CIS Insurance Sectors: Financial Overvie · 2016. 6. 27. · Anastasia Litvinova, Director 23 June 2016. 1 Russia Kazakhstan Belarus Azerbaijan Conclusions Agenda. 2 Russia Kazakhstan

CIS Insurance Sectors:Financial Overview

Anastasia Litvinova, Director

23 June 2016

1www.fitchratings.com

Russia

Kazakhstan

Belarus

Azerbaijan

Conclusions

Agenda


Russia

Kazakhstan

Belarus

Azerbaijan

Conclusions

Agenda


Russian Insurance Sector: Non-Life Insurance Close to Recession

Source: Fitch, CBR

Premiums Written and Growth Rate

-7% +8% +18% +21% +8% +7% +2%

-19% +44%+54%

+52%+61%

+28%+20%

0

200

400

600

800

1,000

1,200

2008 2009 2010 2011 2012 2013 2014 2015

Non-life insurance Life insurance


With MTPL Excluded, Russian Non-Life Segment Contracted by 7% in 2015

MTPL – motor third party liability insurance

Source: Fitch, CBR

-10%

-5%

0%

5%

10%

15%

20%

Non-Life premiums Non-Life premiums (excluding MTPL)

1Q13 2Q13 3Q13 4Q13

1Q14 2Q14 3Q14 4Q14

1Q15 2Q15 3Q15 4Q15

1Q16

Quarterly Growth Rates


Russian Sector Profitability Strongly Improved in 2015 Supported by Investment Result

Source: Fitch, companies’ IFRS reporting

5 %

13 %

8 % 10 %

28%

0

5

10

15

20

25

30

0

10

20

30

40

50

60

70

2011 2012 2013 2014 2015

(%)

Sector Net Income (LHS)

Return on Equity (RHS)

(RUBbn)


Russian Sector Underwriting Result Moderately Improved in 2015

Source: Fitch, companies’ IFRS reports

Key Components of Pre-Tax Income

-40

-20

0

20

40

60

80

Underwriting result Investment result(before FX gains)

FX gains on investments

2011 2012 2013 2014 2015(RUBbn)


Underwriting Profit Concentrated At Three Domestic Groups with 23% Market Share in 2015

Source: Fitch, companies’ IFRS reports

-40

-30

-20

-10

0

10

20

30

SOGAZ, VTB Insurance,Sberbank Insurance

Motor Insurers Other insurers(both life and non-ife)

2011 2012 2013 2014 2015(RUBbn)

Underwriting Result


MTPL: Average Premium Growth Now Exhausted,Average Claim Will Continue to Grow

Growth (%)

Full Year

2015 / 2014

Floating Year

2Q15-1Q16/

2Q14-1Q15

One Quarter

1Q16/1Q15

Premiums written + 45 + 46 + 35

Policies Issued - 7 - 8 - 8

Average Premium + 56 + 59 + 46

Average Claim + 38 + 45 + 59

Source: Fitch calculations based on CBR data


Russia

Kazakhstan

Belarus

Azerbaijan

Conclusions

Agenda


Kazakhstan: Bancassurance – Driver in 2012-2014 Commercial P&C Helped to Resume Growth in 2015


Source: Fitch, NBK

-12%-20% +17% +17% +10%

+26% -5% +11%

+24%+61%

+100%

+63%

+72%

+8%-17%

+17%

0

50

100

150

200

250

300

2007 2008 2009 2010 2011 2012 2013 2014 2015

Non-life insurance Workers' compensation insurance Life insurance

(KZTbn)


Kazakh Sector Profit Made on One-Off Item in 2015

Source: Fitch, NBK, companies‘ reports

Sector Pre-Tax Income(KZTbn)

-50

0

50

100

150

200

250

2008 2009 2010 2011 2012 2013 2014 2015

FX gains on investmentsChange in reinsurers' share in IBNR reserveCore part of the pre-tax income


Profit Highly Concentrated in Both Segments

Source: Fitch, NBK, companies‘ reports

Life Insurance Non-Life Insurance

0

30

60

90

120

150

2009 2010 2011 2012 2013 2014 2015

Net income of the largest bancassurer

Net income of the rest of the segment

(KZTbn)

-1

4

9

14

19

24

29

34

39

2009 2010 2011 2012 2013 2014 2015

Net income of the largest bancassurer

Net income of the rest of the segment(KZTbn)


