Asia Pacific Equity Research
28 January 2016
2015 J.P. Morgan Taylor Fry
General Insurance Barometer
Direct Underwriters, Reinsurers and Brokers
Insurance
Siddharth Parameswaran
AC
(61-2) 9003-8629
siddharth.x.parameswaran@jpmorgan.com
Alvin Liu
(61-2) 9003-8622
alvin.liu@jpmorgan.com
J.P. Morgan Securities Australia Limited
Taylor Fry
Kevin Gomes
(61-2) 9249-2918
kevin.gomes@taylorfry.com.au
Sharanjit Paddam
(61-2) 9249-2914
sharanjit.paddam@taylorfry.com.au
Joshua Jaroudy
(61-2) 9249-2934
josh.jaroudy@taylorfry.com.au
____________________________________
This is the result of a joint research effort between J.P. Morgan and Taylor Fry.
See page 26 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the
firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in
making their investment decision.
www.morganmarkets.com
Asia Pacific Equity Research
28 January 2016
Table of Contents
Survey Description...................................................................3
Executive Summary .................................................................4
Macro backdrop for Australian insurers ................................6
When and why will the cycle turn? .......................................19
Climate change and insurance..............................................21
Survey Participants ................................................................25
2
Asia Pacific Equity Research
28 January 2016
Survey Description
This is the fourth edition of The Barometer, a joint effort between J.P. Morgan and
Taylor Fry. The publication continues from 19 editions of the J.P. Morgan Deloitte
General Insurance Survey, the last of which was published in 2012, for the year to
2011, with the first edition of the Barometer published the following year.
The 2015 J.P. Morgan Taylor Fry General Insurance Barometer provides a detailed
overview of the current state of the Australian general insurance industry and the
industry’s expectations. The report conveys analyses on the key elements of the
industry from the perspective of direct underwriters, reinsurers and brokers,
including:
 detailed product information for the current period and industry expectations for
the next two years, covering issues such as premium rate trends, capacity
changes, claims trends, loss and expense ratios
 perceptions of product profitability
 distribution trends
 practitioner views on key issues affecting the industry and particular classes
 brokers’ perceptions of underwriters.
As has been our longstanding custom, we have also provided editorial comments
from J.P. Morgan and Taylor Fry on key industry issues which serve as a
commentary on industry developments to complement the survey results and
respondent feedback.
Sources of Information
All information in this report is sourced from a survey of the major underwriters,
reinsurers and brokers in the Australian general insurance industry, along with
certain APRA data. A complete list of participating companies is contained at the end
of this report.
The survey is the 23nd consecutive data collection and accordingly there is now a
substantial body of trend data available, and many of the comments and observations
in the report have been drawn from this information.
Acknowledgments
This report has been produced with the support of the Australian insurance industry.
The insurance industry’s support has been generous and is greatly appreciated.
The J.P. Morgan and Taylor Fry teams hope you find this a valuable reference.
3
Asia Pacific Equity Research
28 January 2016
Executive Summary
The key themes to emerge from the 2015 survey and our analysis are outlined below.
2015 combined ratios hit by catastrophe events...commercial outlook tough
The 2015 year saw a significant deterioration of combined ratios for the insurance
industry, primarily due to the catastrophe events in 2015 and the impact of excess
capital and strong competition affecting premium rates. Survey respondents reported
overall combined ratios (including classes not covered in our survey) of 94% in 2015
– up from 87% in 2014. This was matched by a Direct Insurer APRA RoE of 11%,
down from 18% in 2014. For the domestic lines that we cover in the survey, the
combined ratio worsened to 91% from 86% in 2014. This was driven by domestic
motor and householders impacted by catastrophe events, but offset by some strong
releases in NSW and QLD CTP. In commercial, the combined ratio was 107%, a
significant deterioration from 91% in 2014 primarily driven by catastrophe and
reserve strengthening in WA workers compensation. The COR trends in 2015 and
the outlook for 2016 in our latest survey were worse than the industry expected in the
2014 survey.
Survey suggests mixed rates outlook– uptick in personal, tough in commercial
Participants said that domestic rates stalled to 0% (nominal), below claims inflation
of 5%. Motor led trends down with rate reductions of 2%. Domestic class rates are
expected to pick up in 2016 across the board, mainly led by CTP. In commercial
lines, rate trends were even weaker (-6% reduction overall on weighted average,
largely inflation adjusted basis), slightly lower than the -4% expected in the 2014
survey. Fire/ISR continue to show the greatest pressure in commercial lines for both
underwriters and brokers, averaging -10%. Most of the pressures here were in large
commercial risks. The industry is expecting rate pressures to continue downwards in
commercial in 2016 – with rate reductions of 3%.
Claims inflation in personal lines has ticked up; frequency trends to worsen
For the commercial lines, inflation in 2015 was at the same levels to 2014 (4%),
whereas domestic lines increased to 5%, from 3%. In particular, the householders
class experienced 7% inflation this year – above the 4% predicted in the 2014 survey.
The inflation outlook for NSW and QLD CTP is high and expected to average 5% in
2016 and 6% in 2017. Frequency trends in most classes were unfavourable in 2015
(1.3% in domestic lines, 0.4% in commercial lines). NSW CTP experienced a 9.5%
increase in underlying frequency and is predicted to hold these high levels in 2016.
As mentioned earlier, catastrophe costs were above average in 2015, hurting reported
profit trends.
Top concerns for the insurance industry
The top 2 concerns have not changed from last year. 56% of underwriters in the
survey identified competition /rates / capacity as a key concern (it was also the key
concern last year). This was followed by 44% identifying technology as a key
concern.
86% of insurance brokers are worried about an excessively competitive rates
environment, up from 75% last year. 57% indicated concerns regarding pricing and
profitability.
Reinsurers flagged an abundance of capacity and competition as their key concern,
followed by regulatory issues and the investment environment – similar to last year.
4
Part 1: Editorial Comments
Asia Pacific Equity Research
28 January 2016
5
Asia Pacific Equity Research
28 January 2016
Macro backdrop for Australian insurers
Siddharth Parameswaran, Alvin Liu, J.P. Morgan
The J.P. Morgan economist’s
base case for Australia is for
below trend growth – but still
positive for the 25th year in a row.
The economy still is in the midst
of a multi-year adjustment after an
unprecedented boom in
commodity prices and resource
sector investment. The twin
booms created distortions of the
type Australia’s economy has not
handled well in the past (soaring
AUD and productivity slump)AUD
and a productivity slump.)
Growth is slowly gravitating to
non mining sources.
The economic environment since the ‘global financial crisis’ (GFC) of 2008/2009
proved to be one of low global growth prospects, but without the extreme downside
economic outcomes feared. Australia had been a relative outperformer when
compared against other “developed” economies although the prospects going
forward may be different with the US and UK rebounding and Australia facing the
prospects of falling commodity prices, and considerably reduced business
investment.
