venture (JV) between State Bank of India (SBI) and BNP

Paribas Cardif. Their respective stakes in the JV are 74% and 26%.

SBI is India's 'largest commercial bank in terms of profits, assets, deposits, branches

and employees.' It serves millions of clients through 18,000 branches and over 26,000

ATMs. There are over 100mn accounts.

BNP Paribas Cardif is profiled separately in this report.

Unsurprisingly, given SBI's scale and reach, and the strengths of BNP Paribas Cardif,

SBI 'extensively leverages the SBI group relationship as a platform for cross-selling

insurance products, along with its numerous banking product packages such as

housing loans and personal loans.'

However, SBI Life does not just rely on the bancassurance channel. It also distributes to

corporates, through institutional alliances, and via 85,000 agents.

As at the end of March 2012, the company had 7,900 employees and 714 offices

across India.

During 2011-12, SBI Life received various awards for its brands and financial reporting.

It received ISO/IEC27001:2005 Certification for its Information Security Management

System. It remains rated at AAA/stable by Crisil and iAAA by ICRA.

At the end of March 2012, the company's solvency margin was 150%.

Over the five years to the end of March 2012: market shares have risen; the operating

expense ratio has fallen consistently; the 13th month persistency ratio has grown; gross

written premiums have risen by over 100%; and profits have risen from what were, until

2008/09, negligible levels.

(Source: Annual Report for 2011/12.)



Recent

DevelopmentsQ113: SBI Life's overview of the life segment (in relation to 2011/12, published on June

11, 2012), indicates that it has been consolidating its position in what has been, by

some metrics, a shrinking industry. The company noted that new business premiums

contracted during the fiscal year by 9.21% to INR1,258,260mn. The private sector life

companies, whose combined market share, by this metric, was 28.64%, suffered a fall

in new business premiums of 16.92%. Nevertheless, the fall in new business premiums

was more than offset by a rise in renewal premiums. SBI Life, for instance, achieved

23.3% growth in renewal premiums, with the result that overall gross written premium

for 2011/12 was (at INR131,340mn or EUR1,921mn) 1.5% higher than it had been in

2010/11.

According to SBI Life, the industry has responded to the challenges of the new ULIP

guidelines by shifting its focus 'towards customer-centricity, persistency, innovation

and efficiency.'

SBI Life is the largest of the private sector insurers. It accounted for 5.71% of total new

business premiums (for the market as a whole, including LIC), or nearly one-fifth of the

total written by the private sector insurers. The next largest private sector companies,

by this measure, were ICICI Prudential (4.45%), HDFC Standard (3.36%) Bajaj Allianz

(2.38%), Max Life (1.67%), Birla Sunlife (1.67%) and Reliance Life (1.58%).

For SBI Life, highlights of 2011/12 included a record profit of INR5,560mn (EUR81mn),

which was 51% higher than that of 2010/11. 'The operational efficiency has been the

key driver of SBI Life's profitability. The company continues to maintain the lowest

'expense to gross written premium' ratio in the industry, of 6.8% (excluding the service

tax on ULIP charges).' The 13th month persistency ratio of the company rose from

68.8% in 2010/11 to 71.8% in 2011/12. Overall assets under management (AUM)

increased by 15.9% to INR465,760mn (EUR6,815mn) over the course of the year.

'Out of total policies sold by SBI Life during the year, 22% came from the rural

segment, testifying to the company's approach towards life insurance inclusion.

Additionally, 108,829 lives covered by the company came from the underprivileged

social sector, leading to the company's exceeding the minimum social and regulatory

norms.'

All major distribution channels 'demonstrated profitable business growth during the

period. 'The agency channel and institutional alliances provided a significant thrust to

the overall business, contributing 41% of total premium as a result of superior

productivity levels of Insurance Advisors.' Bancassurance and corporate clients

accounted for 34% and 24% respectively of total premiums.

Among much else, the company launched the industry's first multi-lingual website that

includes nine major Indian languages (Hindi, Marathi, Gujarati, Tamil, Telugu,

Malayalam, Bengali, Kannada and Punjabi). It also introduced initiatives that make it

easier for customers to pay premiums by direct debit, electronic funds transfer, ATMs

or credit cards. Other concrete measures to boost customer service included: the

introduction of key features documents; integration of its CRM with IRDA's central



repository of industry-wide grievance data (an industry first, which has enabled the

customers and the regulator to track the status of complaints in real time); an Integrated

Voice Recognition System, which enables clients to get policy details by phone;

Click2Call 'where we reach the customers through the contact centre immediately on

their contact numbers'; multilingual claim forms; a campaign 'to allow customers to

renew the life cover for their lapsed policies; and, Scan Based Underwriting (so that

'branch underwriting teams can refer the proposals for expert opinion to the Central

Processing Centre without sending the proposal in physical form' - with the result that

turnaround times for medical cases is greatly improved.

