Hungary Insurance Report Q2 2010

This report differs from its predecessors in several respects. In our analysis of competitive conditions, we provide a much more comprehensive ranking of insurance companies in the major segments from the point of view of the organisation that is providing the data (in practice, almost always the national insurance regulator or the national insurance trade association). In Poland, for instance, the three largest non-life companies in the first half of 2009 – in terms of gross written premiums – were Allianz, Generali Providencia and Groupama Garancia, whose market shares were 32.5%, 20.0% and 10.4% respectively. In the life segment, the leaders in the first half of 2009 were ING, Aegon and Generali Providencia, whose market shares were 21.4%, 11.3% and 11.0% respectively. Over time, we hope to derive insights from observing how market shares change. We emphasise, though, that a decline in share of gross written premiums is not automatically a bad thing and is often the result of a deliberate corporate decision to focus on more profitable business lines.

In this report, we also provide a breakdown of the insurance sector by line from the point of view of the regulator or the trade association. In Poland, for instance, the largest non-life lines in calendar 2008 were compulsory motor third party liability (CMTPL), land vehicles voluntary insurance (CASCO) and fire and diverse risks. These accounted for 31%, 22% and 22%, respectively, of total non-life premiums. Over time, we should be able to use this information to bring greater sophistication to our forecasting process.

Writing in January 2010, we have been able to ensure that the report includes actual data for 2008. We have generally been able to use data that have been published over the course of 2009 to adjust our forecasts for the year as a whole. We have also extended the forecasts out to 2014. We estimate total premiums in 2009 of HUF839,881mn. This includes non-life premiums of HUF425,379mn and life premiums of HUF414,502mn. In 2014, the corresponding figures are forecast to be HUF1,297,449mn, HUF650,649mn and HUF646,800mn. In terms of the key drivers that underpin our forecasts, we are looking for non-life penetration to rise from 1.67% in 2009 to 1.96% in 2014, and for life density to rise from US$220 to US$333. Our proprietary Insurance Business Environment Rating for Hungary is 59.1.

This quarter, we include a discussion of developments within regional markets on the basis of results published by major cross-border companies in relation to Q209 or Q309 and the latest information provided by regulators and/or trade associations. In local currency terms, we saw non-life premiums shrink marginally for Hungary, in a similar fashion to Croatia and Slovakia.

Hungary’s Insurance Sector in Q210 As of January 2010, the latest industry statistics available from the insurance trade association MABISZ pertained to H109 and made depressing reading. Total premiums for the six months to the end of June 2009 amounted to HUF473,206mn, or 13.3% less than in the previous corresponding period. CMTPL premiums fell by 3.6% to HUF67,836mn, while other non-life insurance premiums dropped by 3.0% to HUF221,777mn. Life premiums slumped by 23.0% to HUF188,334mn. By these measures, Hungary’s non-life segment performed slightly below that of its regional peers. However, the collapse in life premiums was one of the most severe in Central and Eastern Europe.

If Hungarians were less able to buy life insurance in the first half of last year than they had been previously, they were also less able to buy more straight forward products. CMTPL premiums fell from HUF70,365mn in H108 to HUF67,836mn in H109. CASCO premiums dropped from HUF50,803mn to HUF47,956mn. Fire/related risks was unusual in that premiums actually rose slightly.

The pain in the life segment was not evenly spread over the leading players. Allianz’s life premiums roughly halved to HUF13,114mn. Those of Aviva dropped by a similar percentage to HUF11,401mn.

ING’s life premiums fell by about one fifth to HUF40,381mn; those of Groupama Garancia by about one quarter to HUF18,274mn. However, AEGON’s premiums for H109 were only marginally lower than those of the previous corresponding period. The life premiums of Generali/PPF’s Hungarian subsidiary dropped from HUF26,259mn to HUF20,788mn. Needless to say, most of the companies that also participated in the non-life segment fared somewhat better there.

In its report for the three quarters to the end of September 2009, Vienna Insurance Group noted that its Hungarian subsidiary, Union, had achieved double digit growth in premiums. This was not clear from MABISZ’s figures for H109: however, in the first half of the year, Union was undoubtedly one of the few insurance companies in Hungary to achieve growth in total premiums.