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Best’s Insurance News & Analysis
BESTWEEK
Asia-Pacific
11 June, 2013 • Issue 23
Inside:
www.bestweek.com
Trend Watchers
BESTWEEK
International Insurance Society CEO: Insurers Should Capitalize
On Global Trends to Foster Sustainable Growth in Asia
A.M. Best Analysis
Page 7 Fast growth in China chips
at capital adequacy.
By Iris Lai
The Asian insurance industry has to capitalize on global trends such as an aging population, low interest rates and regulatory change to be able to drive sustainable and profitable business growth — topics that will be addressed at International Insurance Society’s
EST EEK
EST EEK
EST EEK
annual meeting in Seoul, South Korea, June 16-19.
B
W
B
W
B
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“Many of the issues affecting insurers around the world are also critical to Asian insurers’
success,” said Michael J. Morrissey, president and chief executive officer of IIS. Insurers
are facing more stringent and often confusing regulatory initiatives and low interest rates
resulting in meager investment income and lower returns.The IIS’ 49th seminar in Seoul
is looking into new market opportunities arising from key global
“Many of the issues
trends. Demographic changes, such
affecting insurers
as an aging population, create sigaround the world
nificant problems and opportunities in many markets, particularly in
are also critical
pension and health insurance, said
to Asian insurers’
the IIS in a report.The aging trend
success.”
has significantly fueled demand
for life and pension products, said
Michael J. Morrissey
the IIS. In Japan, medical life and
President and CEO
IIS
Hong Kong
Health
Page 9 Hong Kong insurers back
efforts to overhaul health system.
Liability
Page 9 Best’s Underwriting Guide
Snapshot: Safety consultants.
■ Conference, page 3
Spreading to the East
Manulife Sees Asia’s Booming Middle Class
As Ripe for Pension and Retirement Business
By Fran Matso Lysiak
Manulife Financial Corp. sees financial opportunities with the booming middle classes in
Asia, said an executive with the Canada-based financial services giant.The company is eyeing
growth in the emerging pension and retirement businesses.
Manulife Financial
Corp.
• Headquarters: Toronto
• Chief Executive: Donald A. Guloien
• Total Assets*: US$487.70 billion
• Net Income*: US$1.74 billion
* As of Dec. 31, 2012
Source: BestLink
AMB Credit Report - Insurance
Professional
Manulife is focusing on the middle class because that’s
“really the story of the economic transformation under
way in Asia,” Philip Hampden-Smith, chief marketing officer
of Manulife Asia, told BestWeek.
Stocks
Best’s Regional Composite
Indexes Week-to-Week:
US (AMBUS)
▼ 2.48
▼ 4.23
Europe (AMBEUR)
Asia/Pacific (AMBAP)
▼ 5.53
Full listing of A.M. Best insurance
stock indexes on Page 9.
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Over the next decade, the size of the middle class just in
the markets where Manulife operates will increase by a
billion people — “that’s about 85% of the global growth.”
■ Manulife in Asian Market, page 2
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED. No part of this report or document may be distributed
in any electronic form or by any means, or stored in a database or retrieval system, without the prior written permission of the A.M. Best
Company. For additional details, refer to our Terms of Use available at the A.M. Best Company website: www.ambest.com/terms.
Life Insurance
“Our markets are
where the money is
as well as where the
money will be.”
■ Manulife in Asian Market, From page 1
That means the insurance market in Asia will grow at twice the rate of GDP growth.
“Our markets are where the money is as well as where the money will be,” HampdenSmith said. For example, in Malaysia,“we’ve been expanding fast into second-tier cities.”
In recent years,“we’ve doubled the size of our agency and moved fast into other channels
— last year alone we implemented or signed 10 new bancassurance partnerships in Asia.”
Manulife runs its Asian businesses on a portfolio approach, Hampden-Smith said. Serving 11
distinct markets “makes us resilient to the inevitable economic fluctuations in any single
market,” he said.
Industry growth has been driven by a combination of rising prosperity, high economic
growth, high savings rates and favorable age profiles in Taiwan, Korea, Hong Kong, Malaysia and Thailand, Mark Konyn, chief executive officer of Cathay Conning Asset Management in Hong Kong, told BestWeek.
Philip Hampden-Smith
Chief Marketing Officer
Manulife Asia
Hampden-Smith also pointed to Manulife’s success in Japan.“A little while back, we
looked at the figures and found ... that if you moved our Japanese business to the United
States, it would be the third-biggest insurance business in the U.S.”
