Report structure

Global insurance overview

This chapter provides a general overview of the trends in the global insurance industry and presents data on global insurance for the period 2000—2003, based on the Swiss Re sigma economic research. The sigma publication series provides comprehensive information on the international insurance markets and in-depth analyses of economic trends and strategic issues in insurance, reinsurance and financial services, covering life and non-life business. It is considered to be one of the most reliable and comprehensive sources of information about insurance industry. This report uses the World Insurance Series published regularly by Swiss Re sigma research with independent expert analysis. The second half of the chapter addresses an important issue within the insurance industry, namely bancassurance with statistics on the distribution of life insurance in Europe.

Introducing the top 10 global insurance companies

The chapters that follow have been written in a similar format, providing comprehensive information on each of the top 10 global insurers. Each chapter includes an overview of the company’s main activities, its history, comprehensive SWOT analysis and analysis of the current company status. The companies profiled in this report are:

1.   Allianz AG

2.   Axa

3.   American International Group, Inc.

4.   Assicurazioni Generali S.p.A.

5.   ING Groep N.V.

6.   Nippon Life Insurance Company

7.   State Farm Insurance Companies

8.   Aviva Plc

9.   Zurich Financial Services

10. The Dai-ichi Mutual Life Insurance Company

These companies are considered to be the largest and most important insurers globally. The main purpose for presenting these companies in this report is to show the examples of best practice among insurers, analysing the reasons behind the growth of these businesses, and indicating any potential problems they might be facing. In this way, these profiles serve as examples for other insurers of what strategies to implement in order to expand their businesses and achieve higher profitability. One of the important characteristics of most of these profiles (as shown in the table below) is the decrease in revenues in 2002 to 2003 due to the global recession. This aspect of insurance business is analysed within the profiles, in most cases indicating that there are signs of recovery among global insurers.

The table is in order of 2003 revenues, with Allianz taking the number one position with a premium income of $113,319 in 2003.

Table 1.1: Top 10 global insurance companies,		by premium income in
	2000—2003
US$million	2002	2003
1. Allianz AG	111,750	113,319
2. Axa	84,791	82,046
3. American International Group, Inc.	67,400	81,300
4. Assicurazioni Generali S.p.A.	77,412	79,881
5. ING Groep N.V.	71,707	64,209
6. Nippon Life Insurance Company	72,224	62,014
7. State Farm Insurance Companies	49,699	56,100
8. Aviva Plc	50,843	52,954
9. Zurich Financial Services	41,423	48,919
10. The Dai-ichi Mutual Life Insurance
Company (year end in March)	47,565	46,990
Source: Annual report analysis		Business Insights

 

Summary

-  ■■ The year 2003 has shown some signs of recovery after two years of worldwide

recession and growth rates are gradually picking up.

-  ■■ The world insurance premium volumes, after a drop from $2,444,903 in 2000 to

$2,408,252 in 2001, are now growing at a steady pace, and reached $2,940,670 in 2003, experiencing a compound annual growth rate of 6.3% in the period 2000 and 2003.

-  ■■ Life insurance premiums have experienced very slow growth after the decrease in

premium income in 2001. In many cases 2003 saw a further decrease in premium income, for example in the UK.

-  ■■ The compound annual growth rate for non-life insurance in Europe between 2000

and 2003 totalled 15.6%, compared with only 5.1% for life insurance during the same period. Only one country, Germany, experienced a negative growth during this period.

-  ■■ Bancassurance has been particularly successful in France, Italy and Spain. Banks in

these countries enjoy more than 50% of the distribution of life assurance products.

" ■■ In Italy, for example, bancassurance accounted for 56% of the distribution of life assurance products, with five of the top 10 life assurance competitors in the market owned by Italian banks.

" ■■ Depolarisation in the UK that will allow non-independent institutions to offer life and pensions products of more than ones provider, coupled with the introduction of more and more simple products will offer a competitive advantage to banks.

 

Introduction

Considering Figure 2.2, it is clear that between 2000 and 2002 there was a rapid decline in stock market growth worldwide. Such falls of course meant that investors saw their assets decrease in value. For example, the German index, the DAX, suffered the most, falling by 58.4% in the period 1999—2002 and the average fall across the five countries’ indices was 44.9%. The Spanish General Index comparatively performed the best, falling 37.1% in the period 1999—2002.

