Romania the next best thing. Generali Romania November 12, 2009 Bucharest

Transcription

1 Romania the next best thing Generali Romania November 12, 2009 Bucharest

2 Content Current Romanian economic outlook. And impact on the insurance industry Generali PPF on the CEE markets Why could Romania be the best next thing in the insurance industry? Conclusions 2

3 Current Romanian economic outlook and impact on the insurance industry

4 Macroeconomic outlook - GDP Strong growth of economy in the past was driven by loans. Credit crunch caused sharp decline of GDP in is expected to record another 5.9% decrease, with a small revival at the end of the year ,1% 413 GDP (bln RON) -8,5% 504-5,9% +2,7% Ø451 50,0 45,0 40,0 35,0 30,0 25,0 20,0 15,0 10,0 5,0 0,0 Czech Republic CEE Population - end of 2008 (million inhabitants) source: United Nations Department of Economic and Social Affairs Population Division 10,4 Poland 38,1 Romani a 21,5 Slovakia 5,4 Slovenia 2,0 Hungary 10,3 Bulgaria 7,6 11,2 3,1 3, 7 Greece A lbania B osnia and Hertegovina Serbia 9,8 Republic of Macedonia 2,0 Ukrain e 46, Romania is a very interesting country, despite temporarily expecting shrinking GDP as it is the second biggest population in CEE with development potential in many areas.

5 Macroeconomic outlook Inflation rate declines in spite of the devaluation of RON. Romanian economy did not reach the bottom yet. It is expected in Q and Q1/2010 resulting in the peak of unemployment in We expect further devaluation of RON to 4.5 RON / EUR in *data source: Romanian National Statistic Institute; Romanian National Prognosis Institute

6 Insurance as % GDP Romania Insurance Penetration CEE Insurance markets are still small compared to the mature Western markets Risk awareness is still on very low level having a as a result no significant increase for the insurance penetration in the upcoming three years. *data source: XPRIMM Insurance Profile magazine; Generali s own estimations; CEA

7 Insurance market size evolution Starting 2005, GWP increased every year, exception making 2009, when GWP decreased by 9,7% (in EUR) compared to 2008 The paid claims are on a continuous growing path; this year the paid claims increased by 13.8 % Insurance become unprofitable To be profitable insurance in term of value of risk should grow in upcoming years (mainly in car insurance) *data source: XPRIMM Insurance Profile magazine;

8 Insurance product mix evolution Romania Insurance market is dominated by car & property insurance and no dramatic change in insurance segments is expected. Car insurance will still dominate non life segment in the upcoming three years. Slow increase of property, accident and liability insurance is foreseen. *data source: XPRIMM Insurance Profile magazine; Generali s own estimations

9 CEE market structure life insurance dominates with around 50%. motor insurances has only 30% property has around 10%

10 Generali PPF Holding

11 Generali Group at a glance A leading insurer Global player focused in Europe Strong capital base Founded in bln Euros gross written premiums (1H09) 287 bln Euros in reserves (1H09) 389 bln Euros AUM (1H09) Niche presence in Swiss private banking; no commercial or corporate banking More than 80,000 employees More than 53 million customers Presence in around 64 countries Historical leader in Italy Top-tier presence in all key European markets, except UK; only in niche life business in US Strong presence in fast growing Eastern European countries Strong rating from key agencies Conservative asset allocation

12 Generali PPF s presence in CEE Poland Belarus Russia Presence in 14 countries with 323 million inhabitants Czech Rep Slovakia Ukraine Total Premiums 2008: EUR 3.4 billion Slovenia Croatia Hungary Romania Serbia Bulgaria # 1 in the Czech Rep. # 2 in Hungary # 3 in Slovakia # 4 in Romania Kazakhstan

13 Why could Romania be the next best thing in the insurance industry?

14 Long term growth opportunities High growth potential In the assumption of Romania converging to the current WE levels of %GDP for both non-life and life insurance in 25 years (at that time representing 61% of WE levels), the local insurance market would growth at 10% CAGR in non-life and 22% CAGR in life insurance segments *data source: Morgan Stanley Research

15 Long term growth opportunities Romania the most attractive market in the region in terms of life market growth potential and market size

16 Long term growth opportunities Romania the most attractive market in the region in terms of non - life market growth potential and market size

17 Demographical Dilemma Public Pension System No. of contributors compared with pensioners number ( ) In 2008, only 4.9 million employees contributed in the system, while the number of pensioners went up to 4.7 million. Birth and fertility rates are dramatically decreasing and the average age of the population is constantly growing; Romania s demographic problems show that its public pension budget is no longer sustainable in its current form and needs a major reform. Annual average number of contributors (thousands persons) Pensioners number (thousands persons)

18 Demographical Dilemma Health Expenditure (% of GDP) Unfortunately, Romania is on the last position Governement share (% of total health expenditure) Czech Republic Hungary Poland Romania Slovenia Public Health Insurance System Not enough money to finance all of the in-patient costs, in addition to the drugs and the medical checkups (which are supposed to be free for all the contributors, children and pensioners). At the end of 2009 an important part of hospitals will not have enough money to pay the employees and the sanitary materials. In order to finance the National Health Insurance System, the Ministry of Health concluded that additional charges for both employees and even pensioners have to be introduced beginning with 2010.

19 How can the insurance industry assist in the demographical dilemma? TO PROMOTE: Changes in the private pensions system 2nd PILLAR PRIVATE PENSIONS Predictability is necessary the existence of a well established plan, respected in any economical, social or political context A faster surpassing of the actual 2% milestone, in favor of the private administrators Increase the contribution of 2% to 0.5% per year - as it was initially in the law 3rd PILLAR PRIVATE PENSIONS Increasing fiscal deductibility, in order to encourage the sector Reform of health services financing PRIVATE HEALTH INSURANCES SYSTEM Regulation of the health services Increasing fiscal deductibility, in order to encourage the sector

20 Public policies implemented in other CEE markets In the coming years, and in an unknown order, CEE countries will have to tackle the challenge of aging populations combined with unsustainable pension systems. This nearly inevitable pension reform could massively spur growth in premiums. A recent example of this is Poland, which in 2008 introduced a capital gains tax exemption to certain types of life policy and saw premiums grow by 52% in 08 vs. 07. Consumer demand for life is growing even without governmental incentives. Public pensions in CEE countries are relatively modest compared to Western levels, and so private saving is becoming a necessity for the growing number of middle to high income earners. Demand for protection products also rises as the wealth of CEE citizens rises. Insurance-related public policies implemented in other CEE markets Fiscal Pension and savings related - Poland example Medical insurance related Slovakia example 20

21 Conclusions Romania the most attractive market, being under penetrated with low GDP per capita, offering the potential of high growth Short-term decrease and slower recovery Consumer demand for life is growing even without governmental incentives. Public pensions in CEE countries are relatively modest compared to Western levels, and so private saving is becoming a necessity for the growing number of middle to high income earners. Demand for protection products also rises as the wealth of CEE citizens rises. Long-term opportunities where public policies are to be devised assistance to the pension system through measures to sustain savings insurance products 21

22 Thank you!