From a global perspective, 2015 saw modest rates of economic growth in developed
economies such as the US and UK but weaker although recovering growth in Europe.
Europe growth has steadily recovered over the past 2 years from -1.1% real GDP
growth in the Mar-13 quarter to 1.6% in the Sep-15 quarter. There could be further
boost to growth with potentially another round of stimulus expected to be announced
by the ECB in CY2016 following from the €500m sovereign QE program
announced in early CY2015. Unemployment rate for Europe remains high at 9.3%
(Oct-2015), although has improved from its peak of ~11% at Apr-2013. The U.S.
appears to be recovering, showing real GDP growth of 2.4% for CY15, which is
relatively in line with their long term average and unemployment has improved
significantly from ~10% in Dec-09 to ~5% in Sep-15. Similar positive trends have
also been observed for UK. Figure 20 - Figure 21. There are expectations in the bond
markets of increases in interest rates in the US and UK.
Australia during 2015 arguably saw sub par levels of growth, although they were still
positive. The J.P. Morgan Economist and Strategists suggest there may similar
pressures for Australia in 2016 with sub-par growth and unlikely movement in the
jobless rate1. This suggests a sluggish outlook for the Australian economy, and
ultimately for demand in the insurance sector, although demand pull inflation may be
kept under check.
We focus in this section of the report on the macro drivers affecting the outlook for
the general insurance industry.
Economic indicators in Australia
 The outlook based on recent research by the J.P. Morgan Economist is that
Australia could grow close to trend in CY2016 at 2.6%, which is above the 2.3%
expected for 2015. He does warn that the composition of the growth will be
driven largely by a rebound in the net exports contribution and a slight
acceleration in consumer spending, rather than investment led growth.
 The unemployment rate in Australia was 6.23% in September 2015 according to
statistics from the ABS and has been rising steadily from 6.17% a year earlier.
This is above the generally accepted target for NAIRU (non-accelerating inflation
rate of unemployment) of 5%; however, we note in recent times the NAIRU may
be considered to have increased slightly above this level2. The J.P. Morgan
1
We reference research by J.P. Morgan Economist on 6 January 2016 “Australia: 2016
another underwhelming year”.
2
We reference research by J.P. Morgan Economist on 19 November 2010 “Australia: lack of
slack to change inflation tack” & on 20 January 2012 “Does the RBA care about the
distribution of growth?” to form our view on the NAIRU.
6
Asia Pacific Equity Research
28 January 2016
Australia Economist predicts an increase in the unemployment rate to peak at
6.4% in 1Q16 as a result of continued forecasted sub-trend GDP growth.3
 RBA currently has a record low cash rate of 2% which gives RBA very little
room for further monetary policy expansion should it be needed (having already
used this tool – see Figure 7). According to the J.P. Morgan Australia Economist,
RBA may continue to preference a low AUD over a low cash rate and our
economist forecasts that there will not be an easing of rates in 2016. 4
 Housing sales volumes and prices were strong in 2015 and the J.P. Morgan
Australian economist expects this to continue to be the case in 2016 although at a
slower pace than in 2015. Our economist expects that national house price
inflation is close to its peak and will most likely decelerate through 2016.5
 The Australian dollar has sat around US$0.70 this month, with market sentiment
suggesting that these rates will continue to depreciate, which can pose some cost
push inflation risk for insurers.
3
We reference research by J.P. Morgan Economist on 6 January 2016 “Australia: 2016
another underwhelming year”.
4
We reference research by J.P. Morgan Economist on 6 January 2016 “Australia: 2016
another underwhelming year”.
5
We reference research by J.P. Morgan Economist on 6 January 2016 “Australia: 2016
another underwhelming year”.
7
Asia Pacific Equity Research
28 January 2016
Figure 1: Unemployment rate Australia
Figure 2: Real GDP growth in Australia
Source: Bloomberg (12/11/2015)
Figure 3: Government fiscal rectification a drag to GDP growth
Figure 4: Investments as % of GDP – mining /non-mining
Source: JPM
Figure 5: Price in US$ of commodities falling (Iron ore, Oil)
Source: Bloomberg
8
Figure 6: A big risk is a highly leveraged consumer
Asia Pacific Equity Research
28 January 2016
Figure 7: Inflation rate indices vs. bond yields – Australia
Figure 8: A$ weakened but arguably still too strong for RBA’s liking
Source: Bloomberg
Source: Bloomberg
Claims: some inflation risks worsened by any economic deterioration
 Consumer price inflation metrics are below the RBA’s long-term target range of
2-3%, with the inflation rate for the year to September 2015 being 1.5%. The
generally soft economic environment (affects demand pull inflation), and falls in
petrol prices may offset some of the cost-push inflation that may be expected
from a depreciating exchange rate.
 Average Weekly Earnings rose 2% in the year to May 2015 (ABS), which is at
the lower end of recent historical levels. This is unsurprising given the softening
economic climate. This may be a slight negative for some classes such as
workers’ compensation, whose premiums are levied as a % of wage roll (whereas
certain claim costs such as medical and legal may move independently of wage
inflation). However, for other classes, it will likely have a positive effect to the
extent that the wage components of repair costs could increase at a slower rate in
short tail lines, and costs of compensation in court awards (where the award takes
into account salary levels) could be subdued in long tail lines.
 Another key area highlighted in terms of claims inflation is the legal
environment, with respondents referring to a slow and effective erosion of tort
reforms over time. This particularly affects the liability and CTP classes. Most
concern in our view centres around the NSW CTP scheme where so far little
effort has been made by the government / regulator in our view to turn around
trends in a rise in represented claims.
9
Asia Pacific Equity Research
28 January 2016
Catastrophe costs globally have
been benign in 2015 globally –
but were high in Australia,
Catastrophe experience
 2015 catastrophe losses were below-trend for the global insurance industry
according to our estimates. A worse CAT environment was observed in Australia,
where catastrophe claims were above the 10-year trailing average.
Figure 9: Australian 2015 catastrophe trends above 10 year trailing
average, with an increasing trend over the past few years
Source: J.P. Morgan estimates, ICA. Note: Numbers pre 2013 are normalised figures as at
2011. 2014 and 2015 numbers are current figures based on latest information (7/12/2015).
2015 number includes the most recent SA bushfire
Figure 10: US industry long term trends ($bn) – benign CY14, but
above avg. 1H15
Source: J.P. Morgan estimates, Insurance Institute Information,
Figures up to 2013 – as at 2013. Numbers thereafter are as at reported in that year. 1H15 is a
half yearly number
Figure 11: Lloyds CAT claims (£m) in 1H15 extremely benign
Figure 12: Globally, CY2014 and 1H15 had relatively benign
experience
Source: J.P. Morgan estimates, Lloyds. Note: All figures Indexed for inflation to 2014, except
1H2015, which is indexed to Jun 15. Claims in foreign currency translated at the exchange
rates prevailing at the date of loss.
