swiss re patrizia baur
TRANSCRIPT
Current insurance market trends: where does Poland stand and what lies ahead?
Sopot Summer Insurance & Reinsurance Days
Sopot17 June 2008
Patrizia BaurSwiss Re Economic Research & Consulting
Slide 2
Agenda
Current situation
Market trends
Outlook
(Re)Insurance DaysSopot17 June 2008
Slide 3
1% of premiums written in Europe stem from Poland
Sources: Supervisory Authorities, Insurance Association, Swiss Re Economic Research & Consulting
Switzerland 3%_ ______
Netherlands 7% __________
United Kingdom 27% _____
Other CEE 4%
Austria 1%_________ ______________Poland 1%
________France 18%
Germany 15% _________
(Re)Insurance DaysSopot17 June 2008
Split of total insurance premiums (life and non-life) EUR 1097bn, 2007
_____Other Europe 25%
Non-life Life1996 3.3% 0.6%2000 4.2% 0.8%2003 5.4% 1.2%2007 9.4% 2.1%
Non-life Life1996 0.7% 0.3%2000 1.1% 0.4%2003 0.8% 0.5%2007 1.1% 1.0%
Share CEE
Share Poland
Slide 4
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Pol
and
Cze
chR
epub
lic
Hun
gary
Rus
sia
Slov
akia
Aus
tria
Accident Motor Property Liability Other
Source: Swiss Re Economic Research & Consulting
Real growth rates
Non-life growth gained momentum in Poland
Portfolio overview2007
Russia: motor hull is included in propertySource: Swiss Re Economic Research & Consulting
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
E
Poland Western Europe Central & Eastern Europe, excl. Poland
Slide 5
Source: Swiss Re Economic Research & Consulting
Real growth rates
High, but slowing life insurance growth
Portfolio overview2006
No data for RussiaSource: Swiss Re Economic Research & Consulting
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
E
Poland Western Europe Central & Eastern Europe, excl. Poland
0%
20%
40%
60%
80%
100%
Poland CzechRepublic
Hungary Slovakia Austria
Ordinary, term life (Pure) endowment, whole life
Unit-linked insurance Marriage & birth
Pension and annuities Accident and Health
Slide 6
* market valuesSource: Swiss Re Economic Research & Consulting
Non-life profitabilityReturn on Equity, book value
Profitability – decreasing from record levels
Life profitabilityReturn on Equity, book value
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
1999 2000 2001 2002 2003 2004 2005 2006 2007E
UK* Germany France Poland
0%
5%
10%
15%
20%
25%
30%
35%
40%
1999 2000 2001 2002 2003 2004 2005 2006 2007E
UK* Germany France Poland
* market valuesSource: Swiss Re Economic Research & Consulting
Slide 7
Agenda
(Re)Insurance DaysSopot17 June 2008
Current situation
Market trends
– Impact of current credit crisis
– Products – where to grow profitably?
– Distribution – the role of bancassurance
Outlook
Slide 8
Towards a more challenging macro environment
-2.8-4.03.7+13.8Slovakia
Russia
Poland
Hungary
Czech R.
+38.2
-26.7
-15.4
-8.1
Stock markets (30 May, %-chg. year to date, local currency)
+3.0+2.414.3
-3.1-4.84.3
-3.9-4.26.8
-3.0-3.56.7
Government deficit(2008, % of GDP)
Current account balance(2008, % of GDP)
Inflation(April 2008, %)
Sources: Bloomberg, Oxford Economic Forecasting Ltd., Swiss Re Economic Research & Consulting
(Re)Insurance DaysSopot17 June 2008
Slide 9
.. but so far impact of the credit crisis remained limited
Source: Bloomberg
Europe EMBI+ spreads
0
200
400
600
800
1000
1200
1400
1600
1800
Sep
-00
Jan-
01
Mai
-01
Sep
-01
Jan-
02
Mai
-02
Sep
-02
Jan-
03
Mai
-03
Sep
-03
Jan-
04
Mai
-04
Sep
-04
Jan-
05
Mai
-05
Sep
-05
Jan-
06
Mai
-06
Sep
-06
Jan-
07
Mai
-07
Sep
-07
Jan-
08
Mai
-08
Bulgaria Poland Russia (rhs) Turkey Ukraine
Slide 10
Consequences for CEE insurance
Non-life insurance gets less profitable
Lower demand for index-linked life products
Countries with high share of foreigners most probably no major supply side issues
Foreign bancassurers under some pressure to sell subsidiaries (Erste Bank Vienna Insurance Group)
Less aggressive acquisition strategies of foreign insurers, less aggressive expansion in CEE countries
(Re)Insurance DaysSopot17 June 2008
Slide 11
Agenda
(Re)Insurance DaysSopot17 June 2008
Current situation
Market trends
– Impact of current credit crisis
– Products – where to grow profitably?
