Reuters.business.insights.the.top.10.global.insura nce.companies.sept.2004.ebook-tlfebook

FINANCE
THE TOP 10 GLOBAL INSURANCE
COMPANIES
Increasing profitability, market share and competitive
edge
By Barbara Kubis-Labiak
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Barbara Kubis-Labiak
Barbara has a BA (Hons) in Business and Management and is currently at the end of her
MSc in International Finance degree. Barbara started her career working as an intern for
the European Commission in Brussels, and then in 1999 she joined Datamonitor
Financial Services department as an analyst. Barbara's work at Datamonitor involved
various projects and reports, including the FinTab project, where she helped to develop
an online data resource covering the insurance, banking, investments and payment cards
sectors. Barbara also authored a number of reports: Retirement Provision in Germany
2001-2008, Retirement Provision in Germany 2002, European Mutual Funds 2001, UK
Wealth Management, Distribution of life insurance and pensions in Europe 2002 and
Central and Eastern European Life and Pensions 2002, as well as consultancy projects,
for example Motor insurance distribution in central Europe, Competitors in occupational
pensions in Germany, Bausparkassen in Germany and many others.


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London N17 0HW. www.mba-group.com

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Table of Contents
The Top 10 Global Insurance Companies
Increasing profitability, market share and competitive edge
Executive Summary 10

The global insurance market overview 10

The top 10 global insurers: company analysis 11

Chapter 1

Introduction 16

Report structure 16

Global insurance overview 16

Introducing the top 10 global insurance companies 16

Chapter 2

Global Insurance Overview 20

Summary 20

Introduction 20

Life and non-life insurance markets worldwide 21

Definitions 21

European life bancassurance overview 27

Unit linked policies 29

Opportunities in European bancassurance 30

Regulations 31

Chapter 3

Allianz AG 34

Summary 34

Overview 34

History 35

SWOT analysis 37

Strengths 37

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Weaknesses 38

Opportunities 38

Threats 39

Company activity snapshot 40

Chapter 4

Axa 44

Summary 44

Overview 44

History 46

SWOT analysis 47

Strengths 47

Weaknesses 48

Opportunities 48

Threats 48

Company activity snapshot 49

Chapter 5

American International Group,
Inc. 54

Summary 54

Overview 54

History 55

SWOT analysis 57

Strengths 57

Weaknesses 58

Opportunities 59

Threats 60

Chapter 6

Assicurazioni Generali S.p.A. 62

Summary 62

Overview 62

History 63

SWOT analysis 65

Strengths 65

Weaknesses 66

Opportunities 67

Threats 68

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Company activity snapshot 68

Chapter 7

ING Groep N.V. 70

Summary 70

Overview 70

History 71

SWOT analysis 73

Strengths 74

Weaknesses 74

Opportunities 75

Threats 76

Company activity snapshot 76

Chapter 8

Nippon Life Insurance Company 80

Summary 80

Overview 80

History 82

SWOT analysis 83

Strengths 83

Weaknesses 84

Opportunities 85

Threats 86

Company activity snapshot 86

Chapter 9

State Farm Insurance Companies 90

Summary 90

Overview 90

History 91

SWOT analysis 93

Strengths 93

Weaknesses 94

Opportunities 95

Threats 96

Company activity snapshot 97

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Chapter 10

Aviva Plc 100

Summary 100

Overview 100

History 101

SWOT analysis 102

Strengths 103

Weaknesses 103

Opportunities 104

Threats 105

Company activity snapshot 105

Chapter 11

Zurich Financial Services 108

Summary 108

Overview 108

History 109

SWOT analysis 111

Strengths 111

Weaknesses 112

Opportunities 112

Threats 112

Company activity snapshot 113

Chapter 12

The Dai-ichi Mutual Life Insurance
Company 116

Summary 116

Overview 116

History 117

SWOT analysis 118

Strengths 118

Weaknesses 119

Opportunities 120

Threats 120

Company news 121

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Chapter 13

Report Conclusions 123

Summary 123

Global insurance industry recovers 123

Japanese stagnation 124

China, the land of potential 125

Stricter regulations 126

Bancassurance 126

Chapter 14

Appendix 129

Definitions of distribution channels 129

Index 130

List of Figures
Figure 1.1:

Total life and non-life premium volume in the top five European markets, 2000—
2003 10

Figure 2.2:

Stock market indices in major stock markets in Europe, 2000—2004 21

Figure 2.3:

Total life insurance premium volume in the top five European countries, 2000—2003
24

Figure 3.4:

SWOT analysis of Allianz 37

Figure 4.5:

SWOT analysis of Axa 47

Figure 5.6:

SWOT analysis of AIG 57

Figure 6.7:

SWOT analysis of Generali 65

Figure 7.8:

SWOT analysis of ING Groep 73

Figure 8.9:

SWOT analysis of Nippon Life Insurance Company 83

Figure 9.10:

SWOT analysis of State Farm Insurance 93

Figure 10.11:

SWOT analysis of Aviva 102

Figure 11.12:

SWOT analysis of Zurich 111

Figure 12.13:

SWOT analysis of Dai-Ichi 118


List of Tables
Table 1.1:

Top 10 global insurance companies, by premium income in 2000—2003 17

Table 2.2:

Total premium insurance volume by country and region, 2000—2003 23

Table 2.3:

Life insurance premium volumes by country and region, 2000—2003 25

Table 2.4:

Non-life insurance premium volumes by country and region, 2000—2003 26

Table 2.5:

Distribution of life assurance by distribution channel, 2002 28

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Executive Summary
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Executive Summary
The global insurance market overview

2003 saw some signs of recovery after two years of worldwide recession and growth
rates are gradually picking up.

The world insurance premium volumes, after a drop from $2,444,903 in 2000 to
$2,408,252 in 2001, are now growing at a steady pace, and reached $2,940,670 in
2003, experiencing a compound annual growth rate of 6.3% in the period 2000 and
2003.
Figure 1.1: Total life and non-life premium volume in the top five European
markets, 2000—2003

0
50,000
100,000
150,000
200,000
250,000

2000 2001 2002 2003
Total premium volume, €mln
0
50,000
100,000
150,000
200,000
250,000
2000 2001 2002 2003
UK
Italy
Netherlands
France
Germany
Total premium volume, € m

Source: Swiss Re, sigma No. 3/2004 Business Insights
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
Life insurance premiums have experienced a very slow growth after the decrease in
premium income in 2001. In many countries 2003 saw a further decrease in premium
income, for example in the UK.

The compound annual growth rate for non-life insurance in Europe between 2000
and 2003 totalled 15.6%, compared with only 5.1% for life insurance during the
same period. Only one country, Germany, experienced a negative growth during this
period.


Bancassurance has been particularly successful in France, Italy and Spain. Banks in
these countries enjoy more than 50% of the distribution of life assurance products.

In Italy, for example, bancassurance accounted for 56% of the distribution of life
assurance products, with five of the top 10 life assurance competitors in the market
owned by Italian banks.

Depolarisation would encourage a competitive advantage for banks holding in the
UK. This would allow non-independent institutions to offer life and pensions
products from more than one provider, coupled with the introduction of simpler
products.
The top 10 global insurers: company analysis

Nippon Life, based in Osaka, Japan, is both the largest provider of life insurance in
Japan and one of the world's largest insurance companies in terms of total assets and
policies in force. The company's core business is life insurance. Products and
services within this area are made available to both individual and corporate/group
clients. The company also offers non-life products and such cover as medical
treatment and long-term care, as well as asset management/asset formation products.

For the fiscal year ended December 2003, ING’s company's revenues (including
both insurance and banking operations) were €64,913 million, compared to
€70,650from the previous year. Operating net profit amounted to €4,053 million, an
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18.1% increase compared with 2002. Banking profits were up by 72.6%, which
compensated for the somewhat weaker performance of insurance activities.


Allianz is hoping its latest 'New Dresdner' program will see the bank earn its cost of
capital again in 2005.Consistent bad news from the Dresdner investment banking
arm has blemished the organisation's reputation. Harsh cost cutting tactics have been
operating for two years now and Dresdner still has not managed to return to
profitability.

State Farm Insurance is a personal lines property/casualty company that provides
auto insurance, non-medical health, life, and homeowners insurance. The company
has various subsidiaries across the United States that sell all types of insurance. It
also operates State Farm Bank, which provides additional financial services. State
Farm Insurance is headquartered in Bloomington, Illinois.

