Swiss Re Patrizia Baur

Current insurance market trends: where does Poland stand and what lies ahead?

Sopot Summer Insurance & Reinsurance Days

Sopot17 June 2008

Patrizia BaurSwiss Re Economic Research & Consulting

Agenda

Current situation

Market trends

Outlook

(Re)Insurance DaysSopot17 June 2008

1% of premiums written in Europe stem from Poland

Sources: Supervisory Authorities, Insurance Association, Swiss Re Economic Research & Consulting

Switzerland 3%_ ______

Netherlands 7% __________

United Kingdom 27% _____

Other CEE 4%

Austria 1%_________ ______________Poland 1%

________France 18%

Germany 15% _________


Split of total insurance premiums (life and non-life) EUR 1097bn, 2007

_____Other Europe 25%

Non-life Life1996 3.3% 0.6%2000 4.2% 0.8%2003 5.4% 1.2%2007 9.4% 2.1%

Non-life Life1996 0.7% 0.3%2000 1.1% 0.4%2003 0.8% 0.5%2007 1.1% 1.0%

Share CEE

Share Poland

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Pol

and

Cze

chR

epub

lic

Hun

gary

Rus

sia

Slov

akia

Aus

tria

Accident Motor Property Liability Other

Source: Swiss Re Economic Research & Consulting

Real growth rates

Non-life growth gained momentum in Poland

Portfolio overview2007

Russia: motor hull is included in propertySource: Swiss Re Economic Research & Consulting

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

E

Poland Western Europe Central & Eastern Europe, excl. Poland


Real growth rates

High, but slowing life insurance growth

Portfolio overview2006

No data for RussiaSource: Swiss Re Economic Research & Consulting

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

E

Poland Western Europe Central & Eastern Europe, excl. Poland

0%

20%

40%

60%

80%

100%

Poland CzechRepublic

Hungary Slovakia Austria

Ordinary, term life (Pure) endowment, whole life

Unit-linked insurance Marriage & birth

Pension and annuities Accident and Health

* market valuesSource: Swiss Re Economic Research & Consulting

Non-life profitabilityReturn on Equity, book value

Profitability – decreasing from record levels

Life profitabilityReturn on Equity, book value

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

1999 2000 2001 2002 2003 2004 2005 2006 2007E

UK* Germany France Poland

0%

5%

10%

15%

20%

25%

30%

35%

40%

1999 2000 2001 2002 2003 2004 2005 2006 2007E

UK* Germany France Poland

* market valuesSource: Swiss Re Economic Research & Consulting

Agenda


Current situation

Market trends

– Impact of current credit crisis

– Products – where to grow profitably?

– Distribution – the role of bancassurance

Outlook

Towards a more challenging macro environment

-2.8-4.03.7+13.8Slovakia

Russia

Poland

Hungary

Czech R.

+38.2

-26.7

-15.4

-8.1

Stock markets (30 May, %-chg. year to date, local currency)

+3.0+2.414.3

-3.1-4.84.3

-3.9-4.26.8

-3.0-3.56.7

Government deficit(2008, % of GDP)

Current account balance(2008, % of GDP)

Inflation(April 2008, %)

Sources: Bloomberg, Oxford Economic Forecasting Ltd., Swiss Re Economic Research & Consulting


. but so far impact of the credit crisis remained limited

Source: Bloomberg

Europe EMBI+ spreads

0

200

400

600

800

1000

1200

1400

1600

1800

Sep

-00

Jan-

01

Mai

-01

Sep

-01

Jan-

02

Mai

-02

Sep

-02

Jan-

03

Mai

-03

Sep

-03

Jan-

04

Mai

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Sep

-04

Jan-

05

Mai

-05

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Jan-

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Mai

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Sep

-06

Jan-

07

Mai

-07

Sep

-07

Jan-

08

Mai

-08

Bulgaria Poland Russia (rhs) Turkey Ukraine

Consequences for CEE insurance

Non-life insurance gets less profitable

Lower demand for index-linked life products

Countries with high share of foreigners most probably no major supply side issues

Foreign bancassurers under some pressure to sell subsidiaries (Erste Bank Vienna Insurance Group)

Less aggressive acquisition strategies of foreign insurers, less aggressive expansion in CEE countries


Agenda


Current situation

Market trends




Outlook

Non-life insurance – competition will become stronger

Source: KNF, Swiss Re Economic Research & Consulting

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

E

Non-life total Accident MTPL Motor hull Property Liability

Opportunities

Infrastructure projects (EU, EURO 2012)

Lowly penetrated SME sector

Potential in liability/agro/credit & surety

Risks

Saturated market for industrial/commercial property

Increasing competition from abroad

Situation in the non-life sectorReal growth by line of business

Life insurance – cooling financial markets ask for new solutions

Source: KNF, Swiss Re Economic Research & Consulting

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

03

Q4

04

Q1

04

Q2

04

Q3

04

Q4

05

Q1

05

Q2

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Q3

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Q1

06

Q2

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Q3

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Q4

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Q1

07

Q2

07

Q3

07

Q4

Total life LifeMarriage & birth LinkedAnnuity Accident & Sickness supplement

Drop in stock markets

Increasing need for risk protection (eg health) and old-age provision

Changing accounting and regulatory environment

Key

Offer new products

Address new client segments

Hot topics in the life sectorReal growth by line of business

Agenda


Current situation

Market trends




Outlook

No information available for Hungary, Czech RepublicSource: Swiss Re Economic Research & Consulting

