The Latin American insurance market December 2011

Transcription

1 The Latin American insurance market December 2011

2 THE LATIN AMERICAN INSURANCE MARKET

3 Authorisation is hereby given to reproduce the information contained in this study, provided the source is cited. 2011, FUNDACIÓN MAPFRE Centro de Estudios Paseo de Recoletos, Madrid Tel.: Fax:

4 SUMMARY 1. Presentation The Latin American insurance market Macroeconomic environment Insurance market Analysis by regions and markets Mexico Central America, Puerto Rico and Dominican Republic Central America Puerto Rico Dominican Republic South America Argentina Bolivia Brazil Chile Colombia Ecuador Paraguay Peru Uruguay Venezuela The Latin American reinsurance market Introduction General observations Statistical annex

5 The Latin American insurance market PRESENTATION FUNDACIÓN MAPFRE hereby presents the ninth edition of its report entitled The Latin American insurance market, this time with information from 2010 and The study aims to provide a general overview of the current state of the insurance market in Latin American countries. In order to do this, as in earlier editions, a summary is provided of the economic context in which the insurance market performed in each of the countries being reviewed. The performance of these markets is also analyzed through sector-specific information related to insurance production by line of business, claims ratios, results, number of companies and the rankings of insurance groups. In this new edition there are two novelties: a chapter that presents an overall view of the reinsurance markets in the region. It was done by Jorge Noguera Arias, a former executive at MAPFRE RE who boasts ample experience in the insurance and reinsurance sectors in Latin America. The other new feature is a special section that has been added on investments in Argentina, Brazil and Chile. As usual, the sources of information used for this study are the publications issued by the insurance supervisory authorities and insurance associations of each country. To facilitate comparisons between countries, the criterion used in Spain for classifying lines of business into Life and Non- Life has been applied. That is why Health, Burial Expenses and Worker Compensation insurance policies, which in some countries are considered lines of Life insurance, are classified as Non-Life for the purposes of this report. It must be stressed that we have further standardized the classification of premiums by line of business, revising data from some countries. Indices of nominal and real variation are used throughout the study. It is worth pointing out that, unless stated otherwise, the numbers used refer to nominal variations. Average regional increases in premium volume are calculated as the weighted average of nominal growth in local currency, adjusting for the size of the insurance market of each country relative to the aggregate figure in euros for each of the regions. The descriptive ratios in this study (claims ratio, expense and combined ratios) were calculated using earned premiums net of reinsurance. Earned premiums correspond to the Spanish terms used in most Latin American countries, which are primas devengadas netas or primas ganadas netas. 5

6 6 2. The Latin American insurance market in

7 The Latin American insurance market THE LATIN AMERICAN INSURANCE MARKET IN MACROECONOMIC ENVIRONMENT 1 The GDP of Latin America and the Caribbean region grew 5.9% in 2010, thanks to robust domestic demand and a rise in overseas demand. This expansion followed a fall of 1.9% in output in 2009 as a result of the financial crisis, although internal factors -- counter-cyclical policies -- and external ones such as a rise in exports -- helped launch a recovery in the second half of the year. The increase in private consumption (5.9%) stemmed from an improvement in labor indices, better expectations for how the economy will perform, more credit in the private sector and in some countries a recovery in remittances sent by emigrants. Public-sector consumption grew more moderately (3.9%) and investment rose 14.5%. As for the overseas sector, there was a significant increase in exports, mainly to the countries of the MERCOSUR bloc, and in imports and goods and services. This was a reflection of the strength of internal demand. The highest rates of growth were seen in Paraguay (15.0%), Argentina (9.2%), Peru (8.8%), Uruguay (8.5%), the Dominican Republic (7.8%), Brazil and Panama (7,5%). But Venezuela saw output fall 1.4%, mainly because of a decline in exports, final private consumption and gross fixed-capital formation. In 2010 there was an across-the-board rise in inflation, with the exception of Ecuador and Puerto Rico, because of an increase in the prices of basic goods, in particular foodstuffs and fuel. Venezuela and Argentina posted the highest rates of price increases, at 27.4% and 10.9%, respectively. The trend continued in 2011, and the yearly inflation rate is expected to come in at around 7,5%. Another point to highlight is a significant rise in exchange rates in the region, due to several factors. These include a high level of international liquidity and the strength of some economies in Latin America, along with the massive influx into some countries of foreign currency because of high prices for basic export goods and a rise in foreign investment. Data available for the first half of 2011 indicate that economic activity has remained strong, although growth is slowing somewhat as a result of the slowing of the international economy and in some cases the gradual removal in some countries of polities that were implemented to confront the crisis. The Economic Commission for Latin America and the Caribbean (ECLAC) estimates that the economies of Latin America and the Caribbean grew 4.3% in INSURANCE MARKET The Latin American insurance sector, which accounts for 3% of world premiums, again posted in 2010 nominal average growth of 14.2 as measured in local currency, with increases in premium volume in all regions. Average real growth was 7.5%, compared to 7.3% in 2009, with all countries posting increases, except Honduras, Mexico and Venezuela. 1 Basic observations from Economic survey of Latin America and the Caribbean, , by the Economic Commission for Latin America and the Caribbean (ECLAC). 7

