Abstract
With economic growth slowing more sharply than anticipated in Q308, we have
been forced to revise
down our 2008 and 2009 growth forecasts, from 10.1%
and 9.7% respectively, to 9.6% and 8.8%.
However, we continue to highlight
the risk that despite the best efforts of authorities, economic growth
may
slow significantly going forward, and that a much-feared ' hard-landing'
scenario is not out of the
question.
Since China does not publish GDP
data by expenditure on a quarterly basis it is very difficult to
determine
what exactly is driving slower economic growth. With global growth continuing
to slow amid
the ongoing financial market turmoil the obvious source of
slower growth would be net exports.
However, official efforts to support
the slowing export sector in China, combined with falling commodity
prices
that have helped to slow surging import growth, have seen record-breaking
trade surpluses
recorded in each of the past two months. While Q308 still
saw a 1.6% year-on-year (y-o-y) narrowing of
the trade surplus, this was
significantly smaller than the 10.9% and 11.7% narrowing witnessed
respectively in the first two quarters. This suggests that although a weaker
external performance continues
to drag on economic expansion, it is
perhaps not the main driver of slowing growth.
However, combined with the
fact that secondary industry (i.e. manufacturing) growth slowed for a
fifth
quarter in a row in Q308, to 10.5% y-o-y from 11.3% in Q208, the
deceleration in industrial output
growth perhaps tells us the most about
the cause behind China' s slowing economy. Indeed, this ties in
well with
the weakening outlook for the export sector, since the majority of Chinese
shipments are
manufactured goods. Although exports have held up well thus
far, the weakening of industrial activity
underscores the fact that demand
for Chinese exports is softening as consumers continue to tighten their
belts across the globe.
Since the last quarter, we have made two major
changes to the data in this report. First, we have – to the
greatest
extent possible – incorporated hard figures that have been made
available by the regulator(s) and
trade association(s) in each country. In
some cases, therefore, we have begun to include numbers that
pertain to
the development of the insurance sector through the early stages of the global
financial crisis.
Second, we have extended our forecasts out to 2013. In
all cases, we have reviewed the key growth
drivers – non-life
penetration and life density – which we had incorporated in our
forecasts.
The Global Financial Crisis is likely to affect the various
segments of the global insurance industry in
different ways. In many
countries – especially in Europe – the coming recession points to
softness in the
non-life segment. In many cases, the numbers of policies
may fall: there should be downwards pressure on
premiums. By contrast, the
main problem for the life segment – in almost all countries – is
the extreme
volatility of financial markets. Over the longer term, though,
the fortunes of life insurance will recover –
thanks to the secular
growth of organised savings in most countries. China, where the larger
insurance
companies continue to achieve double-digit growth in premium
income, is a good example of this. Some
particular niches should also do
well in the current environment, such as legal liability insurance.
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, QBE, RSA, Sun Life Financial, The Hartford,
Principal
Financial Group and Zurich Financial Services.
We estimate that, over the
course of 2008, total premiums in the China rose by 25% to CNY778,873mn.
Non-life premiums rose by 26% to CNY302,058mn, while life premiums rose by 24%
to
CNY476,815mn.
Between now and the end of the forecast period, we
expect that annual non-life premiums will grow by
CNY245,790mn, while
annual life premiums should increase by CNY226,044mn. Growth in non-life
premiums should be driven by the general growth in nominal GDP plus a rise in
non-life penetration from
the current level of 1.01% to 1.20%. Growth in
life premiums should be driven by the change in the
overall population and
a rise in life density from US$44.20 to US$100.00 per capita.
BMI’s
Insurance Business Environment Rating is 62.3.
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