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BI F
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BI FOCUS DAY ASIA LIFE INSURANCE
APR // 15 // 2014
STEVEN LAM – BLOOMBERG INDUSTRIES ANALYST
BI <GO>, BI LIFEA <GO>
BI F
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TABLE OF CONTENTS
TOPIC: Life Insurers in Developed Japan and Developing China
» ASIA INSURANCE MARKET OVERVIEW
» LIFE INSURANCE MARKETS – CHINA & JAPAN
» HEALTH CARE – LESS PUBLIC, MORE PRIVATE
» BLOOMBERG & BLOOMBERG INDUSTRIES
2
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ASIA INSURANCE >>>>>>>>>>>>>>
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ASIA INSURANCE OVERVIEW – LIFE INSURANCE J-CURVE
4
33
Source: Swiss Re data as of 2012. Bloomberg presentation
JAPAN: Life insurance density = $4,143; Life insurance penetration = 9.17%
CHINA: Life insurance density = $103; Life insurance penetration = 1.70%
Taiwan
HK
JapanUK
South Korea
France
SingaporeUSIndia
Malaysia
Germany AustraliaThailandSpain
ChinaIndonesia
Philippines -
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
- 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500
Life insurance - J-curvePenetration (% of GDP)
Density (USD)
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ASIA INSURANCE OVERVIEW – NON-LIFE INSURANCE J-CURVE
5
33
Source: Swiss Re data as of 2012. Bloomberg presentation
JAPAN: Non-life insurance density = $1,025; Non-life insurance penetration = 2.27%
CHINA: Non-life insurance density = $76; Non-life insurance penetration = 1.26%
South Korea
US
GermanyFranceTaiwan
UK AustraliaSpain
JapanThailand
MalaysiaSingapore
HKChina
India
Indonesia
Philippines -
1.00
2.00
3.00
4.00
5.00
6.00
- 500 1,000 1,500 2,000 2,500
Non-life insurance - J-curvePenetration (% of GDP)
Density (USD)
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LIFE INSURANCE - JAPAN & CHINA 6
KEY METRICS JAPAN CHINA
Population » 127 million » 1,361 million
Life insurance premium
(2012) » US$524 billion » US$141 billion
Life premium 5yr CAGR
(2012-2007) – LC » 5% » 15%
Life premium density (US$) » US$4,143 » US$103
Life penetration (% of GDP) » 9.2% » 1.7%
Top 3 players – by
premiums
» Dai-Ichi Life (8750 JP) T&D Holdings (8795 JP) Sony Financial (8729 JP)
» China Life (2628 HK) Ping An Insurance (2318 HK)
CPIC (2601 HK)
Life Expectancy » 79 (men) / 86 (women) » 72 (men) / 76 (women)
Health expenditure per
capita (US$) » $4,000 » $278
Health expenditure as % of
GDP » 9.3% » 5.2%
Public vs. Private split 80% / 20% » 56% / 44%
Source: Swiss Re, World Bank, Bloomberg.
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BI LIFEA <GO>
Carbon Analysis Tool Carbon Analysis Tool
VALUATION - JAPAN 7
Sector valuation metrics:
- ROE FY1: 6.5%, P/B FY1: 0.9x, P/E FY1: 14.2x
Sector average 6.5% 0.9x 14.2x
Data as of April 14, 14
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VALUATION - CHINA 8
Sector valuation metrics:
- ROE FY1: 13.6%, P/B FY1: 1.6x, P/E FY1: 12.4x
Sector average 13.6% 1.6x 12.4x
Data as of April 14, 14
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STOCK PERFORMANCE - JAPAN 9
Data as of April 14, 14
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STOCK PERFORMANCE - CHINA 10
Data as of April 14, 14
Data as of April 14, 14
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STOCK PERFORMANCE – CHINA VS. JAPAN
11
Data as of April 14, 14
Data as of April 14, 14
China H-shr insurers
Japan insurers
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LIFE INSURANCE – JAPAN >>>>>>>>>>>>>>
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/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / /
/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / /
LATEST TOPICS IN JAPAN LIFE INSURANCE
SHARE PRICE DRIVERS
Investments:
» Stocks – Fund flows
» Bonds – Yield curve, Inflation
expectation
» Alternative – Real Estate,
Infrastructure
» FX impact – Yen vs. others
Sales:
» Stocks – Fund flows
» Bonds – Yield curve, Inflation
IMPLICATIONS
» Net profit
» Embedded value and new
business value
13
/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / /
/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / /
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JAPAN - ABENOMICS - EQUITY 14
Key message:
- Strong equity markets benefit insurers’ investment return
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JAPAN – ABENOMICS - YEN 15
Key message:
- Significant currency exposures of life insurers’ overseas portfolio
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JAPAN – TRACKING SALES 16
DESCRIPTION
» Text text
Key message:
- Regulatory changes impact sales and future profit streams
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JAPAN – OVERSEAS M&A 17
DESCRIPTION
» Text text
Key message:
- Japanese insurers seeking growth and opportunities abroad
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LIFE INSURANCE – CHINA >>>>>>>>>>>>>>
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/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / /
/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / /
SHARE PRICE DRIVERS
Reforms centric policies
» Market-based pricing reform
» Health care reform
» Pension reform
» Channel distribution
» Investment channels reform