– Distribution – the role of bancassurance
Outlook
Slide 12
Non-life insurance – competition will become stronger
Source: KNF, Swiss Re Economic Research & Consulting
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
E
Non-life total Accident MTPL Motor hull Property Liability
Opportunities
Infrastructure projects (EU, EURO 2012)
Lowly penetrated SME sector
Potential in liability/agro/credit & surety
Risks
Saturated market for industrial/commercial property
Increasing competition from abroad
Situation in the non-life sectorReal growth by line of business
Slide 13
Life insurance – cooling financial markets ask for new solutions
Source: KNF, Swiss Re Economic Research & Consulting
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
03
Q4
04
Q1
04
Q2
04
Q3
04
Q4
05
Q1
05
Q2
05
Q3
05
Q4
06
Q1
06
Q2
06
Q3
06
Q4
07
Q1
07
Q2
07
Q3
07
Q4
Total life LifeMarriage & birth LinkedAnnuity Accident & Sickness supplement
Drop in stock markets
Increasing need for risk protection (eg health) and old-age provision
Changing accounting and regulatory environment
Key
Offer new products
Address new client segments
Hot topics in the life sectorReal growth by line of business
Slide 14
Agenda
(Re)Insurance DaysSopot17 June 2008
Current situation
Market trends
– Impact of current credit crisis
– Products – where to grow profitably?
– Distribution – the role of bancassurance
Outlook
Slide 15
No information available for Hungary, Czech RepublicSource: Swiss Re Economic Research & Consulting
Bancassurance is underdeveloped
Life insurance2005, except for Poland, Hungary, Czech Rep., France, Italy: 2006
Estimates for Hungary, Czech Republic; * new business splitSource: Swiss Re Economic Research & Consulting
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Pol
and
Hun
gary
Cze
chR
ep.* UK
Fran
ce
Ital
y
Ger
man
y*
Spa
in
Bel
gium
Banks Agents Brokers Others
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Pol
and
UK
Fran
ce
Ital
y
Ger
man
y
Spa
in
Bel
gium
Banks Agents Brokers Others
Non-life insurance2005, except for France and Italy: 2006
Slide 16
Low product complexity
Good fit with core banking products
Cost advantages of bancassurance
Bank branch traffic and density
Labour market flexibility
Opportunities
Distribution synergies
Cost advantages
Risks
Cultural differences
Low product complexity
Good fit with core banking products
High bank branch traffic and density
Captive model?
Success factors
Key drivers of bancassurance
Opportunities and risks
(Re)Insurance DaysSopot17 June 2008
Slide 17
tomorrowtodayyesterday
From macro to micro segmentation
Phases
Client
Channel
total of clients
branch
Affluent
clients
SMEs/
Corporate
clients
Mass
Market
client
macro segmentationmicro segmentation within clients target group
stationary sales non
stationary sales
home banking
TV -banking
mobile sales
smart card banking
non banking CLIENT
Branch
Telephone /Online
Mobile
salesPoints of sale Partners
Trend towards tailor-mademulti-channel distribution
Point of sale
Brokers
sales
Slide 18
Agenda
Current situation
Market trends
Outlook
(Re)Insurance DaysSopot17 June 2008
Slide 19
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Bela
rus
Kaz
akhs
tan
Rom
ania
Russ
ia*
Bulg
aria
Ukr
aine
Slov
akia
Cro
atia
Hun
gary
Cze
ch R
ep.