Source: Swiss Re, Munich Re. Chart in USD . Numbers up to 2013 are normalised to 2013.
Numbers post 2013 are as at reported.
10
Asia Pacific Equity Research
28 January 2016
 In Australia, weather changes can be a significant driver of catastrophe costs.
Adverse trends can impact loss ratios in short tail classes (fire/ISR &
householders in particular). The current 2015/16 summer is an El Nino event,
with Southern Oscillation Index (which seems to be a major driver of catastrophe
costs) falling to approximately -20, which is well below the Bureau of
Meteorology’s -8 threshold for El Nino.
 The charts below show a forecast for the cyclone season in 2015/16 and rain
season for the 3 months to February 2016.
Figure 13: Normal season for parts of eastern Australia
- Forecast for 3 months to February 2015
Figure 14: Average to below-average cyclone season most likely for
Australia
Source: Bureau of Meteorology
Source: Bureau of Meteorology
 The shift to El Nino conditions as highlighted by the Bureau of Meteorology,
would normally be expected to benefit insurers in terms of catastrophe costs. On
average since 1967, El Nino years have had an average catastrophe cost
(excluding earthquakes) of $725m, which is significantly below the $3,043m
during La Nina years. Compared to the overall average annual catastrophe cost of
$1,098m since 1967, an El Nino year would represent on average a ~$380m
benefit to the general insurance industry. Nevertheless – it appears that trends in
2016 FY so far have not been benign.
11
Asia Pacific Equity Research
28 January 2016
Figure 15: Catastrophe losses, excluding earthquake (A$m in 2011
normalised costs) – against the Southern Oscillation Index
(indicator of El Nino, neutral and La Nina Years )
Figure 16: Average catastrophe losses (excl. earthquake) for El
Nino, neutral and La Nina years using ICA data for catastrophes
(excluding earthquake losses) from 1967-2015
Source: ICA, BOM, J.P. Morgan estimates.
Source: BOM, ICA, J.P. Morgan estimates.
Yields on fixed income assets
appear to continue to fall, albeit
at a slower rate than previously
observed between 2010- 2012.
This is a concern for long tail
lines in particular.
The extent of reductions is large
enough to even affect short tail
RoEs.
Investment markets – low investment yields hurting outlook for all classes.
Yields on fixed interest investments (typically held by insurance companies in
Australia to back their liabilities), have remained low as the RBA continues to work
to boost the economy through monetary stimulus in light of global and domestic
weakness. Falling yields have been further exacerbated by credit spreads contracting
in line with a hunt for yield by investors. As seen below, current yields on fixed
income assets of 3-year duration in Australia (of all credit grades) are even lower
than the levels seen during the GFC. We note that yields post the ‘as at date’ for the
survey had not moved substantially.
Figure 17: Yields on fixed income assets of 3 year duration in Australia
Source: Bloomberg
Equity markets were volatile in 2015, with the ASX200 Accumulation index
ultimately finishing down 2.6% YTD (10/12/2015)
12
Asia Pacific Equity Research
28 January 2016
Figure 18: ASX 200 Accumulation Index
Figure 19: ZCB bonds rates has flattened considerably – signalling
uncertainty and weak outlook for the economy
Source: Bloomberg
Source: Bloomberg
13
Asia Pacific Equity Research
28 January 2016
Macro factors overseas impacting global insurance markets
Growth in UK in particular has
improved over the past 2 years
but latest trends for Europe
continue weak, having initially
shown positive trends in FY14.
Macro trends in the U.S. and U.K. improving but still uncertain for Europe
 The charts below show that in the US and UK, economic growth data is now at
levels matching Australia. In Europe also, growth has recovered to similar levels
as its western counterparts, although unemployment levels there still remain
challenging. Our global economics team6 is forecasting a strong divergence in the
emerging market and developed market growth in 2016, with a key thematic
being the possible risk to international financial stability from this divergence, as
well as the pressures of recent drops in oil prices. Historically there has often
been a correlation between weak economic activity and a rise in claims –
although we note that this did not manifest itself during the Financial Crisis (2009
onwards).
Figure 20: Real GDP Growth – Selected Developed Markets
Source: Bloomberg (15/12/2014)
Claims trends are potentially a
concern with inflation remaining
and low yields as seen in
previous years
Figure 21: Unemployment Levels – U.S. and U.K.
Source: Bloomberg (15/12/2014)
Inflation continues to remain while real yields remain weak
 The threat of high inflation in conjunction with near-zero real yields is a very
detrimental combination for insurers. Yields in the US fixed income markets have
been improving although are still at historically low levels. As a result the
continuing low yielding environment continues to be a threat to the insurance
industry any inflation will be hard to cover from investment earnings. Premium
rates have not been moving to offset the impacts of falling yields.
Figure 22: Implied inflation and real yields in U.S. bond market
6
14
“Global Data Watch: August in January”, Bruce Kasman
Asia Pacific Equity Research
28 January 2016
Source: Bloomberg (11/12/2015)
Commercial rates trends have
continued to slow - trending
negative in the US.
Premium rates increases tending to zero but capital levels are strengthening
 The outlook on global premium rates has weakened since the peak in 1Q13 and
there has been negative premium rate growth observed since 1Q15 across the
small, middle and large corporate market. Capital levels however are still quite
strong in the U.S. and appear to be holding after strong positive movement since
1Q12 (see Figure 24).
Figure 23: Premium rate movements in U.S. commercial markets
Source: CIAB
Figure 24: U.S. surplus capital - from amalgamated accounts
Source: Insurance Information Institute. Note: Q1 2010 data includes $22.5bn of paid-in capital
from a holding company parent for one insurer’s investment in a non- insurance business
 Reserve releases are expected to decline going forward in the U.S. (see Figure 26,
based on information from the Insurance Information Institute) although there
still appears to be the ability to support reported profits to some extent through
reserve releases. Inflation data overall remains relatively subdued.
Figure 25: U.S. P/C surpluses – JPM estimate of surpluses in the market reducing (JPM Australia
estimate of the US market).
Source: J.P. Morgan analysis on reserve surplus position of the US market at Dec 2014
15
Asia Pacific Equity Research
28 January 2016
Figure 26: U.S. P/C surpluses – Surpluses diminishing
Source: Insurance Information Institute, A.M. Best. Barclays research for estimates
Figure 27: U.S. Towers Watson – inflation indices
Figure 28: U.S. Towers Watson – inflation indices (superimposed)
Source: Towers Watson. 2014 are preliminary figures.