8 The Latin American insurance market Nominal growth in local currency % Variation in premium volume COUNTRY NON-LIFE LIFE TOTAL Argentina Bolivia Brazil Chile Colombia Costa Rica Ecuador El Salvador Guatemala Honduras Mexico Nicaragua Panama Paraguay Peru Puerto Rico Dominican Republic Uruguay Venezuela Total Figure 1. Variation in premium volume in 2010 in Latin America. Source: own statistics from the information published by each country s insurance oversight authority. In real terms South America registered a larger increase than Central America, at 9.7% compared to 1.9%. Puerto Rico and the Dominican Republic grew 5.7% and 0.6%, respectively, and the Mexican market experienced a 0.5% decline in premiums. Puerto Rico has the highest premium per capita in the region, at 1,958 euros/inhabitant, followed by Chile, (363/inhab.). Next come Brazil 2 (270/inhab.), Venezuela (226/inhab), Panama (199/inhab.), Uruguay (164/inhab.) Argentina (155/inhab.) and Mexico (132/inhab.). Bolivia and Nicaragua are the countries with the lowest per capita premiums. 1, ,900 1,950 2,000 Premiums per capita. Euros Figure 2. Latin America. Premiums per capita The insurance density and penetration have been calculated taking into account the earnings of all the segments of Brazilian private insurance: Insurance, Health, Private pensions and Capitalization.

9 The Latin American insurance market Source: own statistics from the information published by each country s insurance oversight authority and by ECLAC. As for insurance penetration (% premiums/gdp), Puerto Rico 3 's figure again stands out at 16.5%, followed by Chile (4.0%), Venezuela (3.6%), Panama (3.5%), Brazil (3.4%) and Argentina (2.2%). 16.5% 4.0% 3.6% 3.5% 3.4% 2.2% 2.2% 2.1% 2.0% 2.0% 1.9% 1.8% 1.8% 1.8% 1.5% 1.3% 1.2% 1.1% 1.0% 0% 1% 2% 3% 4% 5% 15% 16% 17% % Premium/GDP Figure 3. Latin America.Insurance penetration 2010 Source: own statistics from the information published by each country s insurance oversight authority and by ECLAC. Premium volume in Latin America totaled 91,370 million euros in 2010, for a nominal rise of 19.3%, compared to 10.5% in As stated earlier, the average growth as measured in local currency was 14.2%, which shows that the growth in euros was favored by the appreciation of most local currencies against the single European currency, mainly the Brazilian real and the Colombian peso. On the other hand, the devaluation of the Bolivar in January 2010 caused a 35% drop in premium volume as measured in euros in the Venezuelan market, in contrast with a 23% rise in local currency. The region's eight largest insurers accounted for 95.1% of premiums, and of them the three biggest accounted for 67.1%. Brazil, with a 42.5% share (36.4% in 2009), continued to have the largest market in the region, followed by Mexico and Puerto Rico, which regained third place after being overtaken in premium volume by Venezuela in Life insurance represented 40% of all premiums and did better than non-life, with a rise of 33.6% thanks to a very strong performance by this kind of insurance in the region's largest markets: Brazil, Mexico and Chile. In Brazil, the product known as Vida Gerador de Benefício Livre (VGBL) was once again the main engine of growth, bringing in nearly 16,000 million euros in revenue, for market share of 43% of all Life insurance sold in Latin America. In Mexico there was a 9.3% rise as measured in local currency and 23.6% in euros, thanks mainly to Pension insurance stemming from Social Security Laws and group 3 Premium volume in Puerto Rico includes Health insurance for low-income people. Their premiums are managed by private insurers and paid by the government of Puerto Rico. 9

10 The Latin American insurance market life insurance, which have greater premium volume. After declining the previous year, Life Annuities recovered in Chile. This made for a fine performance by the Life insurance sector, with rises of 19.8% in local currency and 38.4% in euros. Non-Life branches maintained a growth rate of around 11%, with a slight increase of twotenths of a percentage point to 11.4% in Brazil, Mexico and Puerto Rico boast the largest markets, followed by those of Venezuela, Argentina, Colombia and Chile. These seven countries account for 91.7% of the total, and the main sources of growth were Automobile (13.9%), thanks to Its larger role in the market, Personal Accident (28,3%), Worker Compensation (20.8%), and Transport (18.3%). The only branch to decline in 2010 was Health insurance. Data in millions of euros. Nominal growth expressed in euros. Premium Volume COUNTRY NON- LIFE % LIFE % TOTAL % Brazil Mexico Puerto Rico Venezuela Argentina Chile Colombia Peru Ecuador Panama Uruguay Costa Rica Dominican Republic Guatemala El Salvador Honduras Bolivia Paraguay Nicaragua 17,682 7,721 7,313 6,358 5,245 2,448 3, ,177 6, ,019 3,752 1, ,859 14,493 7,943 6,513 6,264 6,200 4,874 1, Total 54, , , Figure 4. Latin America. Premium volume 2010 by country Source: own statistics from the information published by each country s insurance oversight authority and by ECLAC. Automobile insurance again posted double-digit growth of 13.9%, after the slow-down of Revenue totaled 20,643 million euros, and the countries with the highest premium volumes were, in this order, Brazil, Mexico, Venezuela and Argentina. Together they accounted for 85.2% of all premiums. Except for Guatemala and Puerto Rico, all the countries of the region saw their revenue rise. The Health branch contracted 3.3% in 2010, in large part due to the devaluation of the bolivar and the resulting decline in premiums as measured in euros for the Venezuelan insurance market. Venezuela has the second-largest Health insurance market in Latin America and in 2009 it accounted for 38% of all premiums. That share has now gone down to 24%. Puerto Rico features the largest health insurance market in the region, representing half of the premium volume. In Puerto Rico, health care plans for retirees (the Medicare program) continued to decline in 2010 thanks to the spread of the product called Medicare Advantage. All markets posted growth in local currency, except Paraguay. Mexico's, the third-largest, took in 21.9% more than in the previous year.