In a different example, Manulife last year became the first wholly foreign-owned insurer
to enter Cambodia, he said.
Insurance sales in Japan are successful due to the development of the managing general
agent channel, according to BestLink, A.M. Best Co.’s
online financial system. However, in 2009, the company
de-emphasized sales of all variable annuity products. New
Manulife Financial in Asia
variable annuity products are hedged.
Assets under management, by nation in U.S. dollars,
as of Dec. 31, 2012.
(US$ billion)
Hong Kong and Japan have historically accounted for the
majority of Manulife Asia’s earnings and premiums but due
to increased expansion in the other areas of Asia, the proportional contribution of Hong Kong and Japan has been
reduced in recent years, according to BestLink.The Asia division also will expand mutual fund sales and leverage global
China
capabilities to take advantage of the emerging pension and
1.8
Japan
retirement opportunity.
29.7
Hong Kong
29.4
Thailand
0.26
Cambodia
0.007
Vietnam
2.9
Malaysia
1.3
Singapore
4.2
Indonesia
3.0
Source: Manulife Financial
2
BestWeek Asia-Pacific • 11 June, 2013
Taiwan
2.9
Philippines
1.5
A major area of growth for Manulife is pensions, HampdenSmith said. Japan has an aged population but 20 years from
now, Hong Kong “will be as old as Japan is today.”
Manulife Asset Management, he noted, recently issued
research showing that most Association of Southeast
Asian Nations countries will see at least a tripling in the
percentage of their pensioner population in less than
40 years, he said.
Manulife has a history in pensions and “we’re now leveraging that into other markets in Asia.” For example, last year,
■ Manulife in Asian Market, page 6
Regionwide
■ Conference, From page 1
savings insurance have driven new business growth for the life sector. Medical life and
cancer insurance accounted for 20.1% and 15.6%, respectively, of total in force life policies
in 2011, according to the Life Insurance Association of Japan.
“Asia has unique demographic issues, both positive and negative,” said Morrissey. Many
Asian countries’ young population offers high sales potential for life, automobile and business insurance, presenting the fastest growth prospects in the world. In some countries,
Morrissey said an older population has lowered the growth outlook for most conventional
products while greater longevity has created health care expense problems.
While companies in South Asia enjoy higher markets growth, Morrissey said they face
challenges from new competition due to insurers from North Asia, North America and
Europe seeking opportunities in this region. North Asian insurers have to strike a balance
in developing product strategies to address the needs of their aging population while
allocating capital to build presence in the more rapidly developing South Asian countries,
said Morrissey.
Lower interest rates have affected the life insurance sector, which has to review policy
design, benefits and underwriting requirements, said the IIS.This low rate environment
complicates the issue of an aging population by limiting returns and options to support
pension benefits. Insurers from both North and South Asian regions “must develop products and distribution channels that assure profitability in spite of lower interest rates than
have historically been assumed in pricing,” said Morrissey.“Products must be designed to
produce an underwriting profit, not relying heavily on investment returns.” Companies
focusing on products, along with underwriting gains, have consistently delivered the best
returns on capital over a long period of time, he said.
Changing global regulations have driven many Asian countries to strengthen their regulatory systems to be more in line with international standards.The pending implementation of Solvency II in the European Union has encouraged more countries to adopt a
risk-based capital model or to review their current systems. Many regulators in South Asia
have increased their minimum capital requirements. Solvency II is a regulatory regime
designed as a uniform capital adequacy structure for insurance and reinsurance in the
27-nation European Union. “In this stringent regulatory environment, more capital is
required than in the past, and so access to capital must be maintained by building strong
relationship in the capital markets and with a range of capital providers,” said Morrissey.
Companies have to pay more attention to enterprise risk management, particularly on
investment portfolio amid challenging market conditions.
Asian insurers and reinsurers will provide an important source of capital to bear the
world’s increasing risks, especially for extreme weather events.There will be increasing
global cooperation for risk management systems and talent development for best practices, according to Morrissey.The Asia-Pacific region is prone to natural catastrophes such
as earthquakes and typhoons. Japan’s Tohoku earthquake, New Zealand’s Christchurch
earthquakes and Thailand floods in 2011 were among the top 16 most costly world
insurance loss events between 1970 and 2012, with estimated insured losses of US$38.6
billion, US$13.4 billion and US$13.4 billion respectively, according to Munich Re.
