Canadian Life Insurance Industry

Transcription

1 Canadian Life Insurance Industry Edward Kohlberg, CPA, FLMI, CLU Associate Director Anthony McSwieney Senior Financial Analyst A.M. Best Annual Insurance Market Briefing Canada September 5, 2018

2 Canadian Life Market Segment Outlook Is Stable Outlook is stable, but remains cautious Rating outlook reflects limited rating actions Company specific results remain key to rating actions Does not preclude positive or negative rating actions 2

3 Benchmarking Balance Sheet Strength Strongest CRT-1 a+/a 14% 23% Very Strong Strong Adequate a-/bbb+ Strongest Very Strong Strong Weak Very Weak a/a- bbb+/bbb/bbb- bb+/bb/bb- b+ and below 63% 3

4 Benchmarking Operating Performance Assessment Notches 5% Very Strong +2 Strong +1 Adequate 0 Marginal -1 36% 59% Strong Adequate Marginal Weak -2 Very Weak -3 4

5 Benchmarking Business Profile Assessment Notches 4% 9% Very Favorable +2 Favorable +1 Neutral 0 Limited -1 64% 23% Very Favorable Favorable Neutral Limited Very Limited -2 5

6 Benchmarking ERM Assessment Notches 5% 4% Very Strong +1 Appropriate 0 Marginal -1 Weak -2 Very Weak -3/4 91% Very Strong Appropriate Marginal 6

7 CAD Billions Pretax Earnings Source: A.M. Best data and research 7

8 Industry Trends: Direct Premiums Written 90 Canada and United States only CAD Billions Source: A.M. Best data and research Life Annuity A&S Participating Other 8

9 DPW Geographic Diversification 100 % Canada U.S. Europe Asia/Other Source: A.M. Best data and research 9

10 CAD Billions Mutual Fund Deposits by Geographical Distribution Canada U.S. Other Source: A.M. Best data and research 10

11 Regulatory LICAT IFRS 17 11

12 Innovation A.M. Best Survey: Part of Business Model in Need of Update A.M. Best Survey: Needed Technology Improvement Underwriting, 10.0% Improving the customer (and agent) experience 33.3 Product Innovation 18.0% Legacy administrative & claims systems 29.9 Customer Experience 26.5% Distribution 18.5% Data aggregation and data mining New business/underwriting systems Data Mining and Technology 27.0% Risk management/ compliance Source: A.M. Best data and research 12

13 Interest Rate and Macro Concerns Bank of Canada increased overnight rate in July basis points to 1.5% Rate was.75% this time last year Forecast up to 2.25% in early Year may go up to 3.0% in 2019 Economic uncertainty in Canada Low household ownership of life insurance High Household debt Can it derail the economy? 13

14 % 10-Yr Government Bond Yield /1/2008 1/1/2009 1/1/2010 1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018 Source: Bank of Canada 14

15 FX Rate CAD/USD CAD/Euro CAD/GBP

16 Toronto Composite Index (CAD) TSX vs. S&P 500: 1 Year Performance S&P 500 (USD) TSX Composite Index S&P Index Source: Bank of Canada 16

17 Invested Assets (CAD Billions) Investment Income 1, Investment Income (CAD Billions) Invested Assets Interest, Dividends & Income Invest. Income Excluding Derivatives 0 Source: A.M. Best data and research 17

18 Canadian Life Companies Investments Distribution of Invested Assets (%) Category Bonds Total Stock Mortgage Loans Real Estate Policy Loans Cash & Short-term Derivatives Other Invested Assets Total Source: A.M. Best data and research 18

19 Bond Segmentation Canadian Life Bond Portfolio Distribution Portfolio Components Government Municipal, Public Authority, Schools Corporate Public Corporate Private Total Portfolio Components Government 150,726, ,790, ,338, ,634, ,389,285 Municipal, Public Authority, Schools 20,372,922 25,854,965 28,774,003 34,663,432 38,026,288 Corporate Public 182,099, ,576, ,885, ,158, ,457,991 Corporate Private 65,006,522 74,773,331 83,957,924 84,079,100 93,141,265 Total 418,205, ,995, ,956, ,535, ,014,829 Source: A.M. Best data and research 19

20 Corporate Segmentation Sector/Country Energy Basic Materials Industrial Consumer Cyclical Consumer Non-Cyclical Diversified/(Health Care) Financial Technology Communications Utilities Other Total All Sectors Canada United States Other Total Source: A.M. Best data and research 20

21 Survey Question What areas are crucial to L/A success over the next 2 years? Improving product distribution 17.2 Upgrading information systems Improving the customer experience Reducing administrative costs Innovative product development Upgrading analytic / predictive analysis capabilities Improving underwriting effectiveness Enterprise risk management strategy Mergers / Acquisitions International expansion Source: A.M. Best data and research % 21

22 Audience Polling Question: 2018 Review Preview U.S. What do you view as the biggest opportunity for the industry? Retirement Income Solutions Pension Risk Transfer Direct to Consumer Channel Technology: Data Analytics/Predictive Modeling Other 22

23 Biggest Challenges for the Industry Capital Management Aging Distribution Low Interest Rates Regulatory Changes Outdated Business Model Need For Innovation and Technology Improvements Longevity Exposure Cyber Risk 23

24 Q&A 24

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