(Source: Annual Report for 2011/12.)



The New India Assurance Co

SWOT Analysis

Strengths ■ Largest of the four state-owned general insurers, accounting for about one-fifth of

overall activity in the non-life segment.

■ Backing of the government of India.

■ Very substantial opportunities for economies of scale. New India would rank as a

large non-life player in most countries.


■ Variety of products.

■ Clear leadership in health insurance, which is a key source of growth for the

company.

■ Significant international business.

• Only Indian insurance company to be rated by an external agency.

Weaknesses ■ Like the other government-owned non-life companies, New India competes with new

private sector groups, some of which have access to the know-how and innovation

that can be provided by major multi-nationals.

■ To a greater extent than its private sector competitors, New India is required to serve

multiple stakeholders and non-commercial objectives.

■ Profitability has been falling, and is considerably lower than it was in the 2006/07 and

2007/08 years.

■ Like all non-life insurance companies, has suffered as a result of IRDA's ruling that

provisioning for third-party motor claims be increased substantially.

■ The overseas business is significant relative to New India's total operations, but small

by any other measure. In many of the foreign markets in which its branches and

agencies operate, New India faces stiff competition from true multi-nationals and

(often huge) local groups. We would note, though, that LIC's success in Bahrain (in




the life segment) shows what is possible for an Indian insurer that is looking to

develop opportunities in the Middle East.



■ Further development of overseas subsidiaries.


■ Possible (but very unlikely) full privatisation.

■ More efficient pricing and underwriting of motor business following the dismantling of

the Third Party Pool.

Threats ■ Potential, but unlikely, financial crisis affecting India. New India is one of the larger

institutional investors.

■ Continual erosion of market share by competitors who have the understanding and

ability to deliver a better value proposition to individual clients.

■ Persistent lack of profitability.

■ Regulatory changes that have unintended, but adverse, impacts.

Company Overview The New India Assurance Co (New India) is the largest of the four government-owned

non-life companies to be separated out of General Insurance Company of India (GIC) in

1999. The other three insurers are United India Insurance, Oriental Insurance and

National Insurance. New India, like the others, had been nationalised in 1973. It was

originally established in 1919 and was 'the first wholly Indian-owned insurance

company' in the country.

In the year to March 31 2012, the company wrote gross premiums of INR100,000bn or

so, or around US$2bn from its operations in India and elsewhere.

New India offers a wide range of personal and commercial lines. Personal lines include

personal accident, householder, motor, cellular phone, medical and travel insurance.

Commercial/industrial lines include marine hull, aviation, transport, fidelity, bankers'

indemnity and special indemnity, as well as a variety of industrial property & casualty



products. New India also offers various professional liability lines and 'social' products

for low-income groups.

Health insurance accounted for 28% of gross written premiums in 2010/11 and 48% of

the growth in premiums in that year. The company also reduced the health insurance

loss ratio from 113% in 2009/10 to 103% in 2010/11. 'Group policy pricing was

streamlined, performance of Third Party Administrators was closely monitored and

Preferred Provider Network is an initiative spearheaded by New India to Control

healthcare costs.'

New India describes itself as a 'leading global insurance group'. Within India, it has 28

regional offices, 393 divisional offices and 648 branches. There are around 21,000

employees. It is 'the only Indian insurance company to have been rated by an

international ratings agency. AM Best has accorded it a rating of A- on the basis of

'superior capital position; strong operating performance; and (being the) only company

to develop significant international operations (and to have a) long record of successful

trading outside India.'

Overseas Operations

The annual report for 2010/11 indicates that that New India has an inactive subsidiary in

Sierra Leone. NIA (Trinidad & Tobago) produced an underwriting profit of TTD11.6mn in

calendar 2010. In Nigeria, Prestige Assurance generated an underwriting profit of

NGN912.4mn in calendar 2010.

Elsewhere, the company operates through agencies and branches. In 2010/11, the

agencies wrote a total of INR6,453mn in gross premiums. In terms of the business

undertaken, the three largest agencies were those in Oman (INR2,434mn), Dubai

(INR1,625mn) and Abu Dhabi (INR672mn). Other agencies include Bahrain, Kuwait,

Saudi Arabia, Aruba and Curacao.