» Securities market reform
IMPLICATIONS
» Product strategy changes
» Investment yield
» Capital market impact
19
/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / /
/ / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / /
LATEST TOPICS IN CHINA LIFE INSURANCE
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CHINA – HEALTH INSURANCE 20
DESCRIPTION
» Text text
Key message:
- Government-led critical illness program could be costly to insurers
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CHINA – PENSION REFORM 21
DESCRIPTION
» Text text
Key message:
- Tax-deferred pension plans gives incentives for income earner to save
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CHINA – PREMIUM GROWTH RECOVERY 22
Key message:
- Life premiums growth recovery in 2014
China life insurance monthly premium growth %YoY (YTD basis)
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CHINA – INVESTMENT DE-REGULATION 23
DESCRIPTION
» Text text
Key message:
- More flexibility in investment mix => better ALM & risk-return trade-off
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CHINA – DISTRIBUTION CHANNEL 24
Key message:
- Distribution rules lead to changes in product strategies and
profitability
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CHINA – SECURITIES MARKET 25
Key message:
- Securities market change may drive convergence/divergence of dually
listed share prices (A/H premium/discount)
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HEALTH CARE – PUBLIC VS. PRIVATE
>>>>>>>>>>>>>>
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HEALTH EXPENDITURE VS. GDP
» Japan’s total health
expenditure as % of
GDP rose by 1.1 % pts
between 2006 and
2011, vs. 0.6% pts
change for China
» Aging population,
slower GDP growth,
might have contributed
to the ratio change.
27
17.9
11.6 11.1 10.99.3 9.3 9.0 8.9
7.26.2
5.2 4.6 4.1 4.1 3.9 3.62.7
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
Total health expenditure as % of GDP
2006 2011
-0.3 -0.2 -0.2
0.4 0.4 0.5 0.5 0.5 0.6 0.6 0.6 0.70.9 0.9
1.1 1.2
1.9
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
Total health expenditure as % of GDP - 5yr change
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HEALTH EXPENDITURE PER CAPITA 28
» Health expenditure per
capita stood at $4,000
for Japan vs. a mere
$278 for China
» China’s health
expenditure grew at a
relatively faster pace
than Japan.
9,121 8,608
5,939
4,952 4,875
3,958 3,609
2,286 1,616
1,121 807 346 278 202 97 95 59
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
Health expenditure per capita (USD)
2006 2011
24%
18% 17%15% 15%
13% 12% 12% 12%10%
8%7% 6% 5% 5% 4%
1%
0%
5%
10%
15%
20%
25%
30%
Health expenditure per capita - 5yr CAGR
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HEALTH EXPENDITURE PUBLIC VS. PRIVATE
» Share of public health
expenditure for China
rose 15% pts between
2006-2011. Almost no
change for Japan
» Implication: More
burden on China’s
government
Encourage more
participation from
private players such as
Ping An and PICC
Health.
29
83 8077 76 75
69 6560 57 56
46 46 46
34 33 31 31
0
10
20
30
40
50
60
70
80
90
Public health expenditure as % of total
2006 2011
-10.2
-3.5-2.1 -2.0 -1.1 -0.6
0.6 0.9 1.4 1.9 2.0 2.8 4.05.7 6.3 7.5
15.2
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
Public health expenditure as % of total - 5yr change
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BLOOMBERG & BLOOMBERG INDUSTRIES
>>>>>>>>>>>>>>
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BLOOMBERG FUNCTIONS – MA <GO> 31
Key message: Easy to use function to find deals history and track
current deals
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BLOOMBERG FUNCTIONS 32
Key message: Get latest Macro and FX forecasts
ECFC <GO>
FXFC <GO>
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BLOOMBERG INDUSTRIES 33
BI LIFEA <GO>
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KEY TAKEAWAYS >>>>>>>>>>>>>>
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KEY TAKEAWAYS TOPIC: Life Insurers in Developed Japan and Developing China
» ASIA INSURANCE MARKET OVERVIEW
• Long term growth potentials for developing countries like China, India and ASEAN countries
» LIFE INSURANCE MARKETS – CHINA & JAPAN
• Japan – mature markets with prospects of portfolio investments as one of the key share price drivers
• China – developing markets filled with regulatory changes that bring opportunities and challenges
» HEALTH CARE – LESS PUBLIC, MORE PRIVATE
• Rising burden on government funded health expenditures prompt more participation from private insurers to serve the market
» BLOOMBERG & BLOOMBERG INDUSTRIES
• Comprehensive data coverage with current analysis, supported by dedicated industry analysts
35
THANK YOU STEVEN LAM – [email protected]
BLOOMBERG INDUSTRIES ANALYST
BI <GO>, BI LIFEA <GO>
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ot m
ove
or
de
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is te
xt
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x.
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urp
ose
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nly
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es n
ot p
rin
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