Abstract
As anticipated, after exceeding expectations in the first quarter, Hong Kong' s
economic growth slowed
markedly in Q208. Preliminary national accounts
data put Hong Kong' s real GDP growth at 4.2% yearon-
year (y-o-y) in
April-June, down from a revised 7.3% y-o-y in Q108 (previously reported as
7.1%).
On a seasonally adjusted quarter-on-quarter (q-o-q) basis, Hong
Kong' s real GDP contracted by 1.4% q-oq
– its first quarterly fall
since Q203 – however this must be viewed against the stellar Q1
performance.
The data put overall growth in H208 at 5.8% y-o-y. In light
of deteriorating growth prospects – not only
across the developed
world, but also in mainland China – we have revised down our 2008 and
2009
growth forecasts for Hong Kong since our last quarterly Business
Forecast Report. We are now expecting
the territory' s real GDP to expand
by 4.6% in 2008 (down from 5.0%), with growth slowing to 4.1% in
2009
(previously 4.8%). The Hong Kong government has retained its growth forecast
of 4-5% for 2008.
The deteriorating external environment, as the fallout
for the US sub-prime mortgage-induced financial
turmoil spreads, poses a
key threat to Hong Kong' s economic performance in 2009. The slowing global
economy will dampen demand for Hong Kong' s goods, reducing export earnings and
hampering growth.
A downturn in business activity will feed through to the
labour market that, combined with declining
property and stock market
prices, will further erode household wealth and consumer confidence.
Furthermore, while it is not our core scenario, a marked downturn in the
Chinese economy would have a
significant impact on Hong Kong. Positively,
China has pledged to help Hong Kong weather global
economic turmoil by
speeding up infrastructure projects and safeguarding food supplies. Beijing
said in
October that it would safeguard food supplies to Hong Kong to
relieve inflation pressure in the territory,
expedite infrastructure
projects and support small and medium-sized businesses. Beijing also plans
to
further relax visa restrictions to allow more mainland Chinese to
travel freely to Hong Kong, potentially
boosting tourism in the
territory.
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
plc, 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 Hong Kong rose by 26% to
HKD212,314mn. Non-life premiums
rose by 6% to HKD27,014mn, while life premiums rose by 30% to
HKD
185,300mn.
Between now and the end of the forecast period, we expect that
annual non-life premiums will grow by
HKD13,263mn, while annual life
premiums should increase by HKD25,021mn. 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 1.54% to 1.60%. Growth in life
premiums should be driven by the change in the
overall population and a
rise in life density from US$3,080.77 to US$3,500.00 per capita.
BMI’s Insurance Business Environment Rating is 76.5.
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