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The North America Insurance Sectors : A Company and Industry Analysis (June 2007)
Mergent, June 2007, Pages: 32
This report updates the previous North American insurance report, focusing on the markets in Canada and the United States
Current Environment - Key Points
- Leading US insurers- financial results were very solid over the past six months despite being challenged by regulatory changes and capacity shortages
As of March 2, 2007, the market cap of the nation's top five insurers was US$447.68 billion, according to Mergent calculations
- Life premium rates continued to drop in the US life sector over the last six months, with current premium growth in the non-life sector seeming to stall
- The non-life sector's profits, however, were high in the fourth quarter of 2006 due to an ebb in catastrophe losses last year
- Canadian insurers- profits were also solid over the last year, due to the favorable investment environment and strong business growth
- The appetite among US insurers for overseas mergers and acquisitions grew over the last six months due to the effectiveness of penetrating new markets and gaining new customers
- Using excess capital accumulated in recent years, major Canadian insurers also looked to acquisitions as a way to expand their positions
Industry Profile - Key Points
- The US insurance sector is a mix of life and health, and property and casualty, but the life segment contributes about 60% of total industry premiums
Figures from the Bureau of Economic Analysis of the US Department of Commerce indicate that the finance and insurance sector constituted 6.7% of GDP growth in 2005
- Of the 26 US industries on Forbes- Platinum 400 list, the insurance industry registered the best five-year earnings per share growth as at November 2006, with a median annualized gain of 30%
The industry credited its growing profitability to fewer storms last year and improved business conditions
- The insurance sector is a leading player in the Canadian financial industry and in the economy as a whole, employing about 6% of the country's workers in a wide variety of good-paying white collar jobs
The sector is dominated by a handful of large players, including Manulife, Great-West Lifeco and Sun Life
- The profitability of Canada's major insurers has been strong in recent years, primarily as a result of improving economies of scale and international business expansion
Market Trends and Outlook - Key Points
- The US pet insurance market is still underdeveloped, with a current market size of approximately US$200 million
Some researchers estimate the pet insurance market to grow by 25% to reach US$250 million in 2007
- The growing tendency of medium sized insurers to provide disability insurance to their staff as an additional benefit has driven sales of this product
Traditionally, smaller employers are more inclined to cut disability insurance before dropping mainstays including medical insurance
- Higher estimated future losses are likely to result in property insurance rate increases or, at the best, a flattening of the existing rate in 2007
- Auto vehicle theft in Canada is the insurance industry's biggest headache, costing insurers and policyholders more than C$600 million (US$543 million) in claims payouts
- Critical illness insurance in Canada is growing in popularity; however, rates are not falling
Some Canadians are paying high rates because insurers do not take into consideration genetic tests that show a client's risk is reduced
- The Canadian insurance sector full changeover to IFRS is planned to take effect in 2011, replacing existing insurance GAAP accounting standards
The move is expected to make Canadian insurance companies more competitive globally
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