11 The Latin American insurance market The third largest insurance branch by premium volume is Fire and allied lines, which had revenue of 5,054 million euros in 2010, a rise of 10.4%, down more than 7 points from the previous year. A major factor contributing to this decline was the multi-year renewal of the comprehensive policy held by Petróleos Mexicanos (it was done in 2009 and in 2010 there was no issuance) as Fire insurance premiums fell 30.4% in Mexico. The largest market in 2010 was that of Brazil, with a market share of 25%, followed by Mexico's at 22%, whereas the previous year the order was reversed. Next comes Chile with a 14% share and growth of 21.1%. Latin American insurance market Premiums by branch Premiums in millions of euros Line of business % % share Life 27,383 36, Individual and group plans 24,265 32, Private pension plans 3,119 4, Non-Life 49,185 54, Automobile 18,129 20, Health 12,197 11, Other lines of business 5,986 7, Fire and allied lines 4,576 5, Personal accident 2,193 2, Transport 1,954 2, Third-party liability 1,226 1, Credit and/or Surety 1,025 1, Worker compensation 1,901 2, Total 76,569 91, Figure 5. Latin America. Premium volume by branch 2010 Source: own statistics from the information published by each country s insurance oversight authority. The following are highlights from the region's main insurance markets: In Argentina Non-Life insurance was again the main driving force in the market, thanks mainly to growth in Automobiles and Worker Compensation. The Life insurance product known as VGBL (Vida Gerador de Beneficio Livre) ) has consolidated its status as one of the main sources of growth in the Brazilian market. Sold mainly through banks, this product continues to enjoy tax incentives that have lured money from mutual and pension funds. The Chilean market posted growth of 18.2% (compared to -1.7% in 2009) as both the Life and Non-Life insurance branches expanded. The rise in Life stems mainly from an increase in sales of Life Annuities. In Non-Life, Automobile insurance did well because of a strong increase in the number of registered vehicles, as did Earthquake insurance thanks to increases in rates charged to foreign reinsurers. In Colombia the largest growth came in Non-Life, especially Automobile and Third-Party Liability. In Mexico, premium volume rose slightly (3.9%) thanks to the renewal of the multi-year comprehensive policy held by Petróleos Mexicanos (PEMEX). This was done in 2009 and renewed in

12 The Latin American insurance market For yet another year, the insurance market in Puerto Rico was driven by Health insurance, more specifically the Medicare program. Premium revenue in the Venezuelan market achieved nominal growth of 22.7% but a drop of 3.5% in real terms due to high inflation in that country. The Health and Automobile lines, which account for 80% of the sector, expanded 16.0% and 20.8%, respectively. Growth in Automobile insurance stemmed mainly from changes made in premiums and insured capital. The major increase in Health was caused mainly by greater purchases of private policies by the State. Corporate transactions in 2010 were not numerous, but the ones that did take place were significant: The Superintendency of Private Insurance in Brazil approved the sale of a 60% stake that SulAmérica held in BrasilVeículos to Banco do Brasil. MAPFRE and Banco do Brasil reached full agreement on implementing their strategic alliance in the insurance business. The alliance was formed by creating two holding companies (BB-MAPFRE, for Life and Crop insurance, and MAPFRE-BB, for Automobile and General Insurance) that incorporate the insurance units that both companies have in Brazil. Thanks mainly to this agreement, the MAPFRE group rose in the overall ranking of largest insurance groups in Latin America, taking second place behind Bradesco. In November 2010, the U.S. company MetLife concluded the purchase of American Life Insurance Company (ALICO), the Life insurance unit of American International Group (AIG). ALICO had units in several countries of Latin America. This acquisition has not modified MetLife's position in the ranking of the region's insurance groups, but it did boost its market share by seven-tenths of a point. One of the most important events of 2010 was the powerful earthquake that hit Chile early in the year. It was the sixth-largest quake recorded in the world and the second most intense one ever recorded in Chile. A total of 225,000 insurance claims were filed, 80% of them for damage to homes. Ten months after the catastrophe, the insurance industry had paid out nearly all the claims for household damage (99%), and what remained pending was part of the claims related to industry and businesses. It is estimated that the cost of the disaster will approach $30,000 million, of which the insurance industry will cover $8,500 million once all business claims have been settled. These are more complex due to the difficulty of calculating how much a business loses when it is closed. According to an ECLAC publication 4, 2010 was particularly tough for the region in terms of natural disasters: there were 98 major ones that caused more than 223,000 deaths and affected nearly 14 million people. The estimated cost of these events is in excess of $49,400 million. Although events of a geophysical nature (earthquakes, tsunamis and volcanic eruptions) 5 caused the greatest number of deaths and involve a great economic cost, most disasters had to with the weather: tropical storms and large-scale flooding over broad swaths of territory stretching from Mexico to South America Preliminary results of economies of Latin America and the Caribbean Earthquakes in Chile (February), Baja California (Mexico, April) and Ecuador (August). eruption of the Pacaya volcano in Guatemala (May). 6 Hurricanes Alex (June) and Karl (September) in Mexico, tropical storm Agatha in Guatemala, Honduras and El Salvador (May), heavy rain and flooding in Peru (January) and Brazil (April).

