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Life Insurance Companies are the insurance market’s new driver

Total insurance premiums over the past year have increased by 3.9% to 384.8 billion tenge, according to reports of the National Bank, published on the regulator’s website. Life insurance companies (LICs) added to payout dynamics amounting to 126.7 billion tenge or 32.9% of premiums of the entire market.
Life Insurance Companies are the insurance market’s new driver

LICspremiums

Thus, the growth in the accident insurance (AI) sector amounted to 65%, from 9 to 14.9 billion tenge. In AI premiums the share of LICs was critical, 65% or 9.8 billion tenge. It is noteworthy that the dynamics of AI premiums was provided by the increase in the number of insurance contracts concluded. Their number grew by 16% to 674 thousand contracts; and most of these new contracts were retailed, their number increased from 459.5 thousand to 605.7 thousand contracts.

LICs felt great in the classic segment of life insurance, which increased by 67.5% or by 22 billion tenge, reaching a volume of 54.7 billion tenge. By the results of the year 2018, the share of life insurance premiums in total market premiums was 14% against 8.8% a year earlier. The sector has grown due to an increase in market penetration. The number of signed contracts increased by 63% to 1.2 million compared to 743 thousand contracts a year earlier.

Let us note that life insurance has ceased to be the frontier of banking LICs. Despite the fact that the segment leader in absolute terms is Halyk-Life merged with Kazkommerts-Life at the end of 2018, and showing a premium of 26.3 billion tenge in the new status, the collection dynamics of the banking organization did not turn out maximum, albeit impressive: 49%. Freedom Finance Life had the largest increase in premiums, in 27.6 times, in absolute terms premiums increased from 51 million tenge to 1.4 billion tenge. Next in terms of the premium increase (in 5.1 times) is Nomad Life LIC collecting 12.6 billion tenge of premiums. The European Insurance Company collected 14.1 billion tenge (premium growth was 13.6%). In the life insurance class, the concentration of the market is especially pronounced by three large LICs that collect 97% of premiums.

The results of annuity insurance were not impressive; the premiums grew by only 2.9% (970 million tenge) to 34.5 billion tenge. The reason for weak premiums is in a low growth of income on pension annuities, which form the bulk of annuities. In 2018, pension annuities increased by only 3.5% (946 million tenge), to 28.2 billion tenge, whereas in 2017, retirement annuities grew by 18% (4 billion tenge), to 27.3 billion tenge. Despite the good collection of compulsory pension contributions: according to the results of 2018, the amount of pension savings in the UAPF increased by 20.5% (1.5 billion tenge), to 9.4 trillion. tenge, the average savings check of an average Kazakhstani person does not reach the amount allowing to transfer the money to LIC. At the end of 2018, the average savings on accounts for mandatory pension deposits increased from 809.7 to 958.2 thousand tenge. The decrease in the number of insurance contracts on pension annuities from 2.5 thousand to 2 thousand suggests that the market has grown due to the increase in the contract value.

Nomad Life became an absolute leader in revenue in annuity insurance as of 2018. The company collected the most premiums in the class of retirement annuities and annuity contracts.

LIC Ranking on annuity insurance (absolute terms)

                                                                                                                                                                                                                                                                                                                          thousand tenge

Company

Annuities

 

 

 

 

 

Retirement annuities

Annuity Contracts (CAI)

Other types of annuities

Nomad Life 

16 118 528

12 682 859

2 783 472

652 197

Halyk Life

10 490 614

8 770 447

846 255

873 912

Standard Life

5 711 979

5 319 728

391 909

342

State Annuity Company

1 957 234

1 416 108

526 363

14 763

Freedom Finance Life

252 132

25 613

220 627

5 892

 

 

 

 

 

 

Source: National Bank of Kazakhstan

Premiums on annuity contracts (CAI) fell from 5.2 billion to 4.8 billion tenge. The fall was due to a significant, about 20%, reduction in the number of contracts concluded. However, other types of annuity insurance pleased the market with a significant increase of 37.5% (420 million tenge), to 1.5 billion tenge. The growth of premiums was accompanied by blasting sales and expansion of the market capacity. Insurance contracts grew by 67% to 573 contracts and mainly due to activity and demand from individuals, the number of which increased 7.2 times.

