Abstract
Indonesia' s economic growth remained resilient in Q308, registering a still
high 6.1% y-o-y increase,
moderating slightly from the 6.4% and 6.3%
expansion achieved in Q208 and Q108, respectively. As
such, the economy
appeared on track to reach our 6.1% forecast for 2008. Although the latest
figure was
reasonably sanguine given sharper slowdowns in other countries
in the region, slowing growth in exports
will inevitably prove a drag on
Indonesia' s economy. However, a surprising pick-up in private
consumption,
which rose by 1.9% q-o-q in Q308, has cushioned the impact of the slowing
external sector.
Nonetheless, we emphasise that the latest data has not
captured the full effects of deteriorating global
economic conditions that
led to the sharp sell-off in the world' s stock markets in Q408 and
heightened
risk aversion among investors.
Indonesia has enjoyed high
growth rates averaging around 6.0% y-o-y in most quarters since the end of
2006, but this feat is unlikely to be repeated in the medium term as the
country continues to struggle with
high inflation, a poorly performing
rupiah and weak external demand. In spite of Bank Indonesia' s (BI)
six
consecutive rate hikes in 2008 which took the benchmark BI Target Rate to
9.50%, inflation has
remained uncomfortably high. Consumer price inflation
(CPI) actually hit a two-year high of 12.14% y-oy
in September 2008,
before moderating slightly to 11.77% y-o-y in October and 11.68% y-o-y in
November. This is in line with the central bank' s year-end inflation target of
between 11.50-12.50%.
Going forward, inflation should continue to ease on
the back of falling oil prices, and the government has
already reduced
gasoline prices, providing timely relief for consumers, who are key for
growth.
President Susilo Bambang Yudhoyono had revealed an optimistic 6.2%
growth target for 2009 in August
2008, but we believe that the adverse
external conditions facing the economy will limit growth to just
5.0%.
Unsurprisingly, on November 25 2008, Finance Minister Sri Mulyani Indrawati
remarked that the
government will adjust its growth targets to between
4.5-5.0% for 2009, taking them in line with our own
forecast. However, on
December 2 she told parliament that 6.0% is possible. BMI still sees risks
firmly
skewed to the downside, as growth in the 5.0% area will likely be
achievable only if domestic demand
maintains its current growth
trajectory.
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 – that 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 2008, total premiums in
Indonesia rose by 43% to IDR78,267,000mn. Non-life
premiums rose by 6% to
IDR23,867,000mn, while life premiums rose by 66% to IDR54,400,000mn.
Between now and the end of the forecast period, we expect that annual non-life
premiums will grow by
IDR29,108,828mn, while annual life premiums should
increase by IDR134,207,264mn. Growth in nonlife
premiums should be driven
by the general growth in nominal GDP plus a rise in non-life penetration
from the current level of 0.49% to 0.75%. Growth in life premiums should be
driven by the change in the
overall population and a rise in life density
from US$21.88 to US$90.00 per capita.
BMI’s Insurance Business
Environment Rating is 52.8.
|
Related Report
|
View Cart