Axa capitalises on its core strengths: over 50 million clients worldwide; a 44,000-
strong captive distribution force; a global brand; unique product skills in areas such
as insurance underwriting, long-term investments, and financial advice, all on a scale
that enables Axa to leverage best practices and operations platforms across the
group.

Assicurazioni Generali has one of the strongest balance sheets in the sector and
boasts €1.7 billion in excess capital. The low level of equity exposure, limited
exposure to asset management and commercial banking and no direct exposure to
the United States or Japan gives it a very stable outlook in the current environment,
where there is a clear correlation between capital adequacy and share price
performance.

While half of its business comes from the UK, it has presence in France, the
Netherlands, Spain, Italy, Ireland, Canada and Australia. Aviva operates through its
subsidiaries under names such as Aviva, CGNU, Norwich Union, CGU, Morley
Fund Management and Delta Lloyd. It has 30 million customers.

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
For the fiscal year ended March 2004, the Dai-ichi Mutual Life Insurance Company
achieved revenues that totalled ¥5,090.4 billion ($46,990 million) a decrease of 4%
against the previous years revenues that were ¥5,255.9 billion ($47,565 billion).
Reduced insurance premiums and lower revenues from group pensions were some of
the key reasons behind the fall in overall revenues.

Zurich benefits from the considerable scale of its operations. It maintains a presence
in 60 countries globally, and a strong focus on the key markets of the UK, U.S. and
Switzerland, with expanding operations in continental Europe. It is the UK's third
largest household insurer in terms of gross earned premiums. It also has 2,000
financial planning businesses in the UK, through the Zurich Advice Network. This is
also one of the country's largest mortgage introducers. In total it has around 38
million customers.

For fiscal 2003 AIG's revenues were $81.3 billion, an increase of 20.5% on the
previous year's results of $67.4 billion. The company achieved operating revenues
that totalled $15,805 million, a 47.5% increase on the previous year’s total of
$10,712 million.

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Chapter 1
Introduction

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Chapter 1 Introduction
Report structure
Global insurance overview
This chapter provides a general overview of the trends in the global insurance industry
and presents data on global insurance for the period 2000—2003, based on the Swiss Re
sigma economic research. The sigma publication series provides comprehensive
information on the international insurance markets and in-depth analyses of economic
trends and strategic issues in insurance, reinsurance and financial services, covering life
and non-life business. It is considered to be one of the most reliable and comprehensive
sources of information about insurance industry. This report uses the World Insurance
Series published regularly by Swiss Re sigma research with independent expert analysis.
The second half of the chapter addresses an important issue within the insurance
industry, namely bancassurance with statistics on the distribution of life insurance in
Europe.

Introducing the top 10 global insurance companies
The chapters that follow have been written in a similar format, providing comprehensive
information on each of the top 10 global insurers. Each chapter includes an overview of
the company’s main activities, its history, comprehensive SWOT analysis and analysis of
the current company status. The companies profiled in this report are:
1. Allianz AG
2. Axa
3. American International Group, Inc.
4. Assicurazioni Generali S.p.A.
5. ING Groep N.V.
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6. Nippon Life Insurance Company
7. State Farm Insurance Companies
8. Aviva Plc
9. Zurich Financial Services
10. The Dai-ichi Mutual Life Insurance Company
These companies are considered to be the largest and most important insurers globally.
The main purpose for presenting these companies in this report is to show the examples
of best practice among insurers, analysing the reasons behind the growth of these
businesses, and indicating any potential problems they might be facing. In this way, these
profiles serve as examples for other insurers of what strategies to implement in order to
expand their businesses and achieve higher profitability. One of the important
characteristics of most of these profiles (as shown in the table below) is the decrease in
revenues in 2002 to 2003 due to the global recession. This aspect of insurance business
is analysed within the profiles, in most cases indicating that there are signs of recovery
among global insurers.
The table is in order of 2003 revenues, with Allianz taking the number one position with

a premium income of $113,319 in 2003.
Table 1.1: Top 10 global insurance companies, by premium income in
2000—2003
US$million 2002 2003

1. Allianz AG 111,750 113,319
2. Axa 84,791 82,046
3. American International Group, Inc. 67,400 81,300
4. Assicurazioni Generali S.p.A. 77,412 79,881
5. ING Groep N.V. 71,707 64,209
6. Nippon Life Insurance Company 72,224 62,014
7. State Farm Insurance Companies 49,699 56,100
8. Aviva Plc 50,843 52,954
9. Zurich Financial Services 41,423 48,919
10. The Dai-ichi Mutual Life Insurance
Company (year end in March) 47,565 46,990
Source: Annual report analysis Business Insights
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Chapter 2
Global Insurance Overview
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Chapter 2 Global Insurance Overview
Summary

The year 2003 has shown some signs of recovery after two years of worldwide
recession and growth rates are gradually picking up.