Recent A.M. Best
Reports, Research
• Briefing: Middle East & North Africa
Non-Life & Life – Abu Dhabi Enters
the Fray of Financial Services Hub
Competition
The Middle Eastern insurance market
is already served by three hubs, and
A.M. Best expects the establishment
of another in the United Arab Emirates
would face significant challenges. The
proposed free zone will be located on
Al Maryah Island, aiming to promote
Abu Dhabi as a leading global market,
develop the emirate’s economy, and
attract financial investments.
June 3, 2013
• Special Report: U.S. Life/Health –
Financial Review. Earnings Rebound
Driven by Underwriting and Lower
Impairments
The U.S. life/health industry continued
to face many of the same challenges in
2012 as it did in 2011; operating performance and capitalization benefited from
a somewhat more benign equity market.
Although earnings and capital improved
for the industry, operating headwinds
from the sluggish economy, together with
persistently low interest rates, clearly are
having an impact on top-line growth.
May 31, 2013
• Briefing: U.S. Property/Casualty
– U.S. P/C Industry Seems Ready
to Weather Expected Active 2013
Hurricane Season
After a relatively benign first quarter of
2013, the recent Moore, Okla. tornado
and increased weather-related losses in
May will impact second-quarter results.
Forecasters are predicting a well above
average 2013 hurricane season.
May 31, 2013
• Special Report: Kuwait – Market
Review. Kuwait’s Insurance Sector
Faces Regulatory Uncertainty and
Volatile Growth
A.M. Best expects Kuwait’s total gross
premium written to increase in 2013,
at a faster pace than that of other more
mature insurance markets, but at a
slower rate than most other Gulf Cooperation Council countries. A.M. Best
considers Kuwait’s insurance regulation
to be underdeveloped.
May 27, 2013
Looking ahead, Morrissey said building sustainable profitability and growth requires careful planning and management of both a company’s balance sheet and its product offerings. Asian companies should ride on their understanding of local culture, exposures and
distribution partners to succeed in competition with international players.
11 June, 2013 • BestWeek Asia-Pacific3
Financial strength
Current List of Asia-Pacific Credit Ratings
This report includes credit ratings for all companies domiciled in Asia-Pacific, as well as their Outlooks and Implications.
Credit ratings consist of the Financial Strength Rating (FSR) and Issuer Credit Rating (ICR) for each company. Detailed
reports, including rationales, are made available to subscribers on our website shortly after ratings are released. These
company reports have been considerably enhanced, reflecting expanded financial analysis and commentary. For explanations of rating terminology, refer to the Guides to Best’s ratings following this report.
Ratings are effective as of 31 May, 2013. For current ratings please visit www.ambest.com.
IssuerFinancial Credit
Outlook
Strength Outlook
AMB# Company Name
Ultimate Parent
Rating
Implication Rating Implication
4
091420
086552
086085
086993
086052
086652
077834
084314
AIG Australia Limited
Ansvar Insurance Limited
Chubb Insurance Company of Australia Limited
First American Title Insurance Company of Australia Pty Limited
General Reinsurance Australia Ltd
General Reinsurance Life Australia Ltd.
Guild Insurance Limited
QBE Insurance (International) Ltd
Australia
American International Group, Inc
Allchurches Trust Limited
The Chubb Corporation
First American Financial Corporation
Berkshire Hathaway Inc
Berkshire Hathaway Inc
The Pharmacy Guild of Australia
QBE Insurance Group Limited
a
a-
aa+
a-
aa+
aa+
a-
a+
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Negative
A
A-
A++
A- A++
A++
A-
A
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
090810
090957
088692
090955
090079
078649
090988
Aioi Nissay Dowa Insurance (China) Company Limited
China Life Reinsurance Company Ltd.
China Property & Casualty Reinsurance Company Ltd.
China Reinsurance (Group) Corporation
Hyundai Insurance (China) Co., Ltd.
Lloyd’s Insurance Company (China) Limited
NIPPONKOA Insurance Company (China) Limited
China
MS&AD Insurance Group Holdings, Inc.