The branches wrote gross premiums of INR9,496mn in 2010/11. The UK (INR4,580mn)

accounted for nearly half of this. The next three largest branches in terms of business

undertaken were Japan (INR2,101mn), Australia (INR754mn) and Mauritius (INR575mn).

Other branches are in Hong Kong, the Philippines, Thailand, Fiji and New Zealand.

In the 2010/11 year, brokers accounted for premiums of INR7,909mn (or 41% more

than in the previous year). 'Bancassurance contributed premiums of INR2,436.7bn

(versus INR3,270.4bn in the previous year) through the corporate agencies of Union

Bank of India, State Bank of India, Corporation Bank, Catholic Syrian Bank Ltd and

some of the co-operative banks. State Bank of India was a major participant in the

bancassurance business. However, with the setting up of their own associate general

insurance company, they have opted to transfer their corporate agency to SBI General

Insurance Company Limited.'

(Source: www.newindia.co.in, August 12 2012, and annual report for 2010/11.)



Recent

DevelopmentsQ113: In the year to March 31 2012, New India wrote gross premiums of INR85,429mn

within India and of INR15,310mn outside the country. Global net premiums amounted to

INR87,712mn; global net profit, to INR1,793mn. Peak profitability was reached in the

years to March 2007 and 2008, when profits amounted to around INR14,250mn. At the

end of March 2012, the company had global assets of INR421,627mn and net worth of

INR70,576mn.

The company posted an underwriting loss of INR26,435mn in 2010/11 and of

INR22,863mn in 2011/12. Having made a net loss of INR4,215mn in 2010/11, the

company posted a net profit of INR1,793mn in 2011/12. The underwriting loss in the

latest year is mainly 'due to flood losses in Bangkok, major fire losses and Cyclone Keila

claims in Muscat, fire and motor losses in Kuwait, earthquake losses in Japan, high

retro costs and increased attritional claims cost in view of the Lyttleton earthquake and

reinstatement premiums in Australia and losses in the UK.'

'In the intensely competitive de-tariffed (Indian fire) market, coupled with global

recession, the property line of business has witnessed a sharp decline in premium rates.

Despite the high incidence of claims due to a rising risk exposure and a number of large

losses, particularly in the small- and medium- category, catastrophic events in Tamil

Nadu and Sikkim, the claims ratio decreased to 87% from 92% in the previous year.'

Conditions in the Indian engineering insurance market were also very competitive.

The company is fairly upbeat about the prospects for the current 2012/13 year. 'Growth

in personal lines and the auto sector will assist in the speedy growth of the company.

Due to the spread of offices across the country, the company is in an advantageous

position… We (already) have more than 150 micro offices, and plan to open more than

300 micro offices during this year…'

'Health insurance is a growing portfolio and New India has remained a market leader in

this portfolio also. Keeping the market trend, New India will continue to increase the

volumes and to maintain a balanced portfolio.'

'The auto business is more than 36% of our operations and plays a vital role. We are

observing sound underwriting practices and have maintained good (connections) with

the leading manufacturers and financial institutions.

New India hopes to achieve growth in premiums in India of just over 20% in the current

(2012/13) fiscal year. It is hoping to achieve a similar growth in foreign gross premiums

(to INR25,250mn)

(Source: www.newindia.co.in, August 12 2012, and annual report for 2011/12.)



Regional Overview

Asia Non Life Sector Overview

Table: Asia Pacific's Non-Life Premiums, 2010-2017 (US$mn)

2010 2011 2012e 2013f 2014f 2015f 2016f 2017f

Australia 30,674.31 37,041.95 40,102.34 40,206.81 37,367.29 34,678.28 34,750.24 36,758.07

Bangladesh 296.67 293.02 310.56 382.36 459.80 530.62 609.39 699.86

China 71,627.05 88,681.24 105,317.92 119,491.05 131,628.84 144,555.05 157,791.40 173,621.71

Hong Kong 3,992.34 4,457.70 5,067.93 5,477.86 5,874.11 6,268.69 6,694.88 7,153.09

India 11,610.84 14,018.58 14,575.17 17,156.65 19,997.26 23,589.26 27,242.01 30,840.46

Indonesia 3,527.09 4,236.76 4,609.02 5,032.95 5,791.43 6,746.42 7,681.88 8,765.93

Japan 88,280.35 100,702.55 101,653.75 90,462.80 89,160.84 88,358.85 89,330.76 90,497.61

Malaysia 4,227.55 4,826.92 5,178.12 5,774.76 6,447.99 7,198.01 7,883.21 8,541.85

New Zealand 2,598.46 3,193.40 3,358.59 3,344.31 3,275.85 3,346.13 3,468.38 3,669.06

