Further consolidation is expected over the coming years through further exits by marginal insurers, increases in capital standards, and further divestment from banks (and strategic alliances) with some potential in-market mergers, said Credit Suisse in a recent report.
"The Asian life insurance market has grown at a compound rate of 15.4 per cent p.a. in the last ten years (18.5 per cent in the past five years) and outgrown global growth in nine of the last ten years. With a favourable demographic profile in many countries and low penetration rates, we expect this superior growth rate to continue at least over the next decade," it said.
The low interest-rate environment also remains a key challenge for the Asian life insurance sector, especially in markets with high levels of long-term guarantees such as Korea, Japan and Taiwan. In addition, more recent regulation changes in India and China have created some near-term growth issues for these markets, it said.
The bank's preference in the region is for higher growth markets with lack of structural issues (China, Australia and HK/SEA) at reasonable prices. It is overweight on these markets with key picks being China Pacific and Ping An in China; AMP in Australia; and AIA (and Prudential) for Southeast Asia exposure, given lack of liquid stocks in the individual markets.
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