The world insurance premium volumes, after a drop from $2,444,903 in 2000 to
$2,408,252 in 2001, are now growing at a steady pace, and reached $2,940,670 in
2003, experiencing a compound annual growth rate of 6.3% in the period 2000
and 2003.

Life insurance premiums have experienced very slow growth after the decrease in
premium income in 2001. In many cases 2003 saw a further decrease in premium
income, for example in the UK.

The compound annual growth rate for non-life insurance in Europe between 2000
and 2003 totalled 15.6%, compared with only 5.1% for life insurance during the
same period. Only one country, Germany, experienced a negative growth during
this period.

Bancassurance has been particularly successful in France, Italy and Spain. Banks in
these countries enjoy more than 50% of the distribution of life assurance products.

In Italy, for example, bancassurance accounted for 56% of the distribution of life
assurance products, with five of the top 10 life assurance competitors in the
market owned by Italian banks.

Depolarisation in the UK that will allow non-independent institutions to offer life

and pensions products of more than ones provider, coupled with the introduction
of more and more simple products will offer a competitive advantage to banks.
Introduction
Considering Figure 2.2, it is clear that between 2000 and 2002 there was a rapid decline
in stock market growth worldwide. Such falls of course meant that investors saw their
assets decrease in value. For example, the German index, the DAX, suffered the most,
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falling by 58.4% in the period 1999—2002 and the average fall across the five countries’
indices was 44.9%. The Spanish General Index comparatively performed the best, falling
37.1% in the period 1999—2002.
2003, however, showed some signs of recovery, something that all investors have been
looking forward to. After two years of worldwide recession growth rates are gradually
picking up.
Figure 2.2: Stock market indices in major stock markets in Europe, 2000—
2004

Source: Euroland stockmarket indices Business Insights
Life and non-life insurance markets worldwide
Definitions
The most important terms used in this chapter are as follows:

Direct insurance: insurance contract between an individual (or a company) and
an insurer;

total insurance: direct insurance premiums plus reinsurance accepted;

gross insurance: insurance premiums before ceding any portion of them (and

their risks) in reinsurance;
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
net insurance: insurance premiums after ceding some risk to reinsurers;

written premiums: premium income allocated to the current accounting year,
regardless of when the risk (or the contract) runs to, or whether the risk
continues into the next accounting year;

earned premiums: the portion of premium income that corresponds to the
current accounting year. Premium income is spread over the duration of the
contract.
This chapter also distinguishes between life insurance and non-life insurance.

Life insurance: risk insurance intended as protection against the financial
consequences of the death of the insured person which takes the form of
payment of a previously agreed lump sum or pension to a beneficiary, if the
insured person dies during the term of insurance. In the case of pure life
insurance, without any endowment insurance component, no payments are due if
the insured person survives the term of insurance
i
.

Non-life insurance: covers all other types of insurance, including motor
insurance, property and casualty, liability insurance, credit insurance, health and
accident insurance (although some countries classify health and accident
insurance as ‘life insurance’), and other.

The world insurance premiums, after a drop from $2,444,903 in 2000 to $2,408,252 in
2001, are now growing at a steady pace, and have reached $2,940,670 in 2003,
experiencing a compound annual growth rate of 6.3% in the period 2000 and 2003. It is

i
Swisslife definition
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evident that the declines in stock markets worldwide had a direct impact on world
insurance premiums, resulting in either a decrease in premiums or a sluggish growth.
Table 2.2: Total premium insurance volume by country and region, 2000—
2003
Euros 2000 2001 2002 2003 CAGR
UK 232,099 216,666 224,357 214,870 -2.5%
Germany 134,274 138,333 144,176 150,640 3.9%
France 131,192 128,605 132,883 144,351 3.2%
Italy 68,436 77,627 89,260 98,563 12.9%
Netherlands 39,981 43,495 42,218 44,330 3.5%
Spain 37,635 39,392 48,214 41,462 3.3%
Belgium 21,597 22,934 25,354 29,821 11.4%
Sweden 18,130 17,406 17,239 18,703 1%
Ireland 17,065 12,116 13,604 15,282 -3.6%
Denmark 11,229 12,499 13,809 14,819 9.7%
Finland 12,128 12,019 12,345 12,456 0.9%
Norway 7,854 8,175 7,917 11,177 12.5%
Portugal 6,860 7,931 8,491 9,534 11.6%
Total of above 738,480 737,198 779,867 806,009 3%