Pakistan 564.57 592.13 628.81 669.59 735.87 820.67 917.53 1,026.09

Philippines 1,048.90 1,210.77 1,338.14 1,618.87 1,789.30 2,027.29 2,328.80 2,637.39

Singapore 6,294.50 7,615.05 8,313.36 8,924.94 9,572.06 10,316.31 11,169.55 12,148.90

South Korea 47,396.98 57,875.13 59,402.39 61,329.89 69,272.81 78,259.47 88,486.02 95,196.61

Sri Lanka 310.52 392.00 403.91 490.40 594.99 704.68 833.10 985.02

Taiwan 10,781.50 12,304.79 12,961.58 13,719.03 14,957.03 16,235.35 17,394.31 18,639.56

Thailand 3,909.40 4,623.49 5,692.85 6,323.19 6,903.40 7,568.26 8,238.40 8,994.08

Vietnam 891.78 1,060.89 1,155.30 1,371.11 1,660.07 1,988.96 2,373.55 2,810.55

e/f = BMI estimate/forecast. Source: National insurance regulators/associations

Rapidly Growing, But Competitive Markets

Most of the multi-national non-life companies that are active across the Asia-Pacific region have confirmed

that premiums are increasing steadily in most markets. In a presentation on its regional businesses in March

2013, AIG, for instance, noted that it is looking for compound annual growth rates (CAGR) for 2012-17 of

7-8% in each of South Korea, Hong Kong, Taiwan, Malaysia, Thailand and the Philippines. Markets which

are expected to develop more rapidly include those of China (CAGR of 10%), Papua New Guinea (12%)

and Indonesia (16%). More slowly growing markets include those of Australia (3%), Singapore (4%), New

Zealand (3%) and Japan (2%).



The drivers of growth vary from country to country, but include: increasing ownership of cars and rising

sales of motor vehicles generally; increasing numbers of middle class and urbanised households;

infrastructure investment that significantly boosts the number and value of insurable risks; regulatory

changes which promote compulsory insurance lines; higher private health expenditure and; rising corporate

profits.

Of course, the fortunes of the various non-life companies that are active across the region depend on their

particular strategies. In its Annual Results Presentation for 2012 (which was released at the end of February

2013), Australia's QBE, for instance, noted that its organic growth in premiums across the Asia-Pacific

(outside Australia and New Zealand) rose by 18%. This had been 'assisted by the acquisition of Hang Seng

Insurance and the related 10-year distribution agreement with Hang Seng Bank. Overall gross written

premiums rose by 24% to US$578mn. The company managed to reduce its overall combined operating ratio

in the region from 87.4% in 2011 to 85.8% in 2012 in spite of higher reinsurance costs in the wake of the

huge natural catastrophes of 2011. Looking forward, QBE expects regional gross written premiums to rise

by 20% to US$690mn for 2013 as a whole. Net earned premiums are anticipated to expand by 26% to US

$525mn. The company notes that its '2013 strategy will focus on growth, particularly around specialty and

commercial business in Singapore, Hong Kong and Malaysia.'

Allianz is predominantly a life insurer in the region. Nevertheless, its property and casualty premiums

written in Asia-Pacific growth markets (i.e. not including its substantial operations in Australia) rose by

20.4% to EUR180mn in Q113 (relative to Q112). This was mainly due to the strong expansion of Allianz's

motor insurance business in Malaysia. The German group noted that, across the region, 'the price effect was

negative.' Meanwhile, Belgium's Ageas noted that, across the region, gross written premiums in Q113 were

up 13% to EUR243mn. 'In Malaysia, premiums increased 11% to EUR188mn, with growth in all lines of

business, but particularly in the profitable household business. Thailand also saw strong growth (+19% to

EUR54mn) which was concentrated in the Motor and Personal Accident business.' Motor insurance was the

main driver of the 13% growth in premiums of the Thai business of RSA Group in 2012.

Particular multi-nationals have been expanding by way of acquisition. AXA, for instance, noted in its

February 2013 review of performance in 2012, that it had 'accessed new growth opportunities through …

the acquisition of the P&C activities of HSBC in Singapore, Hong Kong and Mexico.' The company is

'optimising its cost structure.'