Source: Towers Watson. 2014 are preliminary figures
 Towers’ Watsons index on US inflation indices suggest insurance inflation trends
are overall still very benign.
 Global reinsurance rates have been trending downwards as expected, as a result
of a benign global CAT environment as well as the excess capital in the market.
In the US, there has also been a significant growth in collateralised reinsurance
over the past 4 years.
16
Asia Pacific Equity Research
28 January 2016
Figure 29: Global rate-on-line index by region, 1990 - 2015
Figure 30: US Reinsurance Trends – sharp rise in collateralised
reinsurance over the past 3 year
Source: Aon Benfield Analytics; Insurance Information Institute. 2014 data is as of June 30 June
2014. Alternative capital accounted for 12% of global reinsurance capital as at 30 Sep 2014.
Source Guy Carpenter
Global capital levels are not falling
In a report on 6 January 2016, Guy Carpenter reported that capital levels in the
reinsurance industry were Stable during 2015 at US$400bn – but included a “2-3%
decline in capital in rated markets" offset by 13% increases in “convergence capital”
(including catastrophe bonds) – taking them to US$68bn. Some of that reinsurance
capital is being deployed in direct corporate markets or returned to shareholders.
Mergers and Acquisitions
2015 saw some large Mergers and Acquisitions announced and completed in the
P&C space. We included some of the more notable ones in the table below
(including the Zurich RSA acquisition that did not proceed). We think pressures on
RoEs are increasing the likelihood more deals. Some of the drivers of M&A in our
view include: (a) Pressure on RoEs from soft markets - forcing insurers to seek cost
synergies (b) a quest for growth in some form in markets where revenues are weak /
negative (c) the desire for efficiency in capital levels through increasing diversity in
operations - which is very useful in a Solvency II world (d) the desire for some
insurers e.g. in Japan and China to diversify out of their home market for the
purposes of growth and / diversification of risk, particularly in an environment where
their monetary systems were flushed with liquidity –seeking sources of returns.
Table 1: Notable Mergers and Acquisitions in 2015CY
Announced
Dec-14
9/01/2015
4/05/2015
10/06/2015
22/06/2015
1-Jul-15
2/08/2015
8/09/2015
Deal
Fosun / Meadowbrook
XL / Catlin
Fosun / Ironshore
Tokio Marine / HCC
Fosun / Delek
Ace / Chubb
EXOR / Partner Re
Mitsui Sumitomo / Amlin
Zurich / RSA - attempted but withdrawn
Date completed
28/04/2015
1/05/2015
23/11/2015
19/11/2015
Metrics
US$433mn
US$4.1bn
US$1.84bn
7.5bn US$
US$462m
US$ 28.3bn
US $6.9bn
3.4bn pounds = 2.4x NTA
Source: JP Morgan
In Australia – we have seen insurers continue to seek growth through acquisition
where possible. We note that the South Australian CTP which is being privatized had
access to customer relationships sold for A$300mn on A$450mn of GWP. Factoring
in required capital injections of 100% of GWP, this suggests an average price to
NTA of 1.67x.
17
Asia Pacific Equity Research
28 January 2016
These trends may help put a stop to the downward trend in the insurance cycle.
Implications for the outlook for Australian Insurers
The 2016 outlook for the Australian economy appears relatively weak with similar
“sub-par” growth trends to those observed in 2015 likely. For Australian insurers this
should mean muted growth prospects, and no economy led pressure valves on
premium rates. Globally, economic trends are strengthening in the US and UK and
Europe, which should boost premium volumes in those markets. Internationally
capital may incrementally be allocated to those markets (but we think this impact
will be small, and it will be profitability dependent)
Low investment yields continue to be a concern. For long tail lines in particular, this
can make a substantial difference to returns in the absence of adequate premium rate
increases.
Australian insurance companies in this environment are likely to receive no favours
from the economic cycle for the growth or profit prospects. A ray of light is that
there is an increased appetite for mergers and acquisitions – which could provide a
circuit breaker to limit price declines.
18
Asia Pacific Equity Research
28 January 2016
When and why will the cycle turn?
Siddharth Parameswaran, Alvin Liu, J.P. Morgan
In this section we show the history of premium rate movements in commercial and
personal lines classes and outline industry participant views on what it may take to
turn the current pricing trends. The survey suggests 2017 maybe when commercial
markets stabilize, whilst personal lines classes are forecast to increase in 2016.
We show in the chart below indices for premium rate movements in commercial
insurance and personal insurance. We have adjusted the personal lines movements
for CPI, in order to arrive at a proxy for a "real" rate index. We note that commercial
class rate movements are largely expressed as a % of turnover – so are arguably
already inflation adjusted. Rates in the industry were negative in 2014 and 2015 on
an inflation adjusted basis for both commercial and personal lines. The industry
numerical responses suggested further downside in 2016 in commercial, followed by
a stabilization from 2017. Personal lines rates are expected to more than match CPI
from 2016 onwards. JPM Comment: We think this is a reasonable central case for
personal lines, particularly given some pressures on one large industry player in
certain personal lines classes.
Figure 31: Australian Premium Rate Index - rebased to 100 in 1993
Source: JP Morgan Taylor Fry General Insurance Barometer
The following charts show that profitability has been elevated in the personal lines
market for some time, although as mentioned earlier in the survey, 2015 was helped
significantly by large reserve releases in CTP classes. Commercial insurance RoEs
however collapsed in 2015 - to be even worse than the trends seen in 2011, when
there were significant losses from the Brisbane floods, Cyclone Yasi etc.
Commercial property RoEs have only been at these low levels in 1991 and 2011.
19
Asia Pacific Equity Research
28 January 2016
Figure 32: Notional RoEs for personal lines (financial years)
Source: APRA, JPM Estimates from APRA combined ratios assuming capital allocation for
motor of 25% of NEP for motor, 40% for householders, 100% for CTP and liability, 50% for
property and 60% for liability.
Figure 33: Notional RoEs for commercial lines (financial years)
Source: APRA, JPM Estimates from APRA combined ratios assuming capital allocation for
motor of 25% of NEP for motor, 40% for householders, 100% for CTP and liability, 50% for
property and 60% for liability
In the sections “Issues Confronting the Underwriters” and “Issues Confronting the
Brokers” we show responses to questions we asked the industry on when the cycle
would turn, and why. We note the following:
 In response to a question to underwriters about when the cycle would turn, one
response suggested the cycle was already turning, another suggested the end of
Calendar Year 2016, whilst 3 said there was no near term end in sight. Broker
responses to the question did not suggest any timelines for a change – but some
commented that competition between brokers was still continuing at very strong
levels right now. JPM Comment: This suggests on balance that particularly in
commercial classes - there is no immediate catalyst for a turn despite the losses.