Insurance of employees against industrial accidents (CAI) reduced in volume by 14% (6 billion tenge), to 36.7 billion tenge. The reason is that the regulator banned life insurance companies from reinsuring the CAI risks in general insurance companies, which, among other things, led to the clearing the market from shady schemes.

Voluntary health insurance (VHI) with LIC participation was slightly reduced in the concluded contracts, but the premiums remained at a comfortable level.

LICs’ fees on Life Insurance, CAI, Accident, and VHI

 

 

 

 

thousand tenge

 Company

Life

CAI

Accident

VHI

Halyk Life

26 343 641

9 833 011

4 331 842

33 541

European Insurance Company

14 118 321

 

4 287 249

 

Nomad Life 

12 606 033

10 183 630

8 920

 

Freedom Finance Life

1 416 855

2 304 085

1 143 672

5 297

Standard Life

198 951

3 033 994

2 510

7 008

State Annuity Company

574

2 290 465

28

 

 

 

 

 

 

Source: The National Bank of Kazakhstan

 

 

 

 

Financial results

LICs’ assets as of 2018 grew by 20%, reaching 329.6 billion tenge. The maximum amount of assets of Halyk-Life is 145.2 billion tenge (44.1% of all LIC assets). The high share is explained with the merger of Halyk-Life with Kazkommerts-Life, and as a result, the asset consolidation of merged companies.

Nomad Life is in second place with 92.7 billion tenge (28.1%), SAC is in the third place with 36.5 billion tenge (11.1%). Next comes Standard Life with 29.4 billion tenge (8.9%), EIC with 15.5 billion tenge (4.7%), and Freedom Finance Life with 10.4 billion tenge (3, one%).

The reserves of LICs reflected asset growth by 21% to KZT 264.6 billion; in the total insurance market reserves they exceeded 50.9%. Halyk-Life and Nomad Life by a substantial margin from the rest LICs collected the largest reserves, 112 billion and 80.2 billion tenge respectively. They are also on top in terms of equity capital: 22.5 billion and 9.9 billion tenge. The equity capital amounted to 49.6 billion tenge, showing an increase of 5.4% (2.5 billion tenge). The insurance payments decreased by KZT 3.1 billion to 15.3 billion.

According to the results of the year of 2018, life insurance companies paid KZT 5.3 billion under insurance contracts. The largest share of the total amount of insurance payments is retirement annuity agreements (44%), annuity agreements “On compulsory insurance of an employee against industrial accidents” (Employers’ Liability Compulsory Insurance) - 23%, Compulsory Insurance against accidents - 22%. The top three in terms of payouts as of 2018 are as follows: Nomad Life with 5, 1 billion tenge, Halyk-Life with 4.5 billion tenge and State Annuity Company with 2.2 billion tenge.

 Company 

Retained earnings for the reporting period*

Net profit for the reporting period**

NOMAD LIFE

4 555 429

6 853 439 

Halyk Life

4 025 797

4 025 797

European Insurance Company

2 875 557

2 875 557

State Annuity Company

919 412

919 412 

Standard Life

554 730

554 730

Freedom Finance Life

392 360

392 360 

Source: *National Bank of the Republic of Kazakhstan

**Corporate websites of LICs

According to the statistics of the National Bank of the Republic of Kazakhstan, by the end of 2018, Nomad Life held the main share of retained earnings - 34% (4.5 billion tenge), Halyk-Life - 30% (4 billion tenge) and European Insurance Company - 21% (2.8 billion tenge). According to the unaudited financial P&L reports as of January 1, 2019 placed on corporate websites of LICs, only Nomad Life had changes in net profit, after the dividend distribution it amounted to 6.8 billion tenge.

Photos from open sources

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