Snakes and Ladders - Insurance reporting season – part 2

This article shares the biggest winners and losers in market capitalization during the previous financial year. We look at the 100 biggest listed insurance companies globally. They are mix of life, health, general insurers with some heavy-weight brokers too.

In my last article I looked at market capitalization as a driving factor behind insurance company annual disclosure reporting tactics. 2024 will be the new reporting regime for many of these insurers, making IFRS insurers more comparable than they have ever been before. Before we get into the full reporting season, let’s see how companies fortunes changed in the year for which they will all soon be reporting:

The Ladders?

Let’s look at the top 10 companies that increased the market capitalization as a percentage.

PZU , a Polish general insurer, had long languished at a low, but consistent market capitalisation since they were privatised in 1998. Recently their expansion activities have gone into predominantly in energy and energy infrastructure sectors. Prior to that it had increased its year-on year sales of about 30%, and a claimed adjusted profit ration of about 20%.

General Insurance Corporation of India (GIC Re) , a reinsurer, took an almighty hit in capitalisation going back to 2018 right through to the end of 2022. Like PZU, it had previously been a state-owned-enterprise and was listed in 2016. 2023 saw a massive recovery in market capitalization, but it’s still significantly lower than compared to 2018. We have no insights as the potential of CICRE – actual value will depend on the level and diversification of risk they are holding and actively managing.

Talanx recapitalized in October 2022, its market capitalization has persistently grown since. This activity coincided with management changes and an apparent change in strategy. New leadership has possibly inspired the investment analysts. Late in 2022 Jan Wicke , CFO also stated of IFRS 17 “This will abolish the undervaluation of insurers shares,” in an interview with Handlesblatt.

Some of these companies have been on a sustained run of growth. Below are the top 10 insurance companies growth by market capitalization since year-end 2018. The outstanding performer is 中国人寿 . We will see shortly that it hasn’t fared well in 2023, it is still a company that has gone from a market capitalization of roughly USD 11 billion in 2018 to now about USD 90 billion, roughly equal to the top five highest growth insurers listed above.?

The snakes

At the other end of the spectrum, there were some big losers in market capitalization. The bottom 4 are companies with a large proportion of their sales in Mainland China. 中国平安 and China Life almost wholly rely on sales within there. Prudential and AIA, both have a heavy reliance on sales to Chinese nationals too, but the greater proportion of their sales is to Chinese nationals buying insurance in other jurisdictions, such as Hong Kong, Singapore and Taiwan.

Hong Kong is the largest of these markets and has recently adopted a new regulatory capital management regime (RBC, similar to Solvency 2). Prudential plc and 友邦保险 proactively adopted RBC early and they are likely to see beneficial moves both in risk pricing, profitability and competitiveness compared to other insurers in the region. For these two insurers there is scope for a great deal of optimism.

What will IFRS 17 do? Will it, as CFO of Talanx Jan Wicke believes, stop insurers form being undervalued? Let us know your thoughts.