Capacity is still plentiful, and competition between brokers is stifling a unified
response upward on rates.
 In response to asking what would cause a turn in the cycle, underwriter responses
included: reserve releases drying up, lawyers becoming more active (which they
suggested was happening in the form of low cost represented models in CTP),
increased pressures from a weak economic cycle, and continuing losses from
events. Broker suggested that a lot of pressure in the cycle had been caused by
new capacity from Lloyds syndicates setting up offices in Australia.
Whilst the comments from the industry for commercial lines appear very bearish, we
believe that the risks of a stabilization and eventual turn are increasing. We note that:
 There have been significant management changes in the industry (at 4 of the 5
largest general insurers in Australia). This could be a catalyst for change, bearing
in mind that reserve releases are likely to be a much lower contributor to their
expected profits over time than for their predecessors.
 There have been recent acquisitions globally - and 5 respondents in our survey
suggested that this would increase over 2016. Any acquirers are likely to be
focused on increasing profitability of their operations to justify their purchase
prices.
 APRA and line management should have a much better view of underlying
profitability than occurred in previous cycles – and it is likely they would view
current rates on Commercial property being unreasonably low (at least that is our
view of current rates).
20
Asia Pacific Equity Research
28 January 2016
Climate change and insurance
Sharanjit Paddam, Taylor Fry
On 29 September 2015, Mark Carney, Governor of the Bank of England and
Chairman of the Financial Stability Board stood in front of the historic Lutine Bell at
Lloyd’s of London – the spiritual home of the insurance industry – and announced to
the gathered senior members of the industry that the risks of climate change to their
industry were real.
He noted three broad channels through which climate change can affect financial
stability:



Physical risks – the impacts today on insurance liabilities and the value of
financial assets that arise from climate and weather related events, such as floods
and storms that damage property or disrupt trade;
Liability risks – the impacts that could arise tomorrow if parties who have
suffered loss or damage from the effects of climate change seek compensation
from those they hold responsible. Such claims could come decades in the future,
but have the potential to hit carbon extractors and emitters – and, if they have
liability cover, their insurers – the hardest; and
Transition risks – the financial risks which could result from the process of
adjustment towards a lower-carbon economy. Changes in policy, technology
and physical risks could prompt a reassessment of the value of a large range of
assets as costs and opportunities become apparent.
Carney’s views came from an extended period of consultation with the insurance
industry in the UK, which were summarised in a Bank of England Prudential
Regulation Authority report: The impact of climate change on the UK insurance
sector, prepared for the UK Department for Environment, Food & Rural Affairs.
Physical risks
Notable conclusions of the report include:




There is growing evidence that the insurance losses arising from global natural
catastrophes are increasing
Whilst increasing exposure is the primary factor driving these increases, there
are indications that climate change is also having an impact. For example,
Lloyd’s of London estimates that the 20cm of sea-level rise since the 1950s
increased Superstorm Sandy’s surge losses by 30% in New York alone.
Climate change is likely to drive reassessments of prudential capital
requirements for insurers
The increasing globalisation of the supply chain, increase the systemic risk. For
example, the 2011 Thai floods resulted in US$12b of insurance payments
including claims arising from the interruption of the supply chain for global
manufacturing firms.
While many of these conclusions arise from the analysis of international insurance
placed in the UK, Australia is not immune. Indeed Australia ranks as the most
exposed developed nation to natural perils, and so is highly exposed to physical risks.
The recent increase in premium rates for property insurance in Northern Australia
reflects the growing realisation of the industry that the risk can no longer be cross
subsidised across Australia in the presence of a competitive market.
21
Asia Pacific Equity Research
28 January 2016
Liability risks
The Bank of England, cognisant of the impact of historical latent liabilities such as
asbestos and pollution losses, sees the potential for increased claims in general
liability classes of business, such as public liability, directors and officers and
professional indemnity, due to a failure to mitigate, a failure to adapt or a failure to
disclose.
Whilst litigation has generally been unsuccessful to date, the Bank notes that there is
a risk that a successful action will open the way for other actions. Of note is the
recent investigation by the New York State attorney general into whether or not
Exxon Mobil mislead the public about the risks of climate change, or mislead
investors about how such risks might hurt the oil business.
Transition risks
Not only does Australia have the largest exposure to natural perils of any developed
nation, its economy is more reliant on coal than any other developed nation.
At the recent COP21 meeting in Paris, nations around the world reaffirmed their
commitment to reduce greenhouse gas emissions. Such actions in the longer term are
likely to lead to a reduction in demand for fossil fuels, and there are risks of a sudden
revaluation of such assets. Where insurers are exposed, directly or indirectly, to the
fossil fuel industry, this leaves an exposure to the risk of a sudden reduction in asset
values.
More broadly, the transition to a low-carbon economy will see a fundamental shift in
areas of production, leading industries, infrastructure demands and population
centres in Australia. These will have a long term impact on the demand for different
types of insurance, and associated risk management, underwriting, and claims
expertise.
How can Australian insurers respond?
While insurers, who generally underwrite on an annual basis, have the option to walk
away when physical risks increase, this is by no means a long term solution. Firstly,
insurers need to grow their business, and the more risks become uninsurable, or
premiums unaffordable, the smaller the potential market for insurers to operate in.
From this perspective, the long term reduction in premium income is the greatest
threat. Secondly, unaffordable premiums increase the risk of adverse publicity and
the risk of government interventions in the market, which are generally not in the
interests of insurers. Lastly, the potential increase in capital requirements to support
larger variability in losses, will act to reduce returns on equity, or increase the
affordability problem.
Insurers need to engage governments and policy makers into adapting for climate
change – e.g. through better protections from flood, stronger building standards to
reduce cyclone losses, and better planning controls to reduce development in high
risk areas. Without these changes, insurers will see a loss of revenue and an increased
exposure to losses.
Insurers must also take steps to identify and measure their exposure to transition risks
– through existing investments in carbon-intensive assets, as well as to liability risks
from historical policies. Where material exposure are identified, insurers need to
adopt a plan of action to reduce such exposures, not only on existing assets and
liabilities, but also on underwriting standards for future business, as well as
investment policy for future asset acquisitions.
The transition to a low carbon economy also offers insurers substantial new
opportunities for business. Swiss Re released a report in 2015 “Profiling the risks in
22
Asia Pacific Equity Research
28 January 2016
solar and wind”, which identified new risk management approaches in the renewable
energy sector, including the opportunity to use weather derivatives to manage the
variability in revenue from renewable energy sources due to variability in output.
They noted that “By the end of this decade, a 50% increase in renewable energy
investment is likely to produce more than a doubling of insurance spending.”
As always, insurers that are agile enough to quickly respond to the changing market
with products that meet the needs of their customers are likely to thrive in the new
reality of climate change.