Asia Life Sector Overview

Table: Asia Pacific Life Premiums, 2010-2017 (US$mn)

2010 2011 2012e 2013f 2014f 2015f 2016f 2017f

Australia 38,058.98 45,225.06 43,693.78 35,622.83 32,787.30 33,192.62 33,601.84 34,010.42

Bangladesh 840.00 878.14 933.78 993.24 1,056.31 1,122.86 1,192.97 1,266.91

China 142,996.90 134,513.22 138,585.97 148,918.84 159,976.69 171,798.34 175,810.64 179,854.83

Hong Kong 22,384.19 24,549.48 27,832.90 29,539.98 30,158.67 30,784.33 31,412.94 32,044.17

India 0.00 61,502.30 56,421.36 62,891.45 70,083.50 78,073.00 85,363.92 93,305.75

Indonesia 8,260.79 10,756.39 12,313.04 13,926.90 15,748.02 17,801.53 20,116.14 22,724.60

Japan 392,580.24 455,106.06 470,077.56 488,534.91 469,299.04 444,509.14 430,756.00 427,478.66

Malaysia 7,822.96 8,670.08 9,544.49 10,991.53 11,721.22 12,495.21 13,315.95 14,186.55

NewZealand 1,240.11 1,432.78 1,516.10 1,608.64 1,706.57 1,810.07 1,919.42 2,034.97

Pakistan 615.00 781.87 835.86 893.44 954.70 1,019.75 1,088.74 1,161.89

Philippines 1,568.73 1,994.13 2,292.64 2,564.82 2,868.82 3,208.07 3,586.54 4,008.78

Singapore 8,344.98 9,872.45 11,652.03 12,491.56 13,378.46 14,314.29 15,315.57 16,370.81

South Korea 71,788.67 79,964.76 84,304.78 88,859.68 93,641.09 98,660.66 100,958.91 103,288.16

Sri Lanka 275.58 318.19 336.93 356.62 377.28 398.96 421.70 445.53

Taiwan 66,006.92 66,226.66 74,909.90 76,542.81 78,160.79 79,833.39 81,524.20 83,222.26

Thailand 9,319.49 10,788.05 11,904.75 13,161.66 14,548.71 16,079.13 17,768.21 19,630.98

Vietnam 721.29 776.16 881.08 979.19 1,087.88 1,208.16 1,341.20 1,488.26

e/f = BMI estimate/forecast. Source: National insurance regulators/associations, BMI

Growth Continues - By Many Metrics

As of mid-2013, the newsflow from the various life insurance markets of the Asia-Pacific confirms that the

(very) positive trends which have been evident for years remain intact. Indeed, across the region as a whole,

life insurance and organised savings continue to provide a good example of a major industry that is largely

immune to the economic challenges that remain in much of the developed world.

Many of the major multi-national life companies which have extensive geographic footprints across the

Asia-Pacific region outside Japan - Ageas, AIA, Manulife, Sun Life Financial, Allianz and Prudential

plc - alluded to strong growth in new business sales, profitability or premiums in their reports for Q113. All

these companies are benefiting in some way from the expansion in the number and wealth of urbanised



middle classes in much of Southeast Asia. In these countries, particular companies are boosting sales and

profitability through expansion of agency networks, focus on specific products or customer segments. In

some markets, companies are expanding sales through bancassurance partnerships.

It should be noted, though, that many of the regional majors continue to achieve strong growth in profits,

new sales or premiums in markets which, by most metrics, are already mature. Allianz's achievement of

11% growth in premiums in Q113, for instance, was significantly due to an 'increase in unit-linked product

sales in Taiwan, supported by strong sales through the HSBC bancassurance channel.' This more than offset

the impact of Allianz's cessation of sales of particular single-premium investment-oriented products in

South Korea. Several of the companies specifically alluded to Hong Kong as being a high growth market in

Q113. Manulife, for instance, noted that its wealth sales in the Special Administrative Region of US$366mn

'were more than double the same period a year ago, the result of continued strong sales momentum

following the launch of the Mandatory Provident Fund's new Employee Choice Arrangement in November

2012, combined with higher mutual fund sales.' Manulife also benefited from strong growth in universal life

sales in Singapore.

The majors continue to undertake acquisitions, or report that they are benefiting from past deals. AIA, for

instance, noted that Value of New Business (VONB - the company's preferred measure of operating

profitability) rose to 38.4% in Q113. A contributing factor was the 'consolidation of the newly acquired

business from ING Malaysia.' Prudential plc noted that it completed its acquisition of Thailand's

Thanachart Life on May 3, 2013. Prudential has initiated an exclusive distribution agreement with

Thanachart Bank. Sun Life Financial highlighted the extremely strong performance of its Sun Life Grepa

Financial business. In April 2013, Sun Life Financial finalised the purchase of 49% stakes in each of CIMB

Aviva Assurance Berhad and CIMB Aviva Takaful Berhad in Malaysia.