China Investment Corporation
China Investment Corporation
China Investment Corporation
Hyundai Marine & Fire Insurance Co, Ltd
Lloyd’s
NKSJ Holdings, Inc.
a-
a
a
a
a-
a+
a-
Stable
Stable
Stable
Stable
Stable
Stable
Stable
A-
A
A
A
A-
A
A-
Stable
Stable
Stable
Stable
Stable
Stable
Stable
013922
014135
013110
011448
012553
Guam
Century Insurance Company (Guam) Limited
Tan Holdings Corporation
Dongbu Insurance Co., Ltd. (U.S. Guam Branch)
First Net Insurance Company
Pacific Indemnity Insurance Company
Tokio Marine Pacific Insurance Limited
Tokio Marine Holdings, Inc.
bbb
a
bbb+
a-
aa-
Positive
Positive
Stable
Stable
Stable
B++
A
B++
A-
A+
Stable
Stable
Stable
Stable
Stable
091430
090678
092223
085402
086939
083761
091406
090772
087838
085029
085637
084822
Hong Kong
AIG Insurance Hong Kong Limited
American International Group, Inc
Blue Cross (Asia-Pacific) Insurance Limited
Bank of East Asia Limited
BOC Group Life Assurance Company Limited
China Taiping Insurance (HK) Company Limited
China Taiping Insurance Group Co.
Hong Leong Insurance (Asia) Limited
Hong Leong Company (Malaysia) Berhad
NIPPONKOA Insurance Company (Asia) Limited
NKSJ Holdings, Inc.
Peak Reinsurance Company Limited
Fosun International Holdings Ltd.
Starr International Insurance (Asia) Limited
Starr International Company, Inc.
Sun Hung Kai Properties Insurance Limited
Sun Hung Kai Properties Limited
Taiping Reinsurance Company Limited
China Taiping Insurance Group Co.
Tugu Insurance Company Limited
PT PERTAMINA (PERSERO)
Wing Lung Insurance Company Limited
China Merchants Bank Co., Ltd.
a
a-
a
a
a-
a
a-
a
a
a-
bbb
bbb+
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Positive
Positive
A
A-
A
A
A-
A
A-
A
A
A-
B++
B++
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Positive
086041
086043
086044
085412
India
General Insurance Corporation of India
The New India Assurance Company Limited
New India Assurance Company Limited
The Oriental Insurance Company Limited
United India Insurance Company Limited
a-
a-
bbb+
bbb+
Stable
Stable
Stable
Positive
A-
A-
B++
B++
Stable
Stable
Stable
Positive
078591
091075
Indonesia
PT Asuransi Jasa Indonesia (Persero)
PT. Asuransi Samsung Tugu
Samsung Fire & Marine Insurance Co, Ltd
bbb+
a-
Stable
Stable
B++
A-
Stable
Stable
085028
090523
085446
085251
085358
084422
085457
084413
Japan
Aioi Nissay Dowa Insurance Company Limited
MS&AD Insurance Group Holdings, Inc.
AIU Insurance Company, Ltd.
American Family Life Assurance Company of Columbus (Japan Branch)
The Fuji Fire & Marine Insurance Company, Limited
American International Group, Inc
Meiji Yasuda Life Insurance Company
Meiji Yasuda Life Insurance Company
Mitsui Sumitomo Insurance Company, Limited
MS&AD Insurance Group Holdings, Inc.
Nippon Life Insurance Company
Nippon Life Insurance Company
NIPPONKOA Insurance Company Ltd
NKSJ Holdings, Inc.
aa
a
aa-
a
aa-
aa
aa-
aa-
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
A+
A
A+ A
A+
A+
A+
A+
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
BestWeek Asia-Pacific • 11 June, 2013
Financial strength
IssuerFinancial Credit
Outlook
Strength Outlook
AMB# Company Name
Ultimate Parent
Rating
Implication Rating Implication
085258
085179
085100
Sompo Japan Insurance Inc.
The Toa Reinsurance Company, Limited
Tokio Marine & Nichido Fire Insurance Co., Ltd.
078304
089625
084138
084244
Japan (continued)
NKSJ Holdings, Inc.
The Toa Reinsurance Company, Limited
Tokio Marine Holdings, Inc.
aa-
aa-
aa+
Stable
Stable
Stable
A+
A+
A++
Stable
Stable
Stable
Macau
China Taiping Insurance (Macau) Co., Ltd.
China Taiping Insurance Group Co.
