a

Insurance trends in AsiaClarence Wong, Chief Economist Asia Pacific

11 April 2011

Hong Kong

a

Asia's insurance market outlook and drivers

2

aAsia is now a significant part of the global primary insurance market

Source: Swiss Re sigma 2/2010 December 2010 update

Premiums, USD bn 2009

3

aThough regional markets are fragmented and at different stages of development

Life premiums, 2009 (USD 10 billion)

Non-life premiums, 2009 (USD 10 billion)

South Korea

Taiwan

Hong Kong

Australia

Japan

PhilippinesID

IndiaSingapore

MYTH China

Vietnam

South Korea

China

Vietnam

Australia

Japan

Taiwan

India

TH

ID

SG

MY

Sources: Oxford Economics; Swiss Re ER&C. Yellow bubbles represent life insurance while grey bubbles represent non-life insurance. Size of bubble represents premiums in 2009. SG: Singapore; HK: Hong Kong; MY: Malaysia; TH: Thailand; ID: Indonesia.

PH

HK

4

aSteep growth paths of Asia’s life markets highlight catch-up potential of emerging markets

* Data series of penetration start from 1980 onwards except Vietnam: 1996; China: 1982; Hong Kong: 1990Source: Swiss Re Economic Research & Consulting

Life premiums/GDP (%)

Per capita GDP, USD ‘000 (log scale)

Current penetration of emerging markets

Potential

0%

2%

4%

6%

8%

10%

12%

14%

16%

0.1 1.0 10.0 100.0

Australia China Hong Kong India Indonesia Japan Malaysia

Philippines Singapore South Korea Taiwan Thailand Vietnam

India

China

Japan

Taiwan

5

a

* Data series of penetration start from 1980 onwards except Vietnam: 1987; Hong Kong: 1988.Source: Swiss Re Economic Research & Consulting

Growth of non-life penetration reflects stages of economic development

Non-life premiums/GDP (%)

Per capita GDP, USD ‘000 (log scale)

Current penetration of emerging markets

Potential

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

0.1 1.0 10.0 100.0

Australia China Hong Kong India Indonesia Japan Malaysia

Philippines Singapore South Korea Taiwan Thailand Vietnam

ChinaIndia

Japan

Taiwan

6

aNear term economic trends will impact insurance demand

Sustained economic growth of Asia

Rebalancing of national

economies

Infrastructure investment

Private consumption

Accelerating inflation

Commodity/food prices &

exchange rates

Fiscal consolidation

Fiscal deficit and ageing population

Capital inflows

Macro-prudential

supervision

Major themes

Related issues

Source: Swiss Re Economic Research & Consulting.

7

aDemographic changes will demand more longevity solutions

Sources: Swiss Re Economic Research & Consulting; United Nations Population Division

8

aRegulatory developments in Asia will continue to have significant impacts

Higher minimum capital requirements

Adoption of RBC solvency systems

Introduction of dynamic stress tests and the use of scenarios

Tightening of solvency

regimes

Regulatory uncertainty remains high

Consolidation is expected to accelerate in some markets

A driver for insurance M&As

Impacts on insurance portfolio and asset management

Increase demand for reinsurance

Convergence of regional regulations

Increased focus on consumer protection (eg establishment of policyholder protection funds)

Alignment of accounting standards to IFRS

9

a

Sources: National insurance authorities; Swiss Re Economic Research & Consulting.

Market access regimes – status quo and expected changes

Establishment of subsidiaries Establishment of branches Expected changes

China No restriction in non-life; JV only in life No restriction in non-life; JV only in life None (CIRC has recently affirmed JV only in the life sector)

India JV only (26% maximum foreign share) JV only (26% maximum foreign share)

The proposed amendments to Insurance Law to increase foreign investment ceiling to 49% and to permit foreign reinsurers to

setup branches has been approved by the government and were introduced in the upper house of parliament in December 2008.

Final approval is still pending.

Indonesia JV only (no limit to foreign share) JV only (no limit to foreign share) None

Malaysia No restriction No new branch license at the moment

Malaysia announced in April 2009 that foreign equity participation thresholds in insurance companies and takaful operators will be increased to a maximum of 70%, from the

current level of 49%.

Thailand Not allowed No new branch license at the moment

Plans to raise foreign share to 49% from 25% but no timetable was given

Vietnam No restrictions (usually restricted to write non-domestic business)

No restriction (usually restricted to write non-domestic business)

Relaxation of foreign branching in pursuant to WTO accession commitments

The other market (Australia, Hong Kong, Japan, Korea, the Philippines, Singapore and Taiwan) have no restriction on market access.