Frontier markets are being seen as areas of opportunity. Prudential plc noted in its Q113 result that it had

'launched its new business in Cambodia, where it has a partnership with ACLEDA Bank plc, the largest

retail and commercial bank in the country.' As of May 2013, Prudential plc was in the process of opening a

representative office in Myanmar. Prudential plc achieved growth of 43% in terms of new business

Annualised Premium Equivalent (APE) in its operations in Vietnam. In January 2013, Sun Life Financial

formed the PVI Sun Life Insurance Company joint venture (JV) with Vietnam's PVI.



Demographic Forecast

Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model. Not only is

the total population of a country a key variable in consumer demand, but an understanding of the

demographic profile is key to understanding issues ranging from future population trends to productivity

growth and government spending requirements.

The accompanying charts detail India's population pyramid for 2011, the change in the structure of the

population between 2011 and 2050 and the total population between 1990 and 2050, as well as life

expectancy. The tables show key datapoints from all of these charts, in addition to important metrics

including the dependency ratio and the urban/rural split.

Source: World Bank, UN, BMI



Table: India's Population By Age Group, 1990-2020 ('000)

1990 1995 2000 2005 2010 2012e 2015f 2020f

Population, total 873,785 964,486 1,053,898 1,140,043 1,224,614 1,258,351 1,308,221 1,386,909

0-4 years 121,433 125,596 126,280 126,239 127,979 128,484 127,253 125,206

5-9 years 110,203 118,019 122,588 123,663 123,985 124,619 126,017 125,601

10-14 years 100,022 109,012 116,916 121,502 122,622 122,644 123,103 125,310

15-19 years 88,522 99,103 108,070 115,850 120,369 121,090 121,728 122,397

20-24 years 79,490 87,387 97,881 106,636 114,273 116,568 119,172 120,762

25-29 years 70,099 78,294 86,094 96,306 104,865 108,186 112,869 117,972

30-34 years 62,463 68,942 77,012 84,574 94,561 98,203 103,381 111,548

35-39 years 55,037 61,282 67,651 75,496 82,875 86,742 93,046 101,980

40-44 years 41,480 53,730 59,871 66,080 73,759 76,598 81,313 91,529

45-49 years 35,055 40,107 52,046 58,066 64,181 67,124 71,973 79,566

50-54 years 31,111 33,310 38,247 49,786 55,727 57,934 61,948 69,701

55-59 years 25,747 28,776 30,972 35,738 46,753 49,468 52,728 58,863

60-64 years 20,043 22,785 25,687 27,858 32,385 36,362 42,791 48,529

65-69 years 14,429 16,608 19,149 21,868 23,992 25,135 28,298 37,606

70-74 years 9,513 10,917 12,799 15,027 17,451 18,240 19,528 23,198

75+ years 9,139 10,620 12,633 15,354 18,834 20,955 23,073 27,142

f = BMI forecast. Source: World Bank, UN, BMI



Table: India's Population By Age Group, 1990-2020 (% of total)

1990 1995 2000 2005 2010 2012e 2015f 2020f

0-4 years 13.90 13.02 11.98 11.07 10.45 10.21 9.73 9.03

5-9 years 12.61 12.24 11.63 10.85 10.12 9.90 9.63 9.06

10-14 years 11.45 11.30 11.09 10.66 10.01 9.75 9.41 9.04

15-19 years 10.13 10.28 10.25 10.16 9.83 9.62 9.30 8.83

20-24 years 9.10 9.06 9.29 9.35 9.33 9.26 9.11 8.71

25-29 years 8.02 8.12 8.17 8.45 8.56 8.60 8.63 8.51

30-34 years 7.15 7.15 7.31 7.42 7.72 7.80 7.90 8.04

35-39 years 6.30 6.35 6.42 6.62 6.77 6.89 7.11 7.35

40-44 years 4.75 5.57 5.68 5.80 6.02 6.09 6.22 6.60

45-49 years 4.01 4.16 4.94 5.09 5.24 5.33 5.50 5.74

50-54 years 3.56 3.45 3.63 4.37 4.55 4.60 4.74 5.03

55-59 years 2.95 2.98 2.94 3.13 3.82 3.93 4.03 4.24

60-64 years 2.29 2.36 2.44 2.44 2.64 2.89 3.27 3.50

65-69 years 1.65 1.72 1.82 1.92 1.96 2.00 2.16 2.71

70-74 years 1.09 1.13 1.21 1.32 1.43 1.45 1.49 1.67

75+ years 1.05 1.10 1.20 1.35 1.54 1.67 1.76 1.96

f = BMI forecast. Source: World Bank, UN, BMI



Table: India's Key Population Ratios, 1990-2020

1990 1995 2000 2005 2010 2012e 2015f 2020f

Dependent ratio, % of totalworking age 1 71.7 68.1 63.8 59.1 55.1 53.8 52.0 50.3

Dependent population, total, '0002 364,739 390,771 410,366 423,652 434,865 440,077 447,272 464,063

