Abstract
The outlook for Kuwait has deteriorated markedly over the last quarter, with
oil prices having fallen
further, production set to contract under the new
OPEC quotas, and the financial sector having seen some
significant
turmoil. We expect the expatriate population to shrink as jobs go (reducing
the number of
consumers), and personal wealth to contract in line with
stock market and real estate asset losses. The
government stimulus package
will go some way towards keeping the economy afloat, in line with the
view
we have been promoting for a while for the whole of the Gulf region, but
nonetheless, we expect the
economy to contract by 1.0% this year, and
recover only slowly going forward, as the unappealing
business and
political environment keeps investors away.
We now see real GDP growth
coming in at -1.0% in 2009 and then 0.4% in 2010 - entirely on the back of
government spending and ongoing momentum in gross fixed capital formation from
projects which had
already secured financing prior to the economic and
financial turmoil. Consumer spending will contract
by 2.0% in 2009 and
remain flat in 2010 (unless the government resorts to introducing income tax,
in
which case it could decline even further). Thereafter growth in this
component will remain very sluggish:
we are forecasting 2.0% annually in
2011, followed by a small pick-up to 3.0% in 2012-2013, compared
with 6.6%
in 2006 (the last period for which we have data), and an estimated 10% and 6%
for 2007 and
2008 respectively.
As elsewhere in the Gulf, the real
estate sector will also contract in 2009, and possibly 2010 as well. The
government took steps to prevent a bubble late last year, introducing new laws
restricting sales and
mortgages, and as such the sector has already had a
significant correction: real estate sales volumes fell
by 33% in 2008
compared to the previous year (with residential sector sales dropping 42% over
the same
period). However, we do not think this will protect it from
further downside going forward. With jobless
expatriates likely to return
to their home countries, there will be reduced demand for homes and new
supply on the market (from vacated homes). Furthermore, banks will remain very
wary of lending to
potential home-owners in the current climate, with real
estate exposure having contributed to the financial
turmoil over the last
few months, and property certainly not looking like a particularly safe
investment at
the moment.
In the Middle East and North Africa, we
profile 17 companies. These are AGF, AIG, Allianz, Aviva,
AXA, Cardif,
ERGO, Eureko, Fortis, Generali, Groupama, HSBC Insurance, Liberty Mutual,
MAPFRE, RSA, UNIQA and Zurich Financial Services. We also look at a number of
the smaller local
firms that are active in the region, particularly in
Kuwait, Oman, Saudi Arabia and the UAE.
Over the course of 2008, actual
total premiums in Kuwait rose by 1% to KWD198mn. Non-life premiums
rose by
1% to KWD142mn, while life premiums did not grow at all (0%) and remained at
KWD56mn.
Between now and the end of the forecast period, we expect that
annual non-life premiums will rise by
KWD237mn, while annual life premiums
should rise by KWD40mn.
Growth in non-life premiums should be driven by
the general growth in nominal GDP: we are assuming
that non-life
penetration remains constant at the current level of between 0.34% to
0.80%.
Growth in life premiums should be driven by the change in the
overall population and a rise in life density
from US$57.66 to US$90.00
per capita.
BMI' s Insurance Business Environment Rating for Kuwait is
45.3.
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