13 The Latin American insurance market Despite a slight fall in the financial result in some countries, results were quite positive. The technical result improved in 13 of the 18 markets that were analyzed 7, thanks to an across-the-board decline in the claims ratio. In the first half of 2011, the insurance sector of Latin America took in premium volume of 50,414 million euros, which marks nominal growth of 18.1% compared to the same period of the previous year. Non-Life branches expanded two percentage points more than Life insurance, to 19%. Accident insurance (both personal and in worker compensation) and Transport continued to post a higher rate of growth than other lines did. Automobile and Health, which have the highest volume, grew around 10%. Datoa in millions of euros. Nominal growth in euros Premiums by line of business. First half of 2011 LINE OF BUSINESS JUNE 2010 JUNE 2011 % Total 42,696 50, Life 16,479 19, Non-Life 26,217 31, Automobile 8,733 9, Health 5,587 6, Other lines of business 4,577 6, Transport 2,512 2, Fire and/or allied lines 2,234 2, Personal accident 1,315 1, Worker compensation 1,260 1, Figure 6. Latin America. Premium volume by line of business, first half of 2011 Source: own statistics from the information published by each country s insurance oversight authority. As for business transactions, the following are worth noting: In February, Zurich and Grupo Santander announced the signing of an agreement aimed at forming a strategic alliance to distribute bancassurance in Latin America over the next 25 years. Under this accord, the Swiss group would acquire a 51% stake in the Pension, Life and General insurance operations of Santander in Brazil, Mexico, Chile, Argentina and Uruguay and would take on the running of the companies. The Spanish bank would retain the remaining 49% and sign a distribution agreement for the sale of insurance products in each country. ING sold its Pension and Life insurance business to Colombia's Grupo de Inversiones Suramericana (Grupo Sura). The sale does not a 36% stake held in Brazilian insurer SulAmérica. As part of its strategy of global expansion and broadening of its presence in Latin America, the German group Talanx announced in April it had acquired the Argentine and Uruguayan units of L'Union de Paris, and in July it announced the purchase of Mexican insurance company Metropolitana. Finally, we comment on the most relevant legislative changes made during the two years being analyzed: In February 2011, the Argentine insurance oversight authority issued Resolution , which made major changes to the regulatory framework for reinsurance. The resolution went into force in September As of that date, Argentine insurance companies can reach reinsurance contracts only with Argentine reinsurance companies; in other words, with companies based in that country or with the Argentine units of for- 7 No information is available on results in the Dominican Republic and Puerto Rico. 13

14 The Latin American insurance market eign companies, with a local capital of at least 20 million pesos (approximately $5 million). Foreign reinsurers that do not set up Argentine units may only accept risks from Argentine insurers when, due to the size and characteristics of the ceded risks, they cannot be covered by the Argentine reinsurance market. The National Council of Private Insurance approved in December 2011 rules for microinsurance in Brazil. Under this resolution micro-insurance can be sold over media such as cell phones and the Internet. It also establishes the maximum limit for the insured sums. This will serve as a parameter for determining whether a particular product can be classified as micro-insurance. In Colombia, Decree 2281 of 2010 was published, regulating the institution and functions of the Financial Consumer Ombudsman. Also, Decree 2555 of the same year brings together all the rules concerning insurance, insurance entities, ARP and special insurance. Until now these were spread out in several different decrees. In June 2011, after a second round of debate in Costa Rica, the Law on Regulation of Insurance Contracts was approved. In Ecuador, in October 2011, the organic law on Regulating and Controlling Market Power was passed. It is also called the "Anti-Monopoly Law." The goal is to correct, prohibit, regulate and sanction four basic infractions: abuse by economic operators with market power, agreements that go against the principle of competition, restrictive practices and disloyal practices. The rule gives banks one year to break ties with stock brokers, insurance companies, fund administrators and trust funds. In April 2010 in Peru, the regulations stemming from the Law on Universal Health Insurance, with the goal of establishing, with the goal of establishing dispositions that allow implementation of universal health insurance in that country. The new Law on Insurance in Venezuela went into force 29 July, This law, which repeals the Law on Insurance and Reinsurance that had been in effect since 1994, sets up rules for the control, oversight, supervision, authorization, regulation and functioning of insurance in Venezuela. 14

15 3. Analysis by regions and countries 15

16 Mexico 3. ANALYSIS BY REGIONS AND COUNTRIES 3.1 MExico Macroeconomic environment In 2010 the Mexican economy grew 5.4%, a rise which partially offset the heavy contraction of 6.1% that it posted in The recovery was driven by strong external and internal demand, which expanded 25.6% and 5.1%, respectively. Private consumption rose 5.0% thanks to an increase in payrolls and a slight recovery in credit. Primary activities registered an annual increase of 3.3%. They were fueled by agriculture (4.0%) with excellent harvests of some crops, (corn, mango, avocado, oranges and sugar cane, among others), thanks to good weather. Secondary activities grew 6.0%, highlighted by the automobile industry, which benefited from the process of reconfiguration of auto companies in North America, as some plants were moved to Mexico to cut costs. Tertiary activities saw production rise 5.0% with a major expansion of activities related to the overseas sector. In the area of trade policy, in November the start of formal negotiations was announced between Brazil and Mexico to reach a strategic economic integration accord. 1,000, , , , ,768755, , , , ,184 8% 6% 4% Millions of euros 600, , ,000 2% 0% -2% -4% -6% -8% GDP in current prices % Real variation in GDP Inflation Figure 7. Mexico. GDP Source: own statistics from the information published by ECLAC and the Bank of Mexico. The inflation rate was 4.4% (compared to 3.6% in 2009), 0.4 percentage points above the goal set by the central bank. The unemployment rate fell slightly, by three tenths of a point, to 6.4%. The exchange rate rose with the major influx of portfolio capital and the monetary policy that was adopted. 16