Luen Fung Hang Insurance Company Limited
Macau Insurance Company Limited
Dah Sing Financial Holdings Limited
Macau Life Insurance Company Limited
Dah Sing Financial Holdings Limited
a
a-
a-
a-
Stable
Stable
Stable
Stable
A
A-
A-
A-
Stable
Stable
Stable
Stable
090060
090756
091269
086913
089132
078303
Malaysia
ACR ReTakaful Berhad
ACR ReTakaful Holdings Limited
Asia Capital Reinsurance Malaysia Sdn Bhd
Khazanah Nasional Berhad
Energas Insurance (L) Limited
Petroliam Nasional Berhad
Labuan Reinsurance (L) Ltd
Lonpac Insurance Bhd
LPI Capital Berhad
Malaysian Reinsurance Berhad
MNRB Holdings Berhad
a-
a-
a
a-
a-
a-
Stable
Stable
Stable
Stable
Stable
Stable
A-
A-
A
A-
A-
A-
Stable
Stable
Stable
Stable
Stable
Stable
092427
Marble Reinsurance Corporation
a-
Stable
A-
Stable
089260
090607
092662
092576
091593
090870
086434
086363
091826
084340
091607
086379
090784
078332
092400
090239
086375
078302
091252
092782
091290
091637
086404
086188
089186
078699
088912
091065
090234
New Zealand
ACS (NZ) Limited
Canterbury Earthquake Church & Heritage
Aioi Nissay Dowa Insurance Company, Limited (New Zealand Branch)
AMI Insurance Limited
Insurance Australia Group Limited
Beneficial Insurance Limited
Broadlands Finance Limited
BNZ Life Insurance Limited
National Australia Bank Limited
CBL Insurance Limited
China Taiping Insurance (NZ) Co Limited
China Taiping Insurance Group Co.
CIGNA Life Insurance New Zealand Limited
Cigna Corporation
Co-operative Life Limited
Co-operative Bank Limited
Consumer Insurance Services Limited
Haier Group Company
The Education Benevolent Society Incorporated
Farmers’ Mutual Group
Farmers’ Mutual Group
Fidelity Life Assurance Company Limited
FMG Insurance Limited
Farmers’ Mutual Group
Kiwi Insurance Limited
New Zealand Post Limited
The New India Assurance Company Limited (New Zealand Branch)
New Zealand Local Government Insurance Corporation Limited
New Zealand Local Govt Ins Corp Ltd
Pacific International Insurance Limited
Partners Life Limited
Partners Group Holdings Limited
Pinnacle Life Limited
Police Health Plan Limited
New Zealand Police Association
Product Care (NZ) Limited
Sovereign Assurance Company Limited
Commonwealth Bank of Australia
TOWER Health & Life Limited
TOWER Limited
TOWER Insurance Limited
TOWER Limited
TOWER Life (N.Z.) Limited
TOWER Limited
TOWER Medical Insurance Limited
nib holdings limited
Union Medical Benefits Society Limited
Virginia Surety Company, Inc. (New Zealand Branch)
bb+ u
aa
a-
bbb-
a
bbb-
bbb-
a-
bbb+
bbb+
bbb
a
a-
a
a-
a-
bbb+ u
bbb
bbb
bb+
bbb+
bbb
aa-
a-
a-
a-
a-
a-
a-
Developing
Stable
Stable
Stable
Stable
Positive
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Negative
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Positive
B u
A+
A-
B+
A
B+
B+
A-
B++
B++
B++
A
A-
A
A-
A-
B++u
B++
B++
B
B++
B++
A+
A-
A-
A-
A-
A-
A-
Developing
Stable
Stable
Stable
Stable
Positive
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Negative
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Positive
077620
Century Insurance Company, Ltd.
bbb-
Stable
B+
Stable
077617
086771
Philippines
Malayan Insurance Co., Inc.
Pan Malayan Mgmt & Investment Corp
National Reinsurance Corporation of the Philippines
bbb+
bbb
Stable
Stable
B++
B++
Stable
Stable
091421
078461
088853
091957
089433
091577
088684
091559
085224
091708
086781
Singapore
AIG Asia Pacific Insurance Pte. Ltd.
American International Group, Inc
Asia Capital Reinsurance Group Pte. Ltd.
ACR Capital Holdings Pte. Ltd.
China Taiping Insurance (Singapore) Pte. Ltd.
China Taiping Insurance Group Co.
ECICS Limited
IFS Capital Limited
First Capital Insurance Limited
Fairfax Financial Holdings Limited
Samsung Reinsurance Pte. Ltd.
Samsung Fire & Marine Insurance Co, Ltd
SCOR Reinsurance Asia-Pacific Pte Ltd
SCOR SE
SHC Insurance Pte. Ltd.
See Hoy Chan Sdn. Berhad
Singapore Reinsurance Corporation Limited
Starr International Insurance (Singapore) Pte. Ltd.
Starr International Company, Inc.