Active population, % of total 3 58.3 59.5 61.1 62.8 64.5 65.0 65.8 66.5

Active population, total, '000 4 509,046 573,715 643,532 716,391 789,750 818,274 860,948 922,846

Youth population, % of totalworking age 5 65.2 61.5 56.8 51.8 47.4 45.9 43.7 40.8

Youth population, total, '000 6 331,659 352,627 365,785 371,404 374,587 375,747 376,374 376,116

Pensionable population, % oftotal working age 7 6.5 6.6 6.9 7.3 7.6 7.9 8.2 9.5

Pensionable population, '000 8 33,080 38,144 44,581 52,249 60,278 64,331 70,899 87,947

f = BMI forecast; 1 0>15 plus 65+, as % of total working age population; 2 0>15 plus 65+; 3 15-64, as % of totalpopulation; 4 15-64; 5 0>15, % of total working age population; 6 0>15; 7 65+, % of total working age population; 8 65+.Source: World Bank, UN, BMI

Table: India's Rural And Urban Population, 1990-2020

1990 1995 2000 2005 2010 2012e 2015f 2020f

Urbanpopulation, %of total 25.5 26.6 27.7 28.7 30.0 30.6 31.6 33.5

Ruralpopulation, %of total 74.5 73.4 72.3 71.3 70.0 69.4 68.4 66.5

Urbanpopulation,'000 216,626.3 247,959.9 281,410.7 314,145.3 367,384.3 385,558.7 413,397.7 464,614.5

Ruralpopulation,'000 632,888.7 684,220.1 734,512.3 780,437.7 857,230.0 872,792.2 894,823.0 922,294.5

Source: World Bank, UN, BMI



Methodology

BMI's insurance reports provide insights into the operating conditions in and prospects for insurance in over

60 mostly developing countries. The reports incorporate the latest information available from official

sources such as regulators, international associations of regulators and trade associations; comparable

information from other countries; and BMI's economic and risk data. The reports focus on gross written

premiums in two segments: non-life and life. Unless stated, 'premiums' refers to gross written premiums.

In BMI's reports, non-life insurance includes health insurance premiums if these are normally considered by

industry observers to lie within the mainstream insurance sector. Non-life insurance includes inwards

reinsurance premiums if these would normally and reasonably be considered a significant part of the non-

life segment. In practice, this means that we generally include inwards reinsurance in developed countries

and offshore financial centres that specialise in insurance. We consider outwards reinsurance to be an

expense. Life insurance includes all long-term savings products that are legally structured as insurance

products. Life insurance premiums do not, therefore, include contributions to pension plans and other long-

term savings schemes unless they are legally constituted as being within the insurance sector.

Life Segment

In projecting life premiums, we consider two aspects: the likely development of population and of life

density (life premiums per capita). Typically, we forecast life density for 2016 and assume density changes

evenly from 2012 to 2016. In some cases there will be clear reasons why life density is not likely to change

evenly over time. In such cases, we forecast life density from year to year. Forecasts of life density for 2016

typically take into account the following factors: life density in 2012; density in nearby countries at a

similar level of development; relative importance of life insurance in terms of overall retirement savings;

and other factors promoting or retarding evolution of the life segment.

Non-Life Segment

In making projections of premiums in the non-life segment, we consider two aspects: the likely

development of nominal GDP and of non-life penetration (non-life premiums as a percentage of GDP).

Typically, we forecast non-life penetration for 2016 (the end of the forecast period) and assume that non-life

penetration changes evenly from 2012 to 2016. However, in some cases, an examination of the various lines

(motor, accident/health, liability, etc) that constitute the non-life segment indicates that the non-life

penetration is not likely to change evenly over time. In such cases we forecast the non-life penetration from



year to year. Forecasts of non-life penetration for 2016 typically take into account the following factors:

non-life penetration in 2012; penetration in nearby countries at a similar level of development; whether or

not health insurance is generally considered to be within the insurance sector; and other factors promoting

or retarding evolution of the non-life segment.

Autos

At a general level we approach our forecasting from both a micro and a macro perspective, assessing the

expansion plans of relevant multinationals/indigenous firms, while also taking account of the prevailing

economic outlook. In this latter respect, BMI projections for macro variables such as industrial output,

private consumption, government investment, monetary policy and GDP growth play a key role.