Bancassurance is underdeveloped

Life insurance2005, except for Poland, Hungary, Czech Rep., France, Italy: 2006

Estimates for Hungary, Czech Republic; * new business splitSource: Swiss Re Economic Research & Consulting

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Pol

and

Hun

gary

Cze

chR

ep.* UK

Fran

ce

Ital

y

Ger

man

y*

Spa

in

Bel

gium

Banks Agents Brokers Others

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Pol

and

UK

Fran

ce

Ital

y

Ger

man

y

Spa

in

Bel

gium

Banks Agents Brokers Others

Non-life insurance2005, except for France and Italy: 2006

Low product complexity

Good fit with core banking products

Cost advantages of bancassurance

Bank branch traffic and density

Labour market flexibility

Opportunities

Distribution synergies

Cost advantages

Risks

Cultural differences

Low product complexity

Good fit with core banking products

High bank branch traffic and density

Captive model?

Success factors

Key drivers of bancassurance

Opportunities and risks


tomorrowtodayyesterday

From macro to micro segmentation

Phases

Client

Channel

total of clients

branch

Affluent

clients

SMEs/

Corporate

clients

Mass

Market

client

macro segmentationmicro segmentation within clients target group

stationary sales non

stationary sales

home banking

TV -banking

mobile sales

smart card banking

non banking CLIENT

Branch

Telephone /Online

Mobile

salesPoints of sale Partners

Trend towards tailor-mademulti-channel distribution

Point of sale

Brokers

sales

Agenda

Current situation

Market trends

Outlook


0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Bela

rus

Kaz

akhs

tan

Rom

ania

Russ

ia*

Bulg

aria

Ukr

aine

Slov

akia

Cro

atia

Hun

gary

Cze

ch R

ep.

Pola

nd

Slov

enia

Ger

man

y

EU1

5

Life Non-life

Still considerable gaps to developed markets

Premiums /GDP (2007, preliminary)

* Russia: without short-term policies aimed at tax optimisationSource: Swiss Re Economic Research & Consulting


ZW

BB

CZ

BD

VNIN ID

CN

NAZA

ROMX

RU

PL

HR

HUSK

OM

KR

TW IL

HK

ES

JPIT

SG

DE

FRGB

USCH

IE

0%

1%

2%

3%

4%

5%

6%

0.1 1.0 10.0 100.0

GDP per capita in 1000 USD

PLHUSKCZ

AT

TH

BW

NZ

NO

MWBD BO

ID

ECDZ

MXRU

HR

MY

OM

IL

IS

SV

VN

IN

CN

NA

KR

HK

ES

JP

IT

SG

DE

FR

US

CH

IE

0%

2%

4%

6%

8%

10%

12%

0.1 1.0 10.0 100.0

GDP per capita in 1000 USD

CEE countries lie in the steep part of the S-curve

Life Insurance 2007

Non-life Insurance 2007

Source: Swiss Re Economic Research & Consulting Source: Swiss Re Economic Research & Consulting



GDP and insurance growth forecast2008-2012, inflation-adjusted

Poland is expected to grow at about the same speed as other CEE markets

Favourable (long-term) macroeconomic environment

Catch-up towards EU wealth levels

State to rely more on private solutions

Tapping of potential farther East

Underwriting discipline

New products (eg structured life)

Further diversification of distribution channels

Growth drivers

0% 2% 4% 6% 8% 10% 12%

Western Europe

Central & EasternEurope (excl.

Poland)

Poland

GDP Life insurance Non-life insurance

Summary

Good capitalisation and saturation in large industrial/commercial lines will intensify competition in non-life insurance.

Profitable growth will be in areas where the growing cake will allow to expand without compromising on terms and conditions.

In life insurance, success will very much depend if insurers

– manage to offer alternatives to pure investment products,

– capture potential resulting out of social security sector and

– use whole range of distribution channels

Insurance products in CEE will increasingly mirror those in Western Europe.

Growth in CEE – and Poland – is expected to outpace Western Europe. However, differences will erode over time.



Thank you!

[email protected]/sigma

Appendix


Statistical overview

Preliminary dataRussia: life insurance without short-term tax optimisation schemes

Sources: WIIW, supervisory authorities, insurance associations, Swiss Re Economic Research & Consulting


2007 GDP Life insurance Non-life insurance(EURbn) (EURm) Penetration (EURm) Penetration

Poland 305.266 5804 1.9% 5605 1.8%Czech Republic 127.358 1938 1.5% 2749 2.2%Hungary 101.786 2008 2.0% 1602 1.6%Slovakia 54.696 760 1.4% 945 1.7%Slovenia 33.375 609 1.8% 1284 3.8%Romania 117.978 409 0.3% 1706 1.4%Russia 898.586 441 0.0% 21153 2.4%Croatia 37.214 337 0.9% 896 2.4%Ukraine 92.325 110 0.1% 2423 2.6%Kazakhstan 69.469 28 0.0% 876 1.3%Belarus 33.126 11 0.0% 231 0.7%

Total Eastern Europe 1950.264 12991 0.7% 41110 2.1%

Disclaimer

The material, views and conclusions contained in this presentation are for information purposes only. Although all information used in this presentation was taken from reliable sources, Swiss Re does not guarantee the accuracy and completeness of its content. All liability for the integrity, confidentiality or timeliness of this presentation or for any damages resulting from the use of information herein is expressly excluded. Under no circumstances shall Swiss Re or any of its affiliates be liable for any financial or consequential loss relating to this presentation.


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