17 Mexico As for the overseas sector, a strong performance by exports along with a rise in foreign direct investment reduced the current account deficit to 0.5% of GDP (0.7% in 2009). For 2011 ECLAC estimates GDP will rise 4%, as exports are not expected to be as robust and the drive from domestic demand is seen as moderate. Insurance market The Mexican insurance market posted premium volume of 241,891 million pesos (14,493 million euros), a nominal rise of 3.9% and -0,5% in real terms. This scant growth is due to the effect of the multi-year renewal of the comprehensive insurance policy of Petróleos Mexicanos (PEMEX), which was carried out in February 2009 but did not take place until Excluding this one-off effect, real annual growth would have been 2.4%. Life branches took in million pesos (5,823 million euros), which marked a realterms decline of 1.7% compared to This was caused by the elimination of tax breaks that had been granted to savings-oriented insurance plans. Meanwhile, Pension plans derived from Social Security Laws grew 81.0% due in part to the incorporation of insurance policies from the Institute of Social Security and Services of State Workers, which did not have this right. Line of business (1) Direct premiums (2) Accident and Illness branch. Premium volumes Millions of pesos Millions of euros % % real Total 241,891 14, Life 97,184 5, Individual life 56,823 3, Collective life 20,082 1, Group life 20,280 1, Pensions 15, Non-Life 128,858 7, Automobile 50,248 3, Health 2 33,639 2, Earthquake and other catastrophic risks 11, Other lines of business 8, Fire 7, Transport 5, Third party liability 5, Personal accident 2 3, Crop 1, Credit Figure 8. Mexico. Premium volume 2010 by line of business Source: own statistics with data published by the Mexican Association of Insurance Institutions and the National Insurance and Finance Commission. 17

18 Mexico Non-Life branches had premium volume of 128,858 million pesos (7,721 million euros), which marked a real decline of 4.7% compared to This stems mainly from a fall of 54.5% in Fire insurance, in which the multi-year renewal of the comprehensive policy of Petróleos Mexicanos played a big role. The Transport and Third-Party Liability lines also saw declines, of 3.3% and 1.5%, respectively. The branches that showed the most growth were Automobile, Health, Credit and Personal Accident. Millions of euros 20,000 15,000 12,655 14,493 11,915 12,633 12,335 10,000 5, Non Life Life Real growth 20% 15% 10% 5% 0% -5% Life Automobile Health Pensions Earthquake and other catastrophic risks Property & Casualty Fire Transport Third-party liability Personal accident Crop insurance Credit 20.8% 13.9% 6.6% 4.7% 3.7% 3.0% 2.3% 2.1% 1.6% 0.8% 0.4% 40.2% Figure 9. Mexico. Evolution of premiums and market share in 2010 by branch As of the end of 2010, the insurance sector was made up of 99 insurance companies, one more than in Of these, 14 were linked to some financial group and 58 had mainly foreign capital, with authorization to operate as units of financial institutions in the sector. Of these insurance institutions, seven had mainly foreign capital while at the same time belonging to a financial group. In 2010, the 10 largest insurance groups in the country accounted for 73.0% of premiums. First place in the overall ranking of insurance groups continued to be held by Metlife México, which boosted its market share to 17%. As for other positions, Seguros Banamex, MAPFRE and Banorte Generali rose one rung while Qualitas slipped by one. METLIFE MEXICO GNP AXA SEGUROS INBURSA BBVA BANCOMER MONTERREY NEW YORK LIFE SEGUROS BANAMEX QUALITAS MAPFRE BANORTE GENERALI 5.8% 5.6% 5.4% 4.4% 4.3% 3.5% 3.1% 12.2% 11.5% 17.0% ,000 1,500 2,000 2,500 Premium volume (millions of euros) and market share (%) Figure 10. Mexico. Ranking Overall Source: own statistics with data published by the National Insurance and Finance Commission. Note: Does not include pensions. 18

19 Mexico In the Non-Life branch, Axa continued to top the ranking with a market share of 15.7%. Qualitas and Seguros Atlas rose, while Inbursa and Banorte Generali fell one spot. The rest of the companies listed on the rankings maintained their positions. AXA SEGUROS GNP QUALITAS INBURSA MAPFRE ABA SEGUROS METLIFE MEXICO SEGUROS ATLAS BANORTE GENERALI BBVA BANCOMER 7.6% 6.9% 5.2% 4.4% 4.3% 3.8% 3.5% 3.3% 15.7% 13.6% ,000 1,200 1,400 Premium volume (millions of euros) and market share (%) Figure 11. Mexico. Ranking Non-Life Source: own statistics with information from the National Insurance and Finance Commission. In the Life insurance business, the top 10 groups accounted for 88.3% of all premiums. Metlife México continued to lead the ranking with a market share of 33.9%, followed by GNP, Monterrey New York Life and Banamex, which all rose on rung because BBVA Bancomer slipped to fifth place. Allianz joined the ranking in 10th place, taking the place of Seguros Santander, which dropped out of the top 10. METLIFE MEXICO GNP MONTERREY NEW YORK LIFE BANAMEX BBVA BANCOMER AXA SEGUROS INBURSA BANORTE GENERALI ARGOS ALLIANZ 10.4% 9.4% 9.1% 8.7% 5.8% 4.3% 2.6% 2.4% 1.8% 33.9% ,000 1,500 2,000 Premium volume (millions of euros) and market share (%) Figure 12. Mexico. Ranking Life Source: own statistics with information from the National Insurance and Finance Commission. Note: Does not include Pensions 19

