Abstract
As a result of its heavy dependence on exports, the Taiwanese economy has been
severely battered by the
collapse in global demand, which has fed into a
precipitous slump in investment and weighed on private
consumption. As
things stand we forecast the island' s economy to contract by a record 4.5% in
2009, but
in view of recent very weak macro data we acknowledge real
downside risks to this prognosis.
Although stocks have ticked higher since
November 2008, gathering further momentum in March, we are
not entirely
convinced that we have now reached the dawn of a fresh bull market. A bleak
fundamental
backdrop and volatile sentiment means that further steep
corrections cannot be ruled out despite the
supportive theme of warming
ties with mainland China.
The Central Bank of The Republic of China has
been ahead of the curve, slashing rates aggressively
since the second half
of 2008. In view of the manifest collapse in trade and the attendant
smothering
effect on domestic demand - via the investment and private
consumption channels - we believe there is
further easing on the cards,
but have tempered our previous forecast mildly in view of recent signals.
The recession will leave a sizeable dent in the government' s coffers, as
revenues shrink and expenditures
swell, and we now envisage the fiscal
deficit reaching 4.8% of GDP in 2009. However, the highly
challenging
economic environment and lingering doubts about the adequacy and efficacy of
the stimulus
measures announced thus far means that even this could prove
too optimistic.
In the Asia Pacific, we profile 23 companies. These are
AEGON, AIG, Allianz, Aviva, AXA, Cardif,
Fortis, Generali, Groupama,
HDI-Gerling, HSBC Insurance, ING Group, Liberty Mutual,
Manulife, MetLife,
Prudential Financial, Prudential plc, QBE, RSA, Sun Life Financial, The
Hartford, Principal Financial Group and Zurich Financial Services.
We also
look at various local firms that are active in the region: some of these
companies rank, in terms
of the premiums that they write, among the
largest in the world.
Over the course of last year, total premiums in
Taiwan rose by 18 % to TWD2,053,709mn. Non-life
premiums rose by 6% to
TWD296,527mn, while life premiums rose 21% to TWD1,757,182mn.
Between now
and the end of the forecast period we expect that annual non-life premiums
should grow by
TWD43,558mn while annual life premiums should grow by
TWD563,441mn.
Growth in non-life premiums should be driven by the general
growth of nominal GDP plus a rise in
penetration from the current level of
2.38% to 2.4%. Growth in life premiums should be driven by the
change in
overall population and a rise in life density from US$2,273.7 to US$3,000 per
capita.
BMI' s Insurance Business Environment rating is 68.3.
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