Non-Life Insurance: Major Weakening of Underwriting Result in 2015

2015a based on unaudited reporting

Source: Fitch, NBK, companies’ reports

Operating Result(‘KASPI Insurance’ excluded)

-30

-20

-10

0

10

20

30

Underwriting result Investment result (before FX gains)

2008 2009 2010 2011 2012 2013 2014 2015ᵃ

(KZTbn)


Loss Ratio – Key Factor Of Non-Life Underwriting Result Weakening


(‘KASPI Insurance’ Excluded )

0 25 50 75 100 125

2008

2009

2010

2011

2012

2013

2014

2015

Combined ratio Loss ratio

(%)


Sector Repatriated 66% of Net Income As Dividends in 2011-2014 and 31% in 2015a

2015a based on unaudited reporting of companies representing 80% of the sector by premiums written


Capital Flows

-60 -40 -20 0 20 40 60 80 100 120 140 160

2011

2012

2013

2014

2015ᵃ

Net income of the year Dividends Capital injections Revaluation, other items

(KZTbn)


Russia

Kazakhstan

Belarus

Azerbaijan

Conclusions

Agenda


Belarus: Life Insurance Constrained by Limited Consumer Lending

Premiums Written

96% 96% 95% 95%95% 95% 94% 95% 95% 94% 94% 93%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Non-Life Insurance Life Insurance

(BYRbn)

Source: Fitch, MinFin of Belarus


Belarus: Penetration of Insurance Sector in GDP Tends to Increase

Premiums written

0

0.2

0.4

0.6

0.8

1

1.2

0

200

400

600

800

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

(%)

Premiums written (LHS) Penetration in GDP, % (RHS)

(USDm)

Source: Fitch, National Bank, MinFin of Belarus


Weight of Compulsory Lines Averaged 52% in 2010-2015

Premiums Written


71% 71% 66% 62% 59% 57% 53%

54%

54%

48%49%

52%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Voluntary lines Compulsory lines(BYRbn)


State-Controlled Insurers Had 87% Market Share in 2015

Market Share per Premiums Written


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sector premiums Sector premiums, excluding workers'compensation and agricultural insurance

2004 2005 2006 2007 2008 20092010 2011 2012 2013 2014 2015


Russia

Kazakhstan

Belarus

Azerbaijan

Conclusions

Agenda


Azerbaijani Insurance Sector:Growth Supported by Life Business

Source: Fitch, MinFin


+24% +61% +10% -4% +1%

+63%+87% +53% +11%

0

50

100

150

200

250

300

350

400

450

500

2010 2011 2012 2013 2014 2015

Non-life insurance Life insurance

(AZNm)


Sector Profitability Dropped in 2015

Source: Fitch calculation for 80% of the sector per premiums written, companies’ AZ GAAP reports

Sector Net Income

05

101520253035404550

Net Income

2012 2013 2014 2015(AZNm)


Life Underwriting Losses Offset by FX Gains on Asset Side

Source: Fitch calculations for 80% of the sector per premiums written, companies’ AZ GAAP reports

Key Components of Pre-Tax Income

-50-40-30-20-10

01020304050

Underwriting result Investment result Other income

2012 2013 2014 2015(AZNm)


Russia

Kazakhstan

Belarus

Azerbaijan

Conclusions

Agenda


CIS Insurance Sectors: Common Features

• Relatively small element of the local financial sectors

• Low GDP penetration

• Small institutional investors

• Limited weight of life premiums

• Mainly dominated by domestic players

• Dependence on External Distribution or Regulation

• Compulsory business is significant, with inflexible tariffs but inflation-exposed claims

• Banks have strong bargaining power as intermediaries

• Commercial non-life insurance is distributed on affiliated basis

• High Exposure to FX Risks

• Non-life underwriting result exposed to FX through claims and outwards reinsurance

• FX risks on the life side usually better matched


CIS Insurance Sectors: Key Differences

• Quality of insurance regulation and supervision

• Consumer lending and bancassurance volumes

• Concentration of players and price competition

• Direct state participation

• Investment opportunities


Key Challenges for Sectors Development

• Limited focus on healthy underwriting performance

• Absence of capital management philosophy

• Low capacity to assume commercial risks

• Weak macroeconomic context to develop life insurance

• High investment risk appetite


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Documents

CIS Insurance Sectors: Financial Overvie · 2016. 6. 27. · Anastasia Litvinova, Director 23 June 2016. 1 Russia Kazakhstan Belarus Azerbaijan Conclusions Agenda. 2 Russia Kazakhstan