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Insurers in Asia report steady embedded value growth amid COVID-19 pandemic

Milliman today released its annual ‘2020 mid-year embedded value results: Asia’ report. This update supplements the ‘2019 embedded value results: Asia’ report released in September 2020, and includes 2020 mid-year embedded value (EV) and value of new business (VNB) results posted by major multinational and domestic life insurers across Asia.

“Most companies in the region recorded steady EV growth in the first half of 2020 despite the economic impact of the COVID-19 pandemic,” said Milliman Principal and Consulting Actuary Paul Sinnott. “The growth in VNB was mixed across Asian markets, with new business sales in some markets severely affected by government restrictions in response to the coronavirus.”

A complimentary copy of the report is available for download here.

A few key insights from the report include:

  • The China and Japan markets led EV growth in the Asia region with most insurers recording double-digit growth in EV.
  • When compared with the first half of 2019, changes in VNB and new business margins in the first half of 2020 were varied. China, which entered and exited lockdown earlier than other Asian markets, was less affected than most VNB, growth-wise. In Hong Kong, the continuing social unrest, restrictions on travel from mainland China, virus-related lockdowns and lower interest rates all contributed to a significant decline in VNB.  
  • All multinationals disclosing results reported a decline in VNB, which they commonly attributed to lower new business sales, unfavourable economic changes and changes to operating assumptions in key markets.
  • The COVID-19 pandemic led to a greater focus on product innovation and digital transformation across the region. Insurers and regulators have taken steps to facilitate digital sales in response to lockdowns and social distancing measures adopted by most governments. This helped insurers in some markets mitigate reductions in sales to an extent.
  • The pandemic has also typically increased demand for protection products across Asia.

For more details, please contact Paul Sinnott in Hong Kong at paul.sinnott@milliman.com.

Emerging actuarial outsourcing trends

Globally, for several years, insurers and reinsurers have been outsourcing actuarial work to captive units or third-party service providers. Over the past couple of years, there has been renewed interest in actuarial outsourcing, with an increasing number of insurers and reinsurers either setting up new outsourcing units or expanding their existing ones.

This trend is especially true for life insurance companies, which are under increasing pressure to reduce costs, especially in the face of demanding regulatory changes. In order to uncover trends related to actuarial outsourcing services in the life insurance industry, Milliman consultants conducted a survey of outsourcing units of life insurers and reinsurers with global operations. While the outcomes of the survey reaffirm some prevailing notions, they also uncover some emerging trends.

To learn more, download Milliman’s “Global life insurance / reinsurance actuarial outsourcing survey.”

Asian life insurance growth story continues boosting embedded value and new business values

Milliman has released its latest report, 2017 Mid-Year Embedded Value Results (excl. Japan), which summarises mid-year 2017 embedded value (EV) results disclosed by Asian insurers in eight key countries. The report examines the results at a company and country level and supplements the 2016 Embedded Value Results: Asia (excl. Japan) report released in August 2017. It also includes an update of the India 2016 full-year results, not available earlier due to the market’s March financial year-end. The findings highlight an overall increase in growth of EV, increase in value of new business (VNB) and improvement in new business margins.

‘As expected, positive performances by Asian equity markets and improving yields have led to an increase in the EV of life insurers within the region,’ said Milliman principal and consulting actuary Paul Sinnott. ‘These favourable economic conditions, combined with refined product strategies and improved distribution channel productivity, continue to drive growth in life insurance premiums, margins and the overall business in Asia.’

Key findings from the report include:

• Overall, insurers have reported positive gains in their 2017 mid-year embedded values over their 2016 mid-year values, with many companies showing single-digit EV growth but some posting larger gains in Hong Kong and mainland China.
• Hong Kong and mainland China insurers continued to report significant increases in VNB in the first half of 2017 compared to the first half of 2016, with over 50% increases in VNB for several companies, primarily driven by strong new business sales.
• Nearly all operating entities reported an increase in their new business margins between the first half of 2016 and the first half of 2017, with single- or double-digit increases in new business margins for many.
• As initial public offering (IPO) activity among insurers continues in India, companies are adopting the market-consistent Indian Embedded Value methodology (which is prescribed for IPO disclosures).

A copy of the report is available for download here.




Proposed changes to U.S. GAAP: An impact analysis of proposed targeted improvements

The Financial Accounting Standards Board (FASB) has proposed significant changes to accounting standards for long duration insurance contracts to address several stakeholder concerns. In this report, Milliman consultants discuss the impact of the FASB’s proposed changes on earnings and equity for several illustrative product types. They also examine the industry’s preparedness to adopt the new guidance.