2003, however, showed some signs of recovery, something that all investors have been looking forward to. After two years of worldwide recession growth rates are gradually picking up.

Life and non-life insurance markets worldwide

Definitions

The most important terms used in this chapter are as follows:

- ■■ Direct insurance: insurance contract between an individual (or a company) and an insurer;

" ■■ total insurance: direct insurance premiums plus reinsurance accepted;

" ■■ gross insurance: insurance premiums before ceding any portion of them (and their risks) in reinsurance;

 

-  ■■ net insurance: insurance premiums after ceding some risk to reinsurers;

" ■■ written premiums: premium income allocated to the current accounting year, regardless of when the risk (or the contract) runs to, or whether the risk continues into the next accounting year;

" ■■ earned premiums: the portion of premium income that corresponds to the current accounting year. Premium income is spread over the duration of the contract.

This chapter also distinguishes between life insurance and non-life insurance.

-  ■■ Life insurance: risk insurance intended as protection against the financial

consequences of the death of the insured person which takes the form of payment of a previously agreed lump sum or pension to a beneficiary, if the insured person dies during the term of insurance. In the case of pure life insurance, without any endowment insurance component, no payments are due if the insured person survives the term of insurance.

-  ■■ Non-life insurance: covers all other types of insurance, including motor insurance, property and casualty, liability insurance, credit insurance, health and accident insurance (although some countries classify health and accident insurance as ‘life insurance’), and other.

The world insurance premiums, after a drop from $2,444,903 in 2000 to $2,408,252 in 2001, are now growing at a steady pace, and have reached $2,940,670 in 2003, experiencing a compound annual growth rate of 6.3% in the period 2000 and 2003. It is evident that the declines in stock markets worldwide had a direct impact on world insurance premiums, resulting in either a decrease in premiums or a sluggish growth.

Table 2.2:	Total premium insurance volume by country and				region, 2000—
		2003
Euros	2000	2001	2002	2003	CAGR
UK	232,099	216,666	224,357	214,870	-2.5%
Germany	134,274	138,333	144,176	150,640	3.9%
France	131,192	128,605	132,883	144,351	3.2%
Italy	68,436	77,627	89,260	98,563	12.9%
Netherlands	39,981	43,495	42,218	44,330	3.5%
Spain	37,635	39,392	48,214	41,462	3.3%
Belgium	21,597	22,934	25,354	29,821	11.4%
Sweden	18,130	17,406	17,239	18,703	1%
Ireland	17,065	12,116	13,604	15,282	-3.6%
Denmark	11,229	12,499	13,809	14,819	9.7%
Finland	12,128	12,019	12,345	12,456	0.9%
Norway	7,854	8,175	7,917	11,177	12.5%
Portugal	6,860	7,931	8,491	9,534	11.6%
Total of above	738,480	737,198	779,867	806,009	3%
US$
United States	859,476	904,021	1,005,985	1,055,498	7.1%
Europe	786,089	762,398	846,697	1,022,158	9.1%
Japan	503,712	445,845	445,940	478,865	-1.7%
Africa	27,145	24,551	24,805	30,968	4.5%
World	2,444,903	2,408,252	2,632,473	2,940,670	6.3%
Note: The values in Euro for UK, Sweden, Denmark and Norway are converted from local
currency into Euro, based on end of year 2003 exchange rate
Source: Swiss Re,	sigma No. 3/2004 (year	2000 from si	gma No. 6/2002)		Business Insights

Life insurance premiums have experienced a very slow growth after the decrease in premium income in 2001. In many cases the year 2003 saw a further decrease in premium income, for example, in the UK. This trend is not only because of the recession of 2001, but also due to the persistent low interest rates resulting in life insurers offering lower returns. Such trends have been observed in the traditional life insurance sector, as well as in unit-linked insurance. According to Swiss Re Economic Research & Consulting data, unit linked insurance experienced negative real growth rate between 2001 and 2003 in France and Spain, and the UK and Italy saw a very slight increase in 2003.