United Overseas Insurance Limited
United Overseas Bank Limited
a
a-
a-
a-
a
a
a+
a-
a-
a
a+
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Positive
A
A-
A-
A-
A
A
A
A-
A-
A
A
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Positive
Micronesia, Federated States of
Marubeni Corporation
Northern Mariana Islands
Tan Holdings Corporation
11 June, 2013 • BestWeek Asia-Pacific5
Financial strength
087968
086796
085468
092701
085225
086459
085600
085850
South Korea
Dongbu Insurance Co., Ltd.
Dongbu Insurance Co., Ltd.
Hanwha General Insurance Company Limited
Hyundai Marine & Fire Insurance Co., Ltd.
Hyundai Marine & Fire Insurance Co, Ltd
Korea P&I Club
Korean Reinsurance Company
LIG Insurance Company Limited
MERITZ Fire & Marine Insurance Co., Ltd.
Meritz Financial Group Inc.
Samsung Fire & Marine Insurance Co., Ltd.
Samsung Fire & Marine Insurance Co, Ltd
a
bbb u
a
a-
a
a-
a-
aa+
Positive
Negative
Stable
Stable
Stable
Stable
Stable
Stable
A
B++u
A
A-
A
A-
A-
A++
Stable
Negative
Stable
Stable
Stable
Stable
Stable
Stable
086496
084184
Taiwan
Central Reinsurance Corporation
South China Insurance Co., Ltd.
Hua Nan Financial Holdings Co. Ltd.
a
a-
Stable
Stable
A
A-
Stable
Stable
085568
086195
Asian Reinsurance Corporation
Bangkok Insurance Public Company Limited
bb u
a-
Developing
Stable
B u
A-
Developing
Stable
091542
091541
091397
PVI Insurance Corporation
PVI Reinsurance Company
Samsung Vina Insurance Limited
bbb-
bbb-
bbb+
Positive
Positive
Stable
B+
B+
B++
Positive
Positive
Stable
Thailand
Vietnam
Vietnam National Oil & Gas Group
Vietnam National Oil & Gas Group
Samsung Fire & Marine Insurance Co, Ltd
■ Manulife in Asian Market, From page 2
Manulife was granted one of only eight licenses as a provider of Malaysia’s new private
retirement scheme, a voluntary scheme to help individuals save for retirement.
BESTWEEK
BESTWEEK
BBEST
W
EEK
ESTWEEK
This Week In BestWeek
Europe & MENA
• Market Monitoring: Turkey’s Civil
Unrest May Reach Insurers’ Portfolios
• A.M. Best Briefing: Abu Dhabi Must
Consider Middle East Insurance Hub
BEST
WEEK
BESTWEEK
BESTWEEK
Competition
BESTWEEK
BESTWEEK
BESTWEEK
Americas
• Special Report: Life/Health Earnings
Rebound, Driven by Underwriting and
Lower Impairments
• Bermuda Captive Conference Takes
Aim at Latin America
• A.M. Best Briefing: U.S. P/C Industry
Seems Ready to Weather Expected
Active 2013 Hurricane Season
• Southport Re CEO: Company
Sometimes Shudders at Comparisons
to Other Private Equity-Backed
Companies
• BestLink: Top Colombia Companies
Stable in 2012; Positiva Compania de
Seguros S.A.Heads Assets Ranking
(BestWeek Asia-Pacific and BestWeek
Europe & MENA can be accessed at
www.bestweek.com)
6
Asset management also is playing an increasingly key role in the industry, Konyn noted.
“In more well developed economies the growth of investment linked insurance is providing an opportunity for asset managers to participate directly in the industry as insurance
companies look to provide funds to back their investment linked business.”
According to BestLink, Manulife may be challenged in the Asian region due to increased
competition from domestic companies, uncertain economic conditions, turbulence in the
banking and real estate sectors of certain Asian countries and political instability.
Manulife competes with domestic and foreign insurers in different markets, HampdenSmith said.“Traditionally, our stiffest competition came from foreign companies but since
the financial crisis, many of those have pulled back and we’ve experienced a resurgence
of domestic insurers.”
There’s also a host of regulatory changes, burdens and challenges.“Perhaps the most
critical factor for regional insurers is the need to integrate their business from a risk and
capital management perspective,” Konyn said.
Hampden-Smith noted the complexity of regulation as a big challenge. In addition to complying with the regulations from its home market, Canada, Manulife has the added layers
in each of the Asia markets, and global regulations from the United States or international
authorities.“As an industry we’re probably experiencing the fastest rate of regulatory
change in decades.”