US$
United States 859,476 904,021 1,005,985 1,055,498 7.1%
Europe 786,089 762,398 846,697 1,022,158 9.1%
Japan 503,712 445,845 445,940 478,865 -1.7%
Africa 27,145 24,551 24,805 30,968 4.5%
World 2,444,903 2,408,252 2,632,473 2,940,670 6.3%
Note: The values in Euro for UK, Sweden, Denmark and Norway are converted from local
currency into Euro, based on end of year 2003 exchange rate
Source: Swiss Re, sigma No. 3/2004 (year 2000 from sigma No. 6/2002) Business Insights
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Figure 2.3: Total life insurance premium volume in the top five European
countries, 2000—2003

0
50,000
100,000
150,000
200,000
250,000
2000 2001 2002 2003
Total premium volume, €mln
0
50,000
100,000
150,000
200,000
250,000

2000 2001 2002 2003
UK
Italy
Netherlands
France
Germany
Total premium volume, € m

Source: Swiss Re, sigma No. 3/2004 Business Insights
Life insurance premiums have experienced a very slow growth after the decrease in
premium income in 2001. In many cases the year 2003 saw a further decrease in
premium income, for example, in the UK. This trend is not only because of the recession
of 2001, but also due to the persistent low interest rates resulting in life insurers offering
lower returns. Such trends have been observed in the traditional life insurance sector, as
well as in unit-linked insurance. According to Swiss Re Economic Research &
Consulting data, unit linked insurance experienced negative real growth rate between
2001 and 2003 in France and Spain, and the UK and Italy saw a very slight increase in
2003.
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Table 2.3: Life insurance premium volumes by country and region, 2000—
2003
Euro 2000 2001 2002 2003 CAGR

UK 175,396 151,823 151,342 134,846 -8.4%
France 90,216 84,507 85,278 92,985 1%
Germany 61,051 62,162 64,625 67,676 3.5%
Italy 39,805 46,619 55,688 63,228 16.7%

Netherlands 23,437 25,511 22,131 22,375 -1.5%
Belgium 12,965 13,435 14,736 18,523 12.6%
Spain 23,767 20,362 26,482 17,675 -9.4%
Sweden 13,693 12,645 11,774 12,781 -2.3%
Finland 9,786 9,510 9,737 9,759 -0.1%
Denmark 7,094 8,139 8,873 9,672 10.9%
Ireland 13,243 6,987 7,246 7,970 -15.6%
Portugal 3,172 4,231 4,467 5,399 19.4%
Norway 3,471 4,240 4,701 5,130 13.9%
Total of above 560,943 514,684 486,480 471,307 -5.6%

US$

US 436,378 443,413 480,452 480,919 3.3%
Europe 503,165 464,357 500,489 584,705 5.1%
Japan 400,993 356,731 353,909 381,335 -1.7%
Africa 20,482 18,267 18,087 22,184 2.7%
World 1,518,401 1,439,177 1,534,061 1,672,514 3.3%

Note: The values in Euro for UK, Sweden, Denmark and Norway are converted from local
currency into Euro, based on end of year 2003 exchange rate
Source: Swiss Re, sigma No. 3/2004 (year 2000 from sigma No. 6/2002) Business Insights
The above table analyses the life insurance premium volumes worldwide, demonstrating
that some countries recorded negative compound annual growth rate in the period
2000—2003, including the UK, Netherlands, Spain, Sweden, Finland and Ireland. The
highest growth rate was recorded in Portugal, with 19.4% compounded annually
between 2000 and 2003, followed by Italy with 16.7% and 13.9% for Norway.
Worldwide, Europe achieved a better growth than the rest of the world, with 5.1%
compounded annually between 2000 and 2003, compared with 3.3% for the United
States and 3.3% worldwide.

The non-life insurance sector experienced a much stronger growth than the life
insurance sector between 2000 and 2003.
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