20 Mexico Results The net result for the year was 15,087 million pesos (904 million euros), a fall of 7.5% compared to 2009 and a result on premiums of 9.4%. The decline is due to a worsening of the technical result because of an increase in the expense ratio, which was 32.4%. But the financial result improved by 10.8%, rising to 38,030 million pesos (2,278 million euros). The technical-financial result in this line of business remained more or less steady at 14.0% (14.1% in 2009). % of net earned premiums 23.0% -8.9% 108.9% 31.5% 77.3% 23.6% -9.6% 109.6% 32.4% 77.2% Financial Result Technical result Expenses Claims ratio Figure 13. Mexico. Result of the technical account Source: Done by MAPFRE with information from the National Insurance and Finance Commission. New legislation In March 2010 the Treasury and Public Credit Secretariat presented to the Federal Commission for Regulatory Improvement (COFEMER) a draft of the Law Governing Insurance and Financial Institutions, the goal of which was to set rules for comprehensive administration of risks, oversight and auditing in line with the model spelled out in Solvency II. Preview of 2011 In the first half of 2011 the Mexican insurance sector posted premium volume of 134,728 million pesos (8,000 million euros), for a nominal rise of 11.3%. 20

21 Mexico Premium volume 1. First half of 2011 Line of business Millions of pesos Millions of euros % Total 134,728 8, Life 60,309 3, Non-Life 74,419 4, Automobile 26,691 1, Health 18,268 1, Fire 13, Transport 3, Accident 2, Other lines of business 10, Figure 14. Mexico. Premium volume in 2011 by line of business (1) Direct premiums Source: Done by MAPFRE with information published by the Mexican Association of Insurance Institutions and the National Insurance and Finance Commission. Life branches showed a nominal rise of 8.4% and posted revenue of 60,309 million pesos (3,581 million euros). Group Life and Pension plans derived from Social Security Laws saw robust increases. As for Non-Life branches, practically all of them posted double-digit growth. Highlights included Fire (20.9%) and Transport (25.3%). 21

22 Central America 3.2 CENTRAL AMERICA, PUERTO RICO AND THE DOMINICAN REPUBLIC CENTRAL AMERICA Economic environment In 2010, the Central American economy posted average GDP growth of 2.0% (compared to 1.5% in This was fueled by strong internal demand, both in terms of consumption and investment, and a rise in demand from abroad. Exports of goods and services were particularly strong in El Salvador and Nicaragua (countries that belong to MERCOSUR along with Mexico and the Dominican Republic) whose rates of expansion exceeded 10%. At year's end, rates of inflation in the countries of Central America ranged from 2.1% in El Salvador to 9.1% in Nicaragua. For 2011, ECLAC foresees an improvement in all of the region's economies, with growth varying from 8.5% in Panama to 3% in Honduras. 35,000 31,162 12% 30,000 27,428 10% Millions of euros 25,000 20,000 15,000 10, % 4.2% 20, % 16,091 11, % 8% 6% 4% 5, % 2.8% 4,813 2% 0% Guatemala Costa Rica Panama El Salvador Honduras Nicaragua GDP in current prices % Real variation in GDP Source: own statistics using information published by ECLAC. Figure 15. Central America. GDP 2010 The economy of Panama grew 7.5% (3.2% in 2009) thanks to an expansion of consumption and private investment. This growth reflects a rise in most sectors of the economy, highlighted by transport (15.5%), extraordinary expansion of the port sector due to greater movement of containers, telecommunications (17.7%), the commercial sector (11.1%), the generalized rise in sales of household goods, vehicle accessories, textile and pharmaceutical products, the hotel and restaurant sector (11%), due to the greater number of tourist visits to the country, and the construction sector (6.7%), thanks to major investments being made in public works projects. The inflation rate finished 2010 at 4.9% as a result of a rise in fuel and food prices. For 2011, ECLAC forecasts economic growth of 8.5%. 22

