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Taiwan Insurance Report Q1 2009
Business Monitor International, March 2009, Pages: 96
BMI's Taiwan Insurance Report provides independent forecasts and competitive intelligence on Taiwan's insurance industry.
In view of a sharp deterioration in key macroeconomic metrics, including a negative real GDP growth figure in Q308 and very poor export order data, we believe the odds of Taiwan falling into a technical
recession are very strong. Accordingly, we have revised down our 2008 growth forecast to 1.5% year-onyear
(y-o-y) and, moreover, now see a strong likelihood of the economy contracting in 2009.
A slew of negative data releases followed the grim Q308 GDP data. Taiwan's export orders shrank by 5.56% y-o-y in October, down from a positive 2.82% in September, marking the worst performance since the end of 2001. Orders from China/Hong Kong plunged by a whopping -22.84% y-o-y to US$6.74bn, followed by a -6.99% decline in contracts to the US to US$7.05bn. In product terms, the only export sector up on the previous year was IT/Telecoms, which came in 11.90% higher. Other key categories such as electronics, base metals and precision equipment registered falls of -1.97%, -12.25% and -20.48%, respectively. The 'leading' nature of these metrics means that we are likely to see continued weak export figures over the coming months. Notably, in another sign of the dim trade outlook the island's number two container shipping company, Yang Ming Marine Transport Corp, has recently (as we go to press) announced that it is planning to cut capacity by 30% on Asia-Europe routes.
Although 2009 could see an end to the financial market volatility that characterised 2008, the dim prospects for many key industries such as electronics and finance, and continued global risk aversion could serve to preclude a sustained rebound. Indeed, given the heavy trade dependence of the Taiwanese economy, corporate performance will hinge critically on the degree to which the G3 (and mainland China) markets manage to avert a protracted downturn and may thus not respond as vigorously as hoped for to fiscal stimulus and further aggressive monetary easing.
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 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.
We estimate that over the course of last year, total premiums in Taiwan rose by 18 % to TWD2,315,649mn. Non-life premiums rose by 6% to TWD322,784mn, while life premiums rose 21% to TWD1,992,866mn (Query: can I double check these figures please – new ones taken from SAAG table). Between now and the end of the forecast period we expect that annual non-life premiums should grow by TWD110,157mn 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 2.24% to 2.4%. Growth in life premiums should be driven by the change in overall population and a rise in life density from US$2,266.71 to US$3,000 per capita.
BMI’s Insurance Business Environment rating is 69.4.
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