In recent years, life reinsurance company, Reinsurance Group of America (RGA), has experienced solid growth in the Asia-Pacific region, a trend it expects to continue, supported by current market dynamics.
Speaking during the life reinsurer’s Q2 2018 earnings call, President and Chief Executive Officer (CEO), Anna Manning, reported premium growth of 5%, and 3% in constant currencies, adding that organic growth in the quarter reached 7.1%, when adjusted for “lumpy items”.
Senior Vice President (SVP) and Chief Financial Officer (CFO), Todd Larson, explained during the call that results in Asia in Q2, excluding Australia, were ahead of expectations as a result of favourable underwriting experience in the majority of countries across the region.
Premium growth in Asia, excluding Australia and adjusting for the effects of certain catch-up premiums, reached 20%, or 17% in constant currencies, explained Larson.
In light of this continued growth in the region, the firm was questioned on the potential for further expansion in the future, and where exactly this growth might come from.
“Very similar to prior quarters, it’s (growth) around our product development efforts in the region, broadly. We take these new ideas for consumer products to clients, and we get an exclusive arrangement in exchange for those product ideas. So, typically, that would be an arrangement that would cover a couple of years,” said Manning.
She continued to explain that RGA is then able to leverage that idea from market-to-market, and then further couples that with a range of new reinsurance structures that assist with the management of capital strains on the business.
“So, overall, that’s our strategy, and that’s where the growth is coming from in Asia,” she added.
The life reinsurer has been experiencing high growth in the region for some time now, and Manning explained that a number of dynamics are at play in Asia, which suggests that intermediate growth of 15% – 20% is achievable.
“It’s not just the reinsurance growth. It’s also the underlying growth in the life insurance market and the penetration rates of reinsurance,” said Manning.
She highlighted the rising middle class in Asia that is driving up demand for protection products, which is ultimately driving underlying insurance premium growth.
“Then reinsurance, historically in many of the countries in Asia, has been at very low levels and so increasing reinsurance penetration adds to that underlying growth.
“And then our strategy of competing, or I should say of not competing against our competitors, but really looking for exclusives, add those three together and I would say, that’s where our intermediate expectations are at this level of growth, 15% to 20%,” said Manning.
The Asia-Pacific region is viewed by many insurers and reinsurers as a huge growth area, both in the life and non-life space. As incomes rise alongside an expanding middle class, the expectation is that insurance penetration will increase, which in turn drives an increased demand for reinsurance protection.