Posted on Mar 15, 2012 by Sergio Ulloa
Singapore's domestic general insurance industry had a good year in 2011, with company profits rising despite a slowing global economy, moribund interest rates and record catastrophe losses experienced in other markets throughout the year.
In their year-end annual briefing released on Wednesday, the General Insurance Association of Singapore (GIA) revealed that the country's non-life market grew by a healthy 4.5 percent last year, with total gross premiums topping S$3.17 billion (US$2.51 billion) by the end of the reporting period, up from S$3.03 billion (US$2.4 billion) in 2010. This growth was accompanied by an industry-wide surge in profitability, with total underwriting profits rising by 25 percent from S$198.1 million (US$157.2 million) in 2010 to $248.3 million (US$196.95 million) by year-end 2011.
According to the GIA report, this upsurge in fortune was lead by the performance of Singapore's motor insurance sector, which surprised many by staying in the black for the first time in 5 years. Last year motor insurers collectively achieved an underwriting profit of S$21.2 million (US$16.82 million) in Singapore after 4 consecutive years of losses
. The GIA noted that this represented a considerable 143 percent rebound on the S$48.9 million (US$38.8 million) losses incurred in 2010 and was also the first time the domestic motor insurance market had been able to register a net profit since 2005, when insurers finished the year S$46.4 million (US$36.8 million) ahead. In addition, 2011 was only the third time in the past 11 years that the motor market finished the year in the black.
While these profits are indeed welcome news, the past decade has still been particularly difficult for motor insurance companies in Singapore. According to the GIA, underwriting losses far outstrip any gains made by motor insurers over the past 11 years, with 2008 and 2002 representing particularly costly periods for the industry with year-end losses of S$214.1 million (US$170 million) and S$124 million (US$98.3 million) respectively. Overall, the Singaporean motor insurance sector has posted an aggregate underwriting loss of S$588 over the past 11 years but the market is now slowly correcting itself through regulatory efforts, fraud prevention measures and upward rate adjustments. The GIA report detailed that Singapore's motor insurers have been able to successfully raise their pricing levels over the past five years, from an average premium of $867 (US$687) in 2006 to a record S$1,274 (US$1010) by 2011. As a result the motor insurance industry earned premium income hit an all-time high of S$1.087 billion (US$860 million) last year, up 4.5 percent from S$1.041 billion (US$830 million) brought in during 2010.
The GIA noted that outside of the motor sector's remarkable turnaround, health insurance companies have made the biggest gains in Singapore over the past year, with earned premiums rising by 14 percent from S$124.7 million (US$98.9 million) in 2010 to S$142 million (US$112.6) in 2011. Similar to the motor sector, health insurers were also able to significantly improve their overall underwriting performance during the year, going from a net loss in 2010 to an S$8.8 million (US$6.9 million) underwriting profit in 2011, a 91 percent turnaround according to the GIA. According to the report, new health insurance sales grew by 6 percent last year, bringing in S$165 million (US$131.5 million) in premiums. This growth in new health insurance sales has been attributed to rising medical costs in Singapore and increased awareness amongst the populace of greater medical protection policies. The GIA further noted that over 2.48 million people are now covered by health insurance in Singapore, well over half the island's population, with paid up premiums totaling S$877 million (US$698.9 million).
The second fastest growing insurance line in Singapore meanwhile was personal accident insurance, which grew by 8 percent in earned premiums with $202.5 million (US$160.6 million), up from $187.6 million (US$148.8 million) in 2010. Unlike health and motor insurance however, the accident sector suffered a 9.5 percent decline in underwriting profit from $49.6 million (US$39.3 million) in 2010 to $44.9 million (US$35.6 million) last year. Of the other general insurance lines mentioned, marine cargo cover perhaps registered the most significant turnaround in Singapore. The non-life sector managed a healthy 4.2 percent growth rate last year after posting its biggest decline in earned premiums ever in 2010. Rounding out the GIA report were work injury compensation insurance, which grew at 3.7 percent in 2011, and fire cover which was up 2.3 percent. Marine hull cover meanwhile grew the least out of all major general insurance sectors at only 0.3 percent, which was down from 4 percent in 2010. The GIA finished the report saying that all major classes of non-life insurance business in Singapore grew last year, and that there were no indicators as of yet that this progress couldn't continue into 2012 and beyond.
The GIA statistics reveal that Singapore's non-life insurance market was largely able to match the performance of its life insurance counterpart throughout 2011. A similar report
released by the Life Association of Singapore (LIA) earlier this year showed that the country's life insurance industry grew by 22 percent in 2011, with new business premiums crossing the S$2 billion threshold for the first time in the sector's history. While Singapore's insurance sector will no doubt continue to be effected by global economic uncertainty, the rising protection and investment needs of the island's middle-class population should provide domestic insurers with enough momentum to achieve sustainable premium growth going forward.
These sentiments were further expressed today by Prudential Singapore, a subsidiary of UK-based insurance giant Prudential PLC, who achieved a record S$473 million (US$375 million) in new business premiums last year, a 30 percent rise on 2010's figures. The firm attributed their strong performance in Singapore to the continued expansion and strength of its distribution channels across the Asia Pacific nation. In their annual briefing, Prudential explained that while new business from its tied insurance agency force had risen by 6 percent, the insurer's successful regional financial sector partnerships enabled it's bancassurance sector to post an 82 percent annual growth rate. In addition to networking, the insurer also profited from domestic product and service innovation, and by expanding their operations more towards Singapore's increasingly affluent and high net worth sector. "Prudential Singapore saw a record breaking year in 2011," noted Executive Officer Kevin Holmgren, adding that "These exceptional results are testament to the success of our strategy and direction."
Prudential success in Singapore reflects the parent company's overall trajectory quite well. For the first time ever last year
, Asia contributed more to Prudential's year-end earnings than their home UK market, and with the region burgeoning middle-class now demanding more sophisticated life insurance and savings products, this looks only set to continue. Prudential's profits in Asia overall jumped 32 percent to £709 million (US$1.11 billion) in 2011 and have now nearly trebled in the past three years. That compares with profit growth of just 1 percent to £683 million in the UK, where sales fell as the company focused more on higher-margin products and more profitable markets in Asia. Overall total operating profits rose by 7 percent to £2.1 billion (US$3.1 billion).
The strength of Prudential's Asian business has prompted speculation that the firm will relocate to Hong Kong
due to the EU's upcoming Solvency II plans which forces insurers to hoard more capital. Prudential confirmed earlier this week that it is indeed considering its domicile position. The insurer also confirmed that it was increasingly moving away from its traditional business model of being reliant on the UK life assurance business for cash generation. In a statement, Prudential's Chief Executive, Mr Tidjane Thiam, affirmed his company's shifting priorities. "The heart of our strategy remains Asia, where our positive momentum has been maintained in 2011," Thiam said, adding that "Asia is generating both growth and cash and our focus on the fast-growing markets of South-East Asia continue to pay off."
Established in 1965, the GIA works to represent and promote the interests of all non-life insurance companies in Singapore.
Founded in 1962, the LIA works to further develop Singapore's life insurance industry. Since its establishment, the organization has launched public education initiatives, improved industry guidelines, conducted valuable market research, and held numerous conferences and seminars for the professional development of the industry.
Prudential has been in the insurance and financial services business since 1848. Today they operate throughout the UK, US and Asia offering international health insurance and retirement planning services, supported by 27,000 employees worldwide.