Manulife (TSX/NYSE/PSE: MFC) is Canada’s largest insurer by assets. Funds under
management by Manulife and its subsidiaries were C$555 billion (US$547 billion) as
of March 31, 2013.
Manulife has operated in Asia since 1897, beginning in Hong Kong and expanding
into the Philippines, Singapore, Indonesia, Taiwan, China, Japan and Vietnam, and then
into Malaysia and Thailand, according to BestLink. Last year, the Asia division started
operations in Cambodia.
BestWeek Asia-Pacific • 11 June, 2013
A.M. Best Research
Solvency Pressure
Fast Growth in China Chips at Capital Adequacy
The following is a transcript of the June 2013 episode of “First Monday.” In this episode,
Financial Analyst Vivian Cheung at A.M. Best Asia-Pacific explores how rapid premium
growth in China’s non-life market has led to increased solvency pressure, noting that a
premium slowdown, while helpful to easing the squeeze, will likely ramp up competition.
Video:
To view “First Monday,” go
to http://www.ambest.com/v.
asp?v=firstmonday613.
Q: China surpassed Japan in 2010 as the world’s second largest economy. With this sharp
economic climb has come an increased demand for insurance protection. For more on
China’s non-life market, we bring in Vivian Cheung, a financial analyst in A.M. Best’s Hong
Kong office. Vivian, impressive growth in China in recent years, though it’s stalling a bit
recently. Still, are insurers feeling growing pains?
A: China’s non-life premium has been growing at 23% on average over the past four
years.The country has emerged as one of the fastest-growing non-life insurance markets.
However, such explosive premium growth has placed pressure on insurance solvency,
as organic capital growth was not sufficient to underpin such a high rate of premium
growth, which has translated into a lower solvency level.
Q: What are regulators doing?
A: The regulators have recently issued new solvency framework that incorporates
a risk-based capital model as part of the quantitative assessment, as well as other
■ China, page 8
CREDIT RATING ACTIONS OVERVIEW
Credit Rating Definitions
A Best’s Financial Strength Rating is an independent opinion of an insurer’s financial strength and ability to meet its
ongoing insurance policy and contract obligations.
A Best’s Issuer Credit Rating is an independent opinion of an issuer/entity’s ability to meet its ongoing senior
financial obligations.
Credit Rating Disclosures
The Financial Strength Rating opinion addresses the relative ability of an insurer to meet its ongoing insurance
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not address any other risk, including, but not limited to, an insurer’s claims-payment policies or procedures; the
ability of the insurer to dispute or deny claims payment on grounds of misrepresentation or fraud; or any specific
liability contractually borne by the policy or contract holder. The rating is not a recommendation to purchase,
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address the suitability of any particular policy or contract for a specific purpose or purchaser.
The Issuer Credit Rating opinion addresses the relative credit risk of an issuer/entity. Credit risk is the risk that an
entity may not meet its contractual, financial obligations as they come due. This rating does not addr ess any other
risk, including, but not limited to, liquidity risk, market value risk or price volatility of rated securities. The rating is not
a recommendation to buy, sell or hold any securities, insurance policies, contracts or any other financial obligations,
nor does it address the suitability of any particular financial obligation for a specific purpose or purchaser.
In arriving at a rating decision, A.M. Best relies on third-party audited financial data and/or other information
provided to it. While this information is believed to be reliable, A.M. Best does not independently verify the accuracy
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Version 060512
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11 June, 2013 • BestWeek Asia-Pacific7
A.M. Best Research
“The country has
emerged as one of
the fastest growing
non-life insurance
markets.”
■ China, From page 7
qualitative factors, to measure an insurer’s solvency. This new framework will require
insurers to manage their risk profile in a more holistic approach, which may imply a
higher capital requirement to support risks that have not been considered under the
current regime.
Q: Vivian, the non-life companies themselves, what should they be doing to relieve capital
pressure?
A: As premium growth has been the key factor that pressures insurers’ solvency margins, a
slowdown in premium growth will definitely help relieve the solvency margin imminently.
Yet, premium growth was mainly demand driven, which was tough for insurers to actually
rein [in] their business growth. Insurers strengthened their capital by either raising new
capital, or issued subordinated debt, which could also serve [as] capital for solvency calculations. Insurers that already have a high net premium leverage level intended to utilize
more subordinated debt to enhance medium-term solvency.
Q: What’s A.M. Best’s capital outlook for China’s non-life industry?