23
Part 2: Survey Participants
Asia Pacific Equity Research
28 January 2016
24
Asia Pacific Equity Research
28 January 2016
Survey Participants
The participants in this year’s survey are listed below. Where an international
organisation is shown, the response is from its Australian-based subsidiary or branch.
Underwriters
Allianz Australia Insurance Ltd
AXA
Chubb Insurance
CommInsure
Hollard
Liberty International Underwriters
NTI
RACQ
Suncorp
Zurich
Brokers
Arthur J Gallagher
Aon Risk Services Australia
Fitzpatrick & Co. Insurance Brokers
Jardine Lloyd Thompson
Macey Insurance Brokers
Marsh
Philp, Newby & Owen
Steadfast
Reinsurers
General Reinsurance
Hannover Re
SCOR Asia Pacific
Swiss Re
25
Asia Pacific Equity Research
28 January 2016
Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research
analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document
individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views
expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of
any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views
expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per
KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or
intervention.
Important Disclosures
Company-Specific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available for
compendium reports and all J.P. Morgan–covered companies by visiting https://jpmm.com/research/disclosures, calling 1-800-477-0406,
or e-mailing research.disclosure.inquiries@jpmorgan.com with your request. J.P. Morgan’s Strategy, Technical, and Quantitative
Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-4770406 or e-mail research.disclosure.inquiries@jpmorgan.com.
Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe:
J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve
months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if
applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy
reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a
recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stock’s expected total return is
compared to the expected total return of a benchmark country market index, not to those analysts’ coverage universe. If it does not appear
in the Important Disclosures section of this report, the certifying analyst’s coverage universe can be found on J.P. Morgan’s research
website, www.jpmorganmarkets.com.
Coverage Universe: Parameswaran, Siddharth: AMP Limited (AMP.AX), Challenger Limited (CGF.AX), IOOF Holdings Limited
(IFL.AX), Insurance Australia Group (IAG.AX), NIB Holdings Limited (NHF.AX), QBE Insurance Group (QBE.AX), Steadfast Group
LTD (SDF.AX), Suncorp Group Ltd (SUN.AX)
J.P. Morgan Equity Research Ratings Distribution, as of December 31, 2015
J.P. Morgan Global Equity Research Coverage
IB clients*
JPMS Equity Research Coverage
IB clients*
Overweight
(buy)
44%
52%
45%
70%
Neutral
(hold)
44%
47%
47%
63%
Underweight
(sell)
12%
35%
8%
50%
*Percentage of investment banking clients in each rating category.
For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold
rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table
above.
Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered
companies, please see the most recent company-specific research report at http://www.jpmorganmarkets.com, contact the primary analyst
or your J.P. Morgan representative, or email research.disclosure.inquiries@jpmorgan.com.
Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based
upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues.
Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US
affiliates of JPMS, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMS,
and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public
appearances, and trading securities held by a research analyst account.
Other Disclosures
26
Asia Pacific Equity Research
28 January 2016
J.P. Morgan ("JPM") is the global brand name for J.P. Morgan Securities LLC ("JPMS") and its affiliates worldwide. J.P. Morgan Cazenove is a marketing
name for the U.K. investment banking businesses and EMEA cash equities and equity research businesses of JPMorgan Chase & Co. and its subsidiaries.
All research reports made available to clients are simultaneously available on our client website, J.P. Morgan Markets. Not all research content is
redistributed, e-mailed or made available to third-party aggregators. For all research reports available on a particular stock, please contact your sales
representative.
Options related research: If the information contained herein regards options related research, such information is available only to persons who have
received the proper option risk disclosure documents. For a copy of the Option Clearing Corporation's Characteristics and Risks of Standardized Options,
please contact your J.P. Morgan Representative or visit the OCC's website at http://www.optionsclearing.com/publications/risks/riskstoc.pdf
Legal Entities Disclosures
U.S.: JPMS is a member of NYSE, FINRA, SIPC and the NFA. JPMorgan Chase Bank, N.A. is a member of FDIC. U.K.: JPMorgan Chase N.A., London
Branch, is authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and to limited regulation by
the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from J.P. Morgan on
request. J.P. Morgan Securities plc (JPMS plc) is a member of the London Stock Exchange and is authorised by the Prudential Regulation Authority and
regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England & Wales No. 2711006. Registered Office 25
Bank Street, London, E14 5JP. South Africa: J.P. Morgan Equities South Africa Proprietary Limited is a member of the Johannesburg Securities
Exchange and is regulated by the Financial Services Board. Hong Kong: J.P. Morgan Securities (Asia Pacific) Limited (CE number AAJ321) is regulated
by the Hong Kong Monetary Authority and the Securities and Futures Commission in Hong Kong and/or J.P. Morgan Broking (Hong Kong) Limited (CE
number AAB027) is regulated by the Securities and Futures Commission in Hong Kong. Korea: This material is issued and distributed in Korea by or
through J.P. Morgan Securities (Far East) Limited, Seoul Branch, which is a member of the Korea Exchange(KRX) and is regulated by the Financial
Services Commission (FSC) and the Financial Supervisory Service (FSS). Australia: J.P. Morgan Australia Limited (JPMAL) (ABN 52 002 888 011/AFS
Licence No: 238188) is regulated by ASIC and J.P. Morgan Securities Australia Limited (JPMSAL) (ABN 61 003 245 234/AFS Licence No: 238066) is
regulated by ASIC and is a Market, Clearing and Settlement Participant of ASX Limited and CHI-X. Taiwan: J.P.Morgan Securities (Taiwan) Limited is a
participant of the Taiwan Stock Exchange (company-type) and regulated by the Taiwan Securities and Futures Bureau. India: J.P. Morgan India Private
Limited (Corporate Identity Number - U67120MH1992FTC068724), having its registered office at J.P. Morgan Tower, Off. C.S.T. Road, Kalina,
Santacruz - East, Mumbai – 400098, is registered with Securities and Exchange Board of India (SEBI) as a ‘Research Analyst’ having registration number
INH000001873. J.P. Morgan India Private Limited is also registered with SEBI as a member of the National Stock Exchange of India Limited (SEBI
Registration Number - INB 230675231/INF 230675231/INE 230675231) and Bombay Stock Exchange Limited (SEBI Registration Number - INB
010675237/INF 010675237). Telephone: 91-22-6157 3000, Facsimile: 91-22-6157 3990 and Website: www.jpmipl.com. For non local research reports,
this material is not distributed in India by J.P. Morgan India Private Limited. Thailand: This material is issued and distributed in Thailand by JPMorgan
Securities (Thailand) Ltd., which is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and
Exchange Commission and its registered address is 3rd Floor, 20 North Sathorn Road, Silom, Bangrak, Bangkok 10500. Indonesia: PT J.P. Morgan
Securities Indonesia is a member of the Indonesia Stock Exchange and is regulated by the OJK a.k.a. BAPEPAM LK. Philippines: J.P. Morgan Securities
Philippines Inc. is a Trading Participant of the Philippine Stock Exchange and a member of the Securities Clearing Corporation of the Philippines and the
Securities Investor Protection Fund. It is regulated by the Securities and Exchange Commission. Brazil: Banco J.P. Morgan S.A. is regulated by the
Comissao de Valores Mobiliarios (CVM) and by the Central Bank of Brazil. Mexico: J.P. Morgan Casa de Bolsa, S.A. de C.V., J.P. Morgan Grupo
Financiero is a member of the Mexican Stock Exchange and authorized to act as a broker dealer by the National Banking and Securities Exchange
Commission. Singapore: This material is issued and distributed in Singapore by or through J.P. Morgan Securities Singapore Private Limited (JPMSS)
[MCI (P) 100/03/2015 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange Securities Trading Limited and is regulated by the
Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB Singapore) which is regulated by the MAS. This
material is provided in Singapore only to accredited investors, expert investors and institutional investors, as defined in Section 4A of the Securities and
Futures Act, Cap. 289. Recipients of this document are to contact JPMSS or JPMCB Singapore in respect of any matters arising from, or in connection
with, the document. Japan: JPMorgan Securities Japan Co., Ltd. and JPMorgan Chase Bank, N.A., Tokyo Branch are regulated by the Financial Services
Agency in Japan. Malaysia: This material is issued and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd (18146-X) which is a
Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets Services License issued by the Securities Commission in Malaysia.
Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a member of the Karachi Stock Exchange and regulated by the Securities and Exchange Commission
of Pakistan. Saudi Arabia: J.P. Morgan Saudi Arabia Ltd. is authorized by the Capital Market Authority of the Kingdom of Saudi Arabia (CMA) to carry
out dealing as an agent, arranging, advising and custody, with respect to securities business under licence number 35-07079 and its registered address is at
8th Floor, Al-Faisaliyah Tower, King Fahad Road, P.O. Box 51907, Riyadh 11553, Kingdom of Saudi Arabia. Dubai: JPMorgan Chase Bank, N.A., Dubai
Branch is regulated by the Dubai Financial Services Authority (DFSA) and its registered address is Dubai International Financial Centre - Building 3,
Level 7, PO Box 506551, Dubai, UAE.
Country and Region Specific Disclosures
U.K. and European Economic Area (EEA): Unless specified to the contrary, issued and approved for distribution in the U.K. and the EEA by JPMS plc.
Investment research issued by JPMS plc has been prepared in accordance with JPMS plc's policies for managing conflicts of interest arising as a result of
publication and distribution of investment research. Many European regulators require a firm to establish, implement and maintain such a policy. This
report has been issued in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons"). This document must not be acted on or relied on by persons
who are not relevant persons. Any investment or investment activity to which this document relates is only available to relevant persons and will be
engaged in only with relevant persons. In other EEA countries, the report has been issued to persons regarded as professional investors (or equivalent) in
their home jurisdiction. Australia: This material is issued and distributed by JPMSAL in Australia to "wholesale clients" only. This material does not take
into account the specific investment objectives, financial situation or particular needs of the recipient. The recipient of this material must not distribute it to
any third party or outside Australia without the prior written consent of JPMSAL. For the purposes of this paragraph the term "wholesale client" has the
meaning given in section 761G of the Corporations Act 2001. Germany: This material is distributed in Germany by J.P. Morgan Securities plc, Frankfurt
Branch and J.P.Morgan Chase Bank, N.A., Frankfurt Branch which are regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht. Hong Kong: The
1% ownership disclosure as of the previous month end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons
27
Asia Pacific Equity Research
28 January 2016
Licensed by or Registered with the Securities and Futures Commission. (For research published within the first ten days of the month, the disclosure may
be based on the month end data from two months prior.) J.P. Morgan Broking (Hong Kong) Limited is the liquidity provider/market maker for derivative
warrants, callable bull bear contracts and stock options listed on the Stock Exchange of Hong Kong Limited. An updated list can be found on HKEx
website: http://www.hkex.com.hk. Japan: There is a risk that a loss may occur due to a change in the price of the shares in the case of share trading, and
that a loss may occur due to the exchange rate in the case of foreign share trading. In the case of share trading, JPMorgan Securities Japan Co., Ltd., will be
receiving a brokerage fee and consumption tax (shouhizei) calculated by multiplying the executed price by the commission rate which was individually
agreed between JPMorgan Securities Japan Co., Ltd., and the customer in advance. Financial Instruments Firms: JPMorgan Securities Japan Co., Ltd.,
Kanto Local Finance Bureau (kinsho) No. 82 Participating Association / Japan Securities Dealers Association, The Financial Futures Association of Japan,
Type II Financial Instruments Firms Association and Japan Investment Advisers Association. Korea: This report may have been edited or contributed to
from time to time by affiliates of J.P. Morgan Securities (Far East) Limited, Seoul Branch. Singapore: As at the date of this report, JPMSS is a designated
market maker for certain structured warrants listed on the Singapore Exchange where the underlying securities may be the securities discussed in this
report. Arising from its role as designated market maker for such structured warrants, JPMSS may conduct hedging activities in respect of such underlying
securities and hold or have an interest in such underlying securities as a result. The updated list of structured warrants for which JPMSS acts as designated
market maker may be found on the website of the Singapore Exchange Limited: http://www.sgx.com.sg. In addition, JPMSS and/or its affiliates may also
have an interest or holding in any of the securities discussed in this report – please see the Important Disclosures section above. For securities where the
holding is 1% or greater, the holding may be found in the Important Disclosures section above. For all other securities mentioned in this report, JPMSS
and/or its affiliates may have a holding of less than 1% in such securities and may trade them in ways different from those discussed in this report.
Employees of JPMSS and/or its affiliates not involved in the preparation of this report may have investments in the securities (or derivatives of such
securities) mentioned in this report and may trade them in ways different from those discussed in this report. Taiwan: This material is issued and
distributed in Taiwan by J.P. Morgan Securities (Taiwan) Limited. India: For private circulation only, not for sale. Pakistan: For private circulation only,
not for sale. New Zealand: This material is issued and distributed by JPMSAL in New Zealand only to persons whose principal business is the investment
of money or who, in the course of and for the purposes of their business, habitually invest money. JPMSAL does not issue or distribute this material to
members of "the public" as determined in accordance with section 3 of the Securities Act 1978. The recipient of this material must not distribute it to any
third party or outside New Zealand without the prior written consent of JPMSAL. Canada: The information contained herein is not, and under no
circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer
to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be
made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly
registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or
territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in
any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities
of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted
through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment
upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence.
