INSURANCE AND ECONOMICS: Colombian Outlook Roberto Junguito Alejandra González agosto 2007 Fasecolda OUTLINE • Economic Outlook • Colombian Insurance Sector: International perspective • Evolution of the Colombian insurance sector • Economic growth and insurance demand agosto 2007 Fasecolda OUTLINE • Economic Outlook • Colombian Insurance Sector: International perspective • Evolution of the Colombian insurance sector • Economic growth and insurance demand agosto 2007 Fasecolda World Economic Growth (2006) % annual growth 12 10,7 10 9,2 7,9 8 6 6,8 5,5 5,4 4 3,3 2,6 2 0 World agosto 2007 USA Euro Zone Emerging Markets China Source: IMF (World Outlook Database) India Colombia Latin America and Carebean Fasecolda Colombian Economic Growth (1981 – 2006) GDP Growth 6.8% (Colombia and the Western Hemisphere) 5,5 3,5 2006 2007 2008 2004 2005 2001 2002 2003 1999 2000 1996 1997 1998 1994 1995 1991 1992 1993 1989 1990 1986 1987 1988 1984 1985 -0,5 1981 1982 1983 % 1,5 -2,5 Colombia Western Hemisphere -4,5 agosto 2007 Source: IMF (World Outlook Database) Fasecolda Industrial Production Index Industrial Production Index (1990 = 100) 160,0 150,0 140,0 130,0 120,0 110,0 100,0 agosto 2007 Source: Banco de la República 2006 2005 2004 2003 2002 2001 2000 1999 1998 80,0 1997 90,0 Fasecolda Investment Índice de formación bruta de capital fijo Gross fixed capital formation Index 1997=100 (1997 = 100) 160 140 120 100 80 60 40 1997 1998 1999 ARG agosto 2007 2000 2001 BRA Source: World Bank CHL 2002 COL 2003 2004 MEX 2005 PER 2006e 2007e VEN Fasecolda Foreign Direct Investment Flows FDI as % of GDP 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 agosto 2007 Source: Banco de la República Fasecolda Improvement of national security and economic growth 7% 80 Homicide rate (Right) % deGDP crecimiento del PIB % growth 60 3% 50 1% -1% 40 30 GDP annual growth (Left) 20 -3% 10 -5% 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 agosto 2007 Source: Ministerio de Defensa, DANE Fasecolda Tasafor porevery cada cien mil habitantes Rate 100,000 inhabitants 70 5% 59% GDP annual growth (right) 57% 5,7% 9,0% 57,5% 6,8% 55,7% 4,9% 7,0% 5,0% 55% 4,7% 53% 3,0% 53,8% 51% 1,0% 1,9% 50% 49% 50,4% -1,0% 47% Poverty Index (left) 45% -3,0% 45,1% -4,2% agosto 2007 Source: MERPD – DANE 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 -5,0% 1991 43% Fasecolda GDP % growth % of poor population Economic growth is essential for the reduction of poverty rates Unemployment rates and economic growth GDP vs. Unemployment Rate 