Insurers' global results for 2004 showed the industry continued expanding and regaining strength, with inflation-adjusted premiums rising by 2.3 percent, to $3.244 trillion, Swiss Re reported today.
The large, Zurich-based reinsurer's "sigma" study includes a prediction that this year the non-life insurance sector will decelerate while life will see a gain in momentum.
According to the company's figures, $1.395 trillion in premium revenue came from non-life business and $1.849 trillion from life business.
"Life premiums returned to growth, while non-life insurers reaped the benefits of focusing on underwriting discipline," Thomas Hess, head of Economic Research & Consulting at Swiss Re, said in a statement issued with the report. "With its financial strength improving further in 2004, the industry is in good shape to leverage growth opportunities in 2005."
Swiss Re said non-life business expanded by 2.3 percent in 2004, following substantial increases of 9 percent in 2002 and 6.4 percent in 2003.
The study found growth in the United States and Western Europe largely counter-balanced a minor decline reported in Japan. Premiums in the emerging markets rose by 7.7 percent on average in 2004. China, Russia, South Africa and India recorded double-digit real growth rates, Swiss Re said.
According to the reinsurer, non-life insurers used tight terms and conditions and disciplined underwriting to post positive underwriting results, despite the record-high catastrophe losses in 2004.
The insurers' conservative investment strategy and modest financial market performance in 2004 resulted in only average investment results, said Swiss Re. However, the company's study found that combined technical and financial profits pushed the operating return on sales to double-digit levels and that non-life insurers continued to strengthen their capital base in 2004.
Swiss Re said 2.3 percent growth in life premiums was led by increases in Western Europe, Oceania and most emerging markets.
The reinsurer said the life premium growth was "somewhat offset by stagnation in the U.S. and the ongoing recession in Japan."
Changes in pension regulation and renewed consumer confidence in life insurance pushed premiums up by 4 percent in Western Europe, Swiss Re said. The company said the United Kingdom had turned around a declining trend of previous years, with upbeat premium income.
The study found sustained economic growth in developing countries resulted in life premiums expanding by 7.4 percent. South and East Asia, the largest emerging areas, recorded life growth close to 10 percent, Swiss Re reported.
Life insurers maintained a low equity exposure in 2004 and retained profits, increasing risk capital and reducing pressure on their balance sheets, Swiss Re said.
The United States led all industrialized counties in premiums, with non-life premiums increasing 2 percent to $603 billion and life increasing 0.1 percent to $494.8 billion.
Among the emerging markets the lead was held by South and East Asia with China reporting non-life premium growth of 17 percent and Hong Kong reporting 30.8 percent growth for life.
Looking ahead, Swiss Re said non-life business is expected to expand at a slow pace this year, especially in industrialized countries. While sustained global economic growth will foster insurance demand, pricing developments will hold back premium growth, the company said.
Assuming average claims levels, the averge return on sales for non-life may be a low double-digit figure again in 2005, according to Swiss Re.
Swiss Re said life premiums are set for continued growth, and sales of savings products are expected to pick up gradually. Regulatory changes may shift more pension business to private insurers, particularly in Europe, the company said. In the emerging markets, which have a wide mortality risk protection gap, life premiums will grow around 2.5 percent faster than gross domestic product in 2005.
Swiss Re said its sigma study "World insurance in 2004″ examined insurance markets in 145 countries, with explicit references to 88.
Swiss Re has posted English, German, French, Italian and Spanish versions of its study on the Web at 'http://www.swissre.com/sigma
Printed edition requests should include a customers address and can be ordered online at sigma@swissre.com or by telephoning Zurich: 41 43 285 25 51 fax 41 43 285 4749 or New York: 212 317-5135 fax 2 12 317-5455.
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