Pola
nd
Slov
enia
Ger
man
y
EU1
5
Life Non-life
Still considerable gaps to developed markets
Premiums /GDP (2007, preliminary)
* Russia: without short-term policies aimed at tax optimisationSource: Swiss Re Economic Research & Consulting
(Re)Insurance DaysSopot17 June 2008
Slide 20
ZW
BB
CZ
BD
VNIN ID
CN
NAZA
ROMX
RU
PL
HR
HUSK
OM
KR
TW IL
HK
ES
JPIT
SG
DE
FRGB
USCH
IE
0%
1%
2%
3%
4%
5%
6%
0.1 1.0 10.0 100.0
GDP per capita in 1000 USD
PLHUSKCZ
AT
TH
BW
NZ
NO
MWBD BO
ID
ECDZ
MXRU
HR
MY
OM
IL
IS
SV
VN
IN
CN
NA
KR
HK
ES
JP
IT
SG
DE
FR
US
CH
IE
0%
2%
4%
6%
8%
10%
12%
0.1 1.0 10.0 100.0
GDP per capita in 1000 USD
CEE countries lie in the steep part of the S-curve
Life Insurance 2007
Non-life Insurance 2007
Source: Swiss Re Economic Research & Consulting Source: Swiss Re Economic Research & Consulting
(Re)Insurance DaysSopot17 June 2008
Slide 21
Source: Swiss Re Economic Research & Consulting
GDP and insurance growth forecast2008-2012, inflation-adjusted
Poland is expected to grow at about the same speed as other CEE markets
Favourable (long-term) macroeconomic environment
Catch-up towards EU wealth levels
State to rely more on private solutions
Tapping of potential farther East
Underwriting discipline
New products (eg structured life)
Further diversification of distribution channels
Growth drivers
0% 2% 4% 6% 8% 10% 12%
Western Europe
Central & EasternEurope (excl.
Poland)
Poland
GDP Life insurance Non-life insurance
Slide 22
Summary
Good capitalisation and saturation in large industrial/commercial lines will intensify competition in non-life insurance.
Profitable growth will be in areas where the growing cake will allow to expand without compromising on terms and conditions.
In life insurance, success will very much depend if insurers
– manage to offer alternatives to pure investment products,
– capture potential resulting out of social security sector and
– use whole range of distribution channels
Insurance products in CEE will increasingly mirror those in Western Europe.
Growth in CEE – and Poland – is expected to outpace Western Europe. However, differences will erode over time.
(Re)Insurance DaysSopot17 June 2008
Slide 24
Appendix
(Re)Insurance DaysSopot17 June 2008
Slide 25
Statistical overview
Preliminary dataRussia: life insurance without short-term tax optimisation schemes
Sources: WIIW, supervisory authorities, insurance associations, Swiss Re Economic Research & Consulting
(Re)Insurance DaysSopot17 June 2008
2007 GDP Life insurance Non-life insurance(EURbn) (EURm) Penetration (EURm) Penetration
Poland 305.266 5804 1.9% 5605 1.8%Czech Republic 127.358 1938 1.5% 2749 2.2%Hungary 101.786 2008 2.0% 1602 1.6%Slovakia 54.696 760 1.4% 945 1.7%Slovenia 33.375 609 1.8% 1284 3.8%Romania 117.978 409 0.3% 1706 1.4%Russia 898.586 441 0.0% 21153 2.4%Croatia 37.214 337 0.9% 896 2.4%Ukraine 92.325 110 0.1% 2423 2.6%Kazakhstan 69.469 28 0.0% 876 1.3%Belarus 33.126 11 0.0% 231 0.7%
Total Eastern Europe 1950.264 12991 0.7% 41110 2.1%
Slide 26
Disclaimer
The material, views and conclusions contained in this presentation are for information purposes only. Although all information used in this presentation was taken from reliable sources, Swiss Re does not guarantee the accuracy and completeness of its content. All liability for the integrity, confidentiality or timeliness of this presentation or for any damages resulting from the use of information herein is expressly excluded. Under no circumstances shall Swiss Re or any of its affiliates be liable for any financial or consequential loss relating to this presentation.
(Re)Insurance DaysSopot17 June 2008