Vivian Cheung
Financial Analyst
A.M. Best Asia-Pacific
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A: Market demand has slowed down in 2012, which is reflected in the premium growth
numbers. Insurer solvency pressure might actually be stabilizing in the near term, as long
as they can achieve organic capital growth that is sufficient to support top-line growth.
On the other hand, some insurers had already strengthened their capital in the past year,
which should give them a thicker capital buffer to sustain higher-than-expected premium
growth in the near term as well.
Weekly Insurance Newsletter published by A.M. Best Company
BestWeek
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BestWeek Asia-Pacific • 11 June, 2013
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Chief Executive Officer Roger Sellek
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8
asia-pacific
Chairman & President Arthur Snyder III
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Senior Vice Presidents Manfred Nowacki, Matthew Mosher, Rita L. Tedesco, Karen B. Heine
Editorial
Editor: David Pilla, 908-439-2200, ext. 5229
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Hong Kong
Health Reform
Hong Kong Insurers Back Efforts to Overhaul Health System
Insurers in Hong Kong support the government’s initiative to revamp the health care
system, which they expect will introduce more consumer choice of medical insurance
products and greater transparency of premiums and fees charged by doctors and hospitals, according to the Hong Kong Federation of Insurers.
The proposed new system should uphold freedom of choice for consumers, including
those employers that offer group benefits for their staffs. It should also clearly define the
operation of the proposed high-risk pool with a commitment of funding support from
the government, and ensure competition among medical insurers to improve and expand
product offerings to consumers, said the HKFI in a statement.
The association said it would support introduction of the health protection scheme along
with the existing medical insurance products, since the scheme should have standard
policy terms and coverage for hospital benefits, lifetime renewal, guaranteed acceptance
and portability subject to proper management of the risks.
The HKFI added the system should include “the development of diagnosis-related group
or packaged pricing to enhance the transparency and predictability of medical costs
for customers,” in addition to strengthening and improving the present claims-dispute
resolution mechanism.
—Rebecca Ng
Stock Indexes
AM Best Stock Indexes Performance
All indexes are made up of insurance industry companies that are publicly traded,
are listed on major global stock exchanges, and have an interactive Best’s Credit
Rating. The exceptions are the insurance brokers indexes (AMBUB and AMBGB),
which contain companies that are not rated by A.M. Best.
AMBG
AMBAP
AMBEUR
AMBGB
AMBGL
AMBGML
AMBGNL
AMBGR
AMBUB
AMBUH
AMBUL
AMBULH
AMBUML
AMBUPC
Global Composite Index
Asia/Pacific Insurance Index
European Insurance Index
Global Insurance Brokers Index
Global Life Insurance Index
Global Multi-Line Insurance Index
Global Non-Life Insurance Index
Global Reinsurance Index
U.S. Insurance Brokers Index
U.S. Health and HMO Insurance Index
U.S. Life Insurance Index
U.S. Life and Health/HMO Insurance Index
U.S. Multi-Line Insurance Index
U.S. Property/Casualty Insurance Index
AMBUS
U.S. Insurance Index
1731.14
% 1 Week
-3.07%
-5.53%
-4.23%
-2.34%
-3.51%
-3.68%
-2.38%
-2.24%
-2.41%
-3.57%
-2.31%
-2.93%
-3.46%
-1.81%
% Year/Year
36.33%
24.06%
48.62%
26.59%
37.12%
50.29%
30.35%
36.94%
26.46%
21.24%
48.13%
31.20%
45.54%
32.11%
% This Year
12.62%
8.62%
2.34%
13.60%
14.96%
6.80%
14.26%
15.16%
13.92%
16.72%
22.97%
19.28%
20.99%
16.69%
1164.15
-2.48%
32.99%
18.13%
Market Price*
1102.53
1040.72
992.08
1609.31
1053.25
697.63
1542.78
1368.26
1499.29
1565.38
966.84
1214.86
296.02
*Current results as of market close 6 June 2013
Visit www.ambest.com/stocks throughout the business day for continuously updated stock trading results.
Best’s
Underwriting
Guide Snapshot:
Occupational
Safety and Health
Consultants
A look at the professional
liability lawsuits
occupational safety and
health consultants face
and the unique coverages
they require. http://
www.bestweek.com/v.
asp?v=bugsafetyhealth
Brought to you by Best’s
Underwriting and Loss
Control Center, www.
ambest.com/riskinfo.
11 June, 2013 • BestWeek Asia-Pacific9