Burden Of Disease

The burden of disease in a country. This is forecasted in disability-adjusted life years (DALYs) using BMI's

Burden of Disease Database, which is based on the World Health Organization's burden of disease

projections and incorporates World Bank and IMF data.

Security Risk Ratings

BMI's Security Ratings service, which integrates closely with our Country Risk service, offer a

comprehensive comparative analysis of security risk across three key areas - interstate conflict, terrorism

and physical safety for expatriate workers - across major states in each region. The ratings are combined to

form a composite security rating to provide an overall guide to long-term trends and risks. Finally, we

integrate our short-term political and economic ratings with the terrorism rating, to indicate a state's

vulnerability to a sustained terrorist campaign or major terrorist attack. In all instances, the rated period is

two years, with each country assigned a score out of 100, with a low score indicating a high level of risk.

Insurance Risk/Reward Ratings

BMI's Insurance Risk/Reward Ratings (RRRs) have a threefold approach. First, we assess market

attractiveness and risks to the predictable realisation of profits in each state, capturing operational dangers

facing firms. Second, we identify objective indicators that serve as proxies for issues/trends in the industry

to ensure consistent evaluation across states. Finally, we use BMI's Country Risk ratings to ensure the

ratings capture broader issues relevant to the industry and that may limit market attractiveness or imperil



returns. The ratings system - which integrates with all industries covered by BMI - offers an industry-

leading insight into prospects/risks for companies. The ratings divide into two distinct areas:

Rewards

Evaluation of the industry's size and growth potential in each state, and also broader industry/state

characteristics that may inhibit its development.

Risks

Evaluation of industry-specific dangers and those emanating from the state's political/economic profile that

call into question the likelihood of anticipated returns being realised over the assessed time period.

Indicators

The following indicators have been used. Almost all indicators are objectively based.

Table: Insurance Risk/Reward Ratings Indicators And Rationale

Rewards

Insurance market rewards Rationale

Non-life premiums, 2012 (US$mn) Indicates overall sector attractiveness. Large markets more attractive than small ones.

Growth in non-life premiums,five years to end-2016 (US$mn)

Indicates growth potential. The greater the likely absolute growth in premiums thebetter.

Non-life penetration, %Premiums expressed as % of GDP. An indicator of actual and (to an extent) potentialdevelopment of non-life insurance. The greater the penetration the better.

Non-life segment measure ofopenness Measure of market's accessibility to new entrants. The higher the score the better.

Life premiums, 2012 (US$mn) Indicates overall sector attractiveness. Large markets more attractive than small ones.

Growth in life premiums, fiveyears to end-2016 (US$mn)

Indicates growth potential. The greater the likely absolute growth in premiums thebetter.

Life penetration, %Premiums as % of GDP. An indicator of actual and (to a certain extent) potentialdevelopment of life insurance. The greater the penetration the better.

Life segment measure ofopenness Measure of market's accessibility to new entrants. The higher the score the better.

Country rewards

GDP per capita (US$) A proxy for wealth. High-income states receive better scores than low-income states.

Active populationThose aged 16-64 in each state, as a % of total population. A high proportion suggeststhat market is comparatively more attractive.

Corporate tax A measure of the general fiscal drag on profits.

GDP volatilityStandard deviation of growth over 7-year economic cycle. A proxy for economicstability.



Insurance Risk/Reward Ratings Indicators And Rationale - Continued

Financial infrastructureMeasure of financial sector's development, a crucial structural characteristic given theinsurance industry's reliance on risk calculation.

Risks

Regulatory framework

Regulatory framework anddevelopment Subjectively evaluates de facto/de jure regulations on development of insurance sector.

Regulatory framework andcompetitive landscape Subjectively evaluates impact of regulatory environment on the competitive landscape.

Country risk (from BMI's Country Risk Ratings)

Long-term financial risk Evaluates currency volatility.

Long-term external riskState's vulnerability to externally induced economic shock, which tend to be principaltriggers of economic crises.

Policy continuity Evaluates the risk of sharp change in broad direction of government policy.

Legal framework Strength of legal institutions. Security of investment key risk in some emerging markets.

Bureaucracy Denotes ease of conducting business in a state.

Source: BMI

Weighting

Given the number of indicators/datasets used, it would be inappropriate to give all sub-components equal

weight. Consequently, the following weight has been adopted.

Table: Weighting Of Indicators

Component Weighting, %

Rewards, of which 70, of which

- Insurance market, of which 65, of which

- Life - 50

- Non-life - 50

- Country rewards - 35

Risks, of which 30, of which

- Regulatory framework: regulations and impact on development and competitive landscape - 40

- Country risk - 60

Source: BMI



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