23 Central America Costa Rica's economy grew by 4.2% (-1.3% in 2009) on the back of an expansion in exports and moderate growth in consumption and gross investment. On the supply side, highlights are growth in agriculture and livestock (6,5%), driven by recovery in production which was damaged in 2009 by bad weather, manufacturing (3.7%), a reactivation of internal and external demand, and the transport sector (6.4%), which was helped by greater demand for services linked to other countries and to communications. The year ended with inflation at 1.8%, stemming from a rise in prices for farm goods and regulated services. For 2011, ECLAC estimates the economy will grow 3.2%. En El Salvador, the GDP growth rate was 1.4% (-3.1% in 2009), thanks to the strength of the export sector, which benefited from foreign demand for manufactured goods. The impact of domestic demand on GDP expansion was very limited. This was because of a slow recovery in jobs and remittances and low levels of credit granted to the private sector. As for activity by sectors, we would note the growth in the farm and livestock sector (3.4%) due to the rise in international prices for sugar and coffee, and the manufacturing sector (2.2%), which was favored by demand from the United States. The year ended with an average inflation rate of 2.1%. For 2011, ECLAC is forecasting economic growth of 2.5%. The economy of Nicaragua posted economic growth of 4.5% (-1.5 in 2009), thanks to a 32% rise in exports and a slight increase in household consumption, due to a rise in the minimum wage and an increase in remittances sent to families. By sectors, mining rose 39.8% as a result of the rise in international prices for gold and silver and the reopening of one of the country's largest mines. Year-on-year inflation was 9.1% due to the recovery in economic activity and the rise in prices for oil and some foodstuffs because of adverse weather. For 2011 ECLAC is estimating GDP expansion of around 4%. GDP growth in Guatemala was 2.8% (0.5% in 2009), thanks mainly to a rise in exports that was prompted by recovery of the U.S. economy and strong domestic demand. On the supply side, the sectors posting the highest growth were communal services (5.3%), commerce (4.4%) and agriculture (0.6%). The constructor sector shrank 11.9% due to scant private investment plans, a shortage of bank financing and slow execution of public works projects. Inflation hit 5.4% because of a rise in prices for foodstuffs and beverages, a result of natural disasters that occurred in ECLAC forecasts economic growth of around 4% in Finally, in Honduras, the rise in domestic consumption and the recovery in foreign demand favored an expansion of economic activity, leading to GDP growth of 2.8% (1.9% in 2009). By sectors, most posted growth, led by commerce (3.2%) because of the rise in imports and remittances sent to families, and transport (6.7%). Inflation ended the year at 6.5% because of the increase in prices for oil and basic foodstuffs, especially wheat and beans. In September 2010, Honduras signed an agreement with the International Monetary Fund that will give it greater access to international financial markets. ECLAC forecasts economic growth of 3% in

24 Central America Insurance market The slow recovery of most economies of the Central American region after the recession of 2008 and 2009 is still reflected in the insurance industry. In 2010 the insurance market had production of 2,264 million euros, which makes for an average real increase of 1.9% compared to 3.9% in Despite this, the insurance sector's contribution to the economy (premiums/gdp) remained at 2,0% (compared to 2.1% in 2009). This reflects the lack of an insurance-minded culture in the region and low levels of income. The average per capita premium was 52 euros, ranging from 15 euros in Nicaragua to 199 in Panama. % Premiums/GDP or Penetration (P) Premiums per capita or Density (D). Euros Figure 16. Central America. Penetration and density 2010 Source: own statistics from the information published by each country s insurance oversight authority and national statistics institute. All the countries of the region saw premium volume growth in euros that surpassed expansion as measured in local currency, thanks to the appreciation of their currencies compared to the euro. Costa Rica's production grew significantly, at a rate of 23.2% (compared to 4.0% in 2009), thanks to participation from new companies and new products. Guatemala and Panama expanded by 14.5%. Honduras, Nicaragua and El Salvador registered increases of 12.1%, 9.3% and 8.6%, respectively. In Life insurance, all the countries of the region expanded except Panama, where premiums fell by 2.7%. Highlights included growth in Guatemala (19.0%) and Costa Rica (16.4%). Despite stiff competition in rates, Non-Life branches did well, with double-digit increases in all countries except Nicaragua, where they expanded by 8%. 24

25 Central America % Premiums. Millions of euros % % % % % 0.6% % 3.0% 2.0% 1.0% 0.0% 0 Panama Costa Rica Guatemala El Salvador Honduras Nicaragua Non Life Life Real variation -1.0% Figure 17. Central America. Premium volume in 2010 Source: own statistics from the information published by each country s insurance oversight authority and by ECLAC. Results were favored by an across-the-board improvement in the claims ratio, which made for an improved combined ratio in most countries, except Costa Rica and El Salvador, where it rose due to an increase in the expense ratio. The net result improved in Panama, El Salvador, Guatemala and Honduras and remained at double-digit levels in all countries, highlighted by Honduras at 22.7%. % of earned premiums net of reinsurance Ratio (%) Panama Costa Rica El Salvador Guatemala Honduras Nicaragua Claims ratio Expenses Combined ratio (%) Financial result 13.2 n.d Tech.-Fin. Result 14.8 n.d Net result Source: MAPFRE Figure 18. Central America. Results With premium volume of 919 million balboas (697 million euros), Panama's insurance market remains the largest in Central America, with nominal growth of 8.5% and real growth of 3.4%. The sector's output accounts for 3.5% of GDP, the highest in the region. The Panamanian insurance market was made up of 27 companies, three more than in Non-Life branches were driven by growth in Automobile (20.8%), Surety (49.0%), Technical risks 8 (26.0%) and Multi-peril (16.6%). Life insurance contracted 2.7%. The claims ratio went down three points to 52.7%, as did net expenses, by half a point. This gave rise to a 3.5-point improvement in the combined ratio. The net result was 13.4% (54 million euros). 8 Technical Risks covers damage to windows and glass, equipment, household appliances and machinery.. 25