Dubai: This report has been issued to persons regarded as professional clients as defined under the DFSA rules. Brazil: Ombudsman J.P. Morgan: 08007700847 / ouvidoria.jp.morgan@jpmorgan.com.
General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co.
or its affiliates and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to
JPMS and/or its affiliates and the analyst's involvement with the issuer that is the subject of the research. All pricing is as of the close of market for the
securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change
without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any
financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not
intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this report must make its own
independent decisions regarding any securities or financial instruments mentioned herein. JPMS distributes in the U.S. research published by non-U.S.
affiliates and accepts responsibility for its contents. Periodic updates may be provided on companies/industries based on company specific developments or
announcements, market conditions or any other publicly available information. Clients should contact analysts and execute transactions through a J.P.
Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise.
"Other Disclosures" last revised January 01, 2016.
Copyright 2016 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or
redistributed without the written consent of J.P. Morgan. #$J&098$#*P
28
Asia Pacific Equity Research
28 January 2016
J.P. Morgan Australasia Research Responsibilities
Rob Stanton, Head of Research
Banks
Scott Manning
James Nicholias
Bharat Anand
(61-2) 9003 8638
(61-2) 9003 8643
(61-2) 9003 8644
(61-2) 90038642
rob.a.stanton@jpmorgan.com
Healthcare
scott.r.manning@jpmorgan.com
Steven Wheen
james.nicholias@jpmorgan.com
Anasuya Ramesh
bharat.k.anand@jpmorgan.com
REITs
Richard Jones
Rob Stanton
Scott Molloy
(61-2) 9003 8627
(61-2) 9003 8626
steven.d.wheen@jpmorgan.com
anasuya.x.ramesh@jpmorgan.com
(61-3) 9633 4038
(61-2) 9003 8638
(61-2) 9003 8635
richard.b.jones@jpmorgan.com
rob.a.stanton@jpmorgan.com
scott.x.molloy@jpmorgan.com
Insurance
Siddharth Parameswaran
Ismar Tuzovic
(61-2) 9003 8629
(61-2) 9003 8624
siddharth.x.parameswaran@jpmorgan.com
ismar.tuzovic@jpmorgan.com
Diversified Financials
Ismar Tuzovic
Siddharth Parameswaran
Russell Gill
(61-2) 9003 8624
(61-2) 9003 8629
(61-2) 9003 8625
ismar.tuzovic @jpmorgan.com
siddharth.x.parameswaran @jpmorgan.com
russell.j.gill@jpmorgan.com
Emerging Companies
Russell Gill
(61-2) 9003 8625
Garry Sherriff
(61-2) 9003 8621
Armina Soemino
(61-2) 9003 8620
russell.j.gill@jpmorgan.com
garry.sherriff@jpmorgan.com
armina.x.soemino@jpmorgan.com
Media
Jarrod McDonald
Thomas Beadle
(61-2) 9003 8604
(61-2) 9003 8603
jarrod.mcdonald@jpmorgan.com
thomas.g.beadle@jpmorgan.com
Telecommunications
Paul Brunker
Thomas Beadle
(61-2) 9003 8641
(61-2) 9003 8603
paul.m.brunker@jpmorgan.com
thomas.g.beadle@jpmorgan.com
Resources
Lyndon Fagan
Mark Busuttil
Andrew Muir
Joseph Kim
Luke Nelson
(61-2) 9003 8648
(61-2) 9003 8619
(61-2) 9003 8617
(61-2) 9003 8615
(61-2) 9003 8618
lyndon.fagan@jpmorgan.com
mark.busuttil@jpmorgan.com
andrew.x.muir@jpmorgan.com
joseph.x.kim@jpmorgan.com
luke.nelson@jpmorgan.com
Transport
Scott Carroll
Megan Freeman
(61-2) 9003 8610
(61-2) 9003 8633
scott.j.carroll @jpmorgan.com
megan.a.freeman@jpmorgan.com
Energy
Ben Wilson
Daniel Butcher
(61-2) 9003 8612
(61-2) 9003 8611
benjamin.x.wilson@jpmorgan.com
daniel.butcher@jpmorgan.com
Strategy
Paul Brunker
Cheryl Ng
(61-2) 9003 8641
(61-2) 9003 8640
paul.m.brunker@jpmorgan.com
armina.x.soemino@jpmorgan.com
Economics
Stephen Walters
Tom Kennedy
Ben Jarman
(61-2) 9003 7980
(61-2) 9003 7981
(61-2) 9003 7982
stephen.b.walters@jpmorgan.com
tom.kennedy@jpmorgan.com
ben.k.jarman@jpmorgan.com
Quantitative & ESG
Berowne Hlavaty
James Eustace
(61-2) 9003 8602
(61-2) 9003 8601
berowne.d.hlavaty@jpmorgan.com
james.eustace@jpmorgan.com
ESG
Carolyn Holmes
Megan Freeman
(61-2) 9003 8647
(61-2) 9003 8633
carolyn.j.holmes@jpmorgan.com
megan.a.freeman@jpmorgan.com
Database
Stephen Blagg
(61-2) 9220 1584
stephen.j.blagg@jpmorgan.com
Beverages & Food, Paper & Packaging, Chemicals
Stuart Jackson
(61-2) 9003 8631
stuart.a.jackson@jpmorgan.com
Richard Szabo
(61-2) 9003 8630
richard.x.szabo@jpmorgan.com
Gaming
Matt Ryan
William Loh
(61-2) 9003 8634
(61-2) 9003 8633
matthew.h.ryan@jpmorgan.com
megan.a.freeman@jpmorgan.com
Retail
Shaun Cousins
Uma Joshi
(61-2) 9003 8623
(61-2) 9003 8628
shaun.r.cousins@jpmorgan.com
uma.x.joshi@jpmorgan.com
Infrastructure
Carolyn Holmes
Megan Freeman
(61-2) 9003 8647
(61-2) 9003 8633
carolyn.j.holmes@jpmorgan.com
megan.a.freeman@jpmorgan.com
Utilities & Building Materials
Jason Steed
(61-2) 9003 8609
Chris Laybutt
(61-2) 9003 8608
Keith Chau
(61-2) 9003 8607
jason.h.steed @jpmorgan.com
christopher.r.laybutt@jpmorgan.com
keith.chau@jpmorgan.com
Property Developers & Contractors
Anthony Passe-De Silva
(61-2) 9003 8614
William Loh
(61-2) 9003 8613
anthony.g.passede.silva@jpmorgan.com
william.en.loh@jpmorgan.com
29
Asia Pacific Equity Research
28 January 2016
2015 J.P. Morgan Taylor Fry General Insurance Barometer
Direct Underwriters, Reinsurers and Brokers
30