 

Table 2.3:	Life insurance premium volumes by country and				region, 2000—
		2003
Euro	2000	2001	2002	2003	CAGR
UK	175,396	151,823	151,342	134,846	-8.4%
France	90,216	84,507	85,278	92,985	1%
Germany	61,051	62,162	64,625	67,676	3.5%
Italy	39,805	46,619	55,688	63,228	16.7%
Netherlands	23,437	25,511	22,131	22,375	-1.5%
Belgium	12,965	13,435	14,736	18,523	12.6%
Spain	23,767	20,362	26,482	17,675	-9.4%
Sweden	13,693	12,645	11,774	12,781	-2.3%
Finland	9,786	9,510	9,737	9,759	-0.1%
Denmark	7,094	8,139	8,873	9,672	10.9%
Ireland	13,243	6,987	7,246	7,970	-15.6%
Portugal	3,172	4,231	4,467	5,399	19.4%
Norway	3,471	4,240	4,701	5,130	13.9%
Total of above	560,943	514,684	486,480	471,307	-5.6%
US$
US	436,378	443,413	480,452	480,919	3.3%
Europe	503,165	464,357	500,489	584,705	5.1%
Japan	400,993	356,731	353,909	381,335	-1.7%
Africa	20,482	18,267	18,087	22,184	2.7%
World	1,518,401	1,439,177	1,534,061	1,672,514	3.3%
Note: The values in Euro for UK, Sweden, Denmark and Norway				are converted from local
currency into Euro, based on end of year 2003 exchange rate
Source: Swiss Re,	sigma No. 3/2004 (year	2000 from sig	ma No. 6/2002)		Business Insights

The above table analyses the life insurance premium volumes worldwide, demonstrating that some countries recorded negative compound annual growth rate in the period 2000—2003, including the UK, Netherlands, Spain, Sweden, Finland and Ireland. The highest growth rate was recorded in Portugal, with 19.4% compounded annually between 2000 and 2003, followed by Italy with 16.7% and 13.9% for Norway. Worldwide, Europe achieved a better growth than the rest of the world, with 5.1% compounded annually between 2000 and 2003, compared with 3.3% for the United States and 3.3% worldwide.

The non-life insurance sector experienced a much stronger growth than the life insurance sector between 2000 and 2003.

 

Table 2.4:	Non-life insurance premium volumes			by country	and region,
		2000—	2003
Euro	2000	2001	2002	2003	CAGR
UK	56,703	97,509	109,797	120,337	28.5%
Germany	73,223	45,563	51,305	56,230	-8.4%
France	40,976	44,098	47,605	51,366	7.8%
Italy	28,631	31,008	33,572	35,335	7.3%
Spain	13,867	19,031	21,732	23,787	19.7%
Netherlands	16,544	17,984	20,087	21,955	9.9%
Belgium	8,632	9,499	10,618	11,297	9.4%
Ireland	3,821	5,129	6,358	7,312	24.2%
Sweden	4,437	4,761	5,369	6,027	10.8%
Denmark	4,135	4,360	4,961	5,120	7.4%
Norway	4,383	3,935	4,320	4,679	2.2%
Portugal	3,687	3,700	4,024	4,135	3.9%
Finland	2,342	2,508	2,608	2,697	4.8%
Total of above	261,381	289,085	322,356	350,278	10.3%
US$
US	423,098	460,608	525,533	574,579	10.7%
Europe	282,924	298,041	346,207	437,452	15.6%
Japan	102,719	89,114	92,031	97,530	-1.7%
Africa	6,663	6,284	6,718	8,784	9.6%
World	926,503	969,074	1,098,412	1,268,157	11%
Note: The values	in Euro for UK, Sweden, Denmark and Norway			are converted from local
currency into Euro, based on end of year exchange rate
Source: Swiss Re,	sigma No. 3/2004 (year	2000 from si	gma No. 6/2002)		Business Insights

Table 2.3 shows a different story to Table 2.4. The CAGR for non-life insurance in Europe between 2000 and 2003 totalled 15.6%, compared with only 5.1% for life insurance during the same period. Only one country, Germany, experienced negative growth.

According to Swiss Re Economic Research & Consulting, the growth in non-life insurance was mainly driven by renewed premium rate increases. The strongest growing sector was the third party liability, due to the higher claims payouts and subsequent increases in the amount of premiums charged.