26 Central America 26 Costa Rica's insurance sector, the region's second-largest, posted nominal growth of 6.8% and real-terms expansion of 1.9%. Premium volume was 377,750 million colones (550 million euros). The entry into force in July 2008 of the Law Regulating the Insurance Market" opened up Costa Rica's insurance market and created the General Insurance Supervisor (SUG- ESE in Spanish), which was coordinated by the Pensions Supervisor for a transitional period of 18 months, until February SUGESE's tasks include developing new rules to facilitate the working of the market and guarantee protection of policy-holders. In line with this goal, in November 2010, the Regulations on Insurance Sales" were published and lawmakers are debating a bill called the Insurance Contract Act" which will complement the legislative framework which goes back to Another rule planned for 2011 was one opening up the market for mandatory insurance to competition, specifically mandatory Automobile insurance and Occupational Hazard insurance, which until now have been monopolized by the National Institute of Costa Rica. Net claims fell seven points to 62.9% as the result of measures adopted in the scrutiny of claims. But the expense ratio rose by 13 points to 38.9%. This stemmed from an increase in administrative costs at the National Insurance Institute as a result of the amortization of several investments aimed at achieving greater levels of efficiency and competitiveness, and also from heavy administrative costs faced by new companies authorized to operate in this country's market. The net result was 16.8% (61 million euros). As of December 2010, the Costa Rican insurance sector was made up of seven companies, of which four dealt exclusively with personal insurance. One handled only general insurance, and two operated in Life and Non-Life insurance. There are also four countries with conditional authorization; in other words, they have obtained authorization but must meet a series of pre-requisites in order to get up and running. As for insurance mediation, as of December 2010 there were seven brokerage companies active, 78 agencies, seven insurance brokers and 1,186 insurance agents. For 2011 SUGESE still faced the following projects linked to strategic, institutional goals: Overall reform of regulations on solvency of insurers and reinsurers, regulations on defending and protecting insured parties, modification of regulations on asset sufficiency of financial groups and conglomerates and modifications to the Transit Act and the labor code. These changes are needed as to open up mandatory insurance to competition. As of December 2010, the insurance sector of El Salvador had issued premiums to the tune of $443 million, or 344 million euros, with nominal growth of 2.8% and real growth of 0.7%. The lines that grew the most were Life (mainly Disability and Pensions) with a 3.8% increase and Accident and Illness at 4.2%. Automobile insurance expanded slightly, by 0.3% due to restrictions on granting of consumer loans and a fall in automobile sales. The branches that did not perform as well were Fire and Allied Lines, and Credit and Surety, which declined 0.6% and 4.7%, respectively. They were hit by a slump in economic activity and limits to granting of housing loans. Net claims improved nearly two points to 49.6%, thanks to a fall in claims in property damage insurance as a result of a more restrictive selection policy. The claims ratio

27 Central America for Automobiles fell thanks to the growing number of cars that are equipped with antitheft devices that allow for tracking down a stolen vehicle. Although the expense ratio rose 2.5 points to 36.2%, the Salvadoran market had the region's best combined ratio, at 85.8%. In 2010 Guatemala's insurance sector posted premium volume of 3,805 million quetzales (357 million euros), for a nominal increase of 7.4% and a real-terms one of 1.9%. With the exception of Automobile and Third-Party Liability, all lines of insurance grew and were favored by bancassurance as a sales channel. The branches that stand out are Health (13.4%), Earthquake (13.1%) and Transport (13.8%). The line with the biggest market share continued to be Automobile at 25.3%, followed by Health (20.5%) and Life (19.6%). The net claims ratio was again the highest in the region, even though it fell by nearly three points to 64.4%. The causes were stiff competition, which in many cases led companies to charge insufficient rates, and the high level of crime in the country. The branches that were most affected were Automobile, Accident and Illness, where were also hit by higher prices for spare parts, medication and hospital services. The expenditure ratio came down by nearly a point, so the combined ratio improved to 97.2% (compared to 100.9% in 2009). The net result improved half a point to 10.1% (24 million euros). In July 2010 the Congress of the Republic of Guatemala approved decree of the Insurance Activity Act, which came into force in January The decree regulates the incorporation, organization, merger, operation, registration and liquidation of insurance companies, as well as the control to be exercised thereon by the Banking Supervisor. In Guatemala, legislation applicable to insurance and finance companies dated back to the 1950s and 60s. In 2010 the insurance sector of Honduras took in 5,693 million lempiras in premiums (228 million euros). That marked nominal growth of 6.3% and real growth of -0,1%. The most robust growth was seen in Third-Party Liability (44.1%), Fire and Allied Lines (17.4%) and Transport (15.7%). Professional risks and Surety posted major declines of 26.3% and 11.7%, respectively. The claims ratio went down five points to 52.3%, which offset a rise of four points in the expense ratio to 89.0%. The net result for the year was 22.7% (22.3 million euros), two points more than in The region's smallest market, that of Nicaragua, saw premium volume of 2,225 million cordobas (88 million euros), which represents nominal growth of 9.9% and real growth of 0.6%. The lines that did best were Health (11.1%), Fire (10.2%%) and Accident and Illness (5.0%). Net claims fell to 42.0%, which was the region's lowest rate. The sector's financial result was 12.3%, which made for a technical-financial result of 18.4%. The net result for the year was 18.5% (9.6 million euros). As for the total ranking of groups in 2010, it remained unchanged in El Salvador and Guatemala and shifted in Panama, Honduras and Nicaragua. En Panama, Generali rose one spot and Ancon took over last place on the list, while in Nicaragua, América and Lafise climbed one rung and the Instituto Nicaragüense de Seguros moved up to third place. Concentration of the insurance sector in Central America remains at levels similar to those observed in