Bangkok--13 Mar--Moody's
At present, European insurers' presence in the Asian (ex-Japan) markets has a credit-neutral effect on their credit profiles, says Moody's Investors Service in a new Special Commentpublished today. However, over the longer-term, if the insurers expandprofitably in the region, the credit implications might be positive.
"For most European insurers, their current presence in Asia ex-Japan remains too small to affect their overall financials, and thus theircredit profiles," explains Antonello Aquino, a Moody's Senior Vice
President and author of the report. "Nevertheless, we believe that overthe longer term, European insurers' credit profiles might benefit from aprofitable expansion in Asia, due to the added geographicaldiversification and profitability benefits that this would bring to theirportfolios," adds Mr. Aquino.
Abrupt regulatory changes and embedded product guarantees have beenamongst the obstacles for the successful expansion in Asia ex-Japan ofinternational insurers so far. "Many European insurers retreated fromTaiwan between 2008-10, for example, because of the high level of productguarantees offered in this market. More recently, legislation changes inIndia have led to a decline in life sales. As a consequence, and perhapsmore than in other regions of the world, the ability to manage regulatory
environments, maintain product innovation and control distribution arethe hallmarks of successful insurers in Asia ex-Japan," says Mr. Aquino.
According to the report, European insurers' overall market share inAsia's (ex-Japan) life insurance market remains limited, at just below10% of the total regional annual premium equivalent (APE) in 2010.
Moody's analysis suggests that the profit contribution from Asia ex-Japanremains modest for most European insurers, at around 5% IFRS underlyingresult on average in 2010, with the exception of Prudential Plc, whichhas a substantial presence in most major markets in the region.
However, Moody's notes that the Asia ex-Japan market is not monolithicand certain countries are much more attractive to European insurers thanothers. While Asia ex-Japan collectively is a large and fast-growing lifeinsurance market, European insurers are likely to find large variationsin business attractiveness and ease of access across economies. InMoody's view, Vietnam, Indonesia, the Philippines, and Thailand presenta higher level of growth potential for foreign insurers in Asia ex-Japan,despite the typical risks associated with emerging-market evolution.
Moody's new special comment, entitled "Most European Life Insurers Face aLong Road in Asian (ex-Japan) Markets ", is available on www.moodys.com.