10

a

Growth and profitability

1111

a

aPremium growth projection – emerging Asian insurance markets will continue to outperform

Forecasts as of January 2011 and has not taken into account impact of recent events in Japan.Source: Swiss Re Economic Research & Consulting

11.2%

9.2%

9.2%

7.3%

6.1%

6.0%

5.3%

4.9%

4.7%

4.3%

3.7%

3.4%

1.9%

11.9%

10.4%

10.5%

6.1%

6.5%

6.0%

5.0%

5.7%

5.2%

4.2%

3.5%

3.4%

2.0%

0% 4% 8% 12% 16%

Vietnam

China

India

Indonesia

Philippines

Thailand

Malaysia

Korea

Singapore

Hong Kong

Taiwan

Australia

Japan

2010-2020 2010-2015

Non-life direct premium growth Life direct premium growth12.73%

11.02%

10.25%

8.30%

6.98%

6.95%

6.22%

6.21%

5.48%

5.48%

3.85%

3.53%

2.08%

13.51%

11.12%

10.50%

9.01%

6.74%

7.06%

6.17%

5.97%

5.72%

5.31%

3.82%

3.52%

2.12%

0% 4% 8% 12% 16%

Vietnam

Indonesia

India

China

Singapore

Thailand

Philippines

Malaysia

Hong Kong

Australia

Korea

Taiwan

Japan

2010-2020 2010-2015

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aForeign market share in different Asian markets

Share of foreign companies in non-life insurance, 2009

Sources: National insurance supervisory authorities; Swiss Re Economic Research & Consulting.

Share of foreign companies in life insurance, 2009

Note: For India, all joint ventures (JVs) with 26% maximum foreign shares are considered foreign companies in this table.

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aUnderwriting profitability of domestic primary insurers versus joint ventures and foreign branches

P&C

Sources: National insurance authorities; Swiss Re Economic Research & Consulting.

L&H

Note. U/W profits are statutory reported figures or equal to premiums less claims, com-missions and internal expenses otherwise. U/W Profit margin equal to the U/W results divided by premiums.

Markets covered: in P&C profitability analysis: Australia, China, Hong Kong, India, Japan, Korea, Indonesia, Malaysia, Singapore, Taiwan

Markets covered in L&H profitability analysis: China, India, Indonesia, Japan, Korea, Taiwan

Note. The charts depicting premium per insurer 2009 cover the following markets: Australia, China, Japan, India, Korea, Hong Kong, Taiwan, Singapore, Indonesia, Malaysia, Thailand, Philippines, Vietnam.

92.6

-26.9-16.6

-40

-20

0

20

40

60

80

100

Domestic Foreign JV

Net profit per life insurer 2006-08 average(mean value, USDm)

3227

761391

0

500

1000

1500

2000

2500

3000

3500

Domestic Foreign JV

Premium per life insurer 2009(all markets, mean value, USDm)

0.02%

-2%

-5%-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

Domestic Foreign JV

Net profit margin of the median life insurer 2006-08 average (%)

452

5492

0

100

200

300

400

500

Domestic Foreign JV

Premiums per non-life insurer 2009(all markets, mean value, USDm)

-13.6

2.0

-2.5

-16

-12

-8

-4

0

4

Domestic Foreign JV

UW profit per P&C insurer 2006-08 average

(mean value, USDm)

-0.3%

6%

-2%-4%

-2%

0%

2%

4%

6%

8%

Domestic Foreign JV

U/W profit margin of the median non-life insurer 2006-08 average (%)

14

aLarge life markets carried the bulk of life profits while smaller markets showed healthy P&C underwriting results

Japan4168

Taiwan-374

India-780

Indonesia212

Korea1607

China2823

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

-20000 80000 180000 280000 380000

Net

pro

fit

mar

gin

%, 2

00

6-2

00

8 m

arke

t av

erag

e

Total life market premiums, USD m

China-1925.1

India-928

Korea-955

Australia1532

Singapore103

Hong Kong167

Taiwan17

Malaysia35

Indonesia74 Japan

-361

-20%

-15%

-10%

-5%

0%

5%

10%

-20000 30000 80000

U/W

pro

fit

mar

gin

%, 2

00

6-2

00

8 m

arke

t av

erag

e

Total non-life market premiums, USD m

Note: P&C & L&H analysis based on 2006-08 average for selected markets where official data is available. U/W profits equal to premiums less claims, com-missions and internal expenses. U/W Profit margin equal to the U/W results divided by premiums.

Sources: National insurance authorities; Swiss Re Economic Research & Consulting.

Size of bubble represents relative size of net profits/losses Size of bubble represents relative size of underwriting profits/losses

Life insurance Non-life insurance(GAAP basis) (GAAP basis)

Indonesia

15

a

Questions & answers

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a

Corporate calendar

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Corporate calendar & contacts

17

aLegal notice

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Although all the information used was taken from reliable sources, Swiss Re does not accept any responsibility for the accuracy or comprehensiveness of the details given. All liability for the accuracy and completeness thereof or for any damage resulting from the use of the information contained in this presentation is expressly excluded. Under no circumstances shall Swiss Re or its Group companies be liable for any financial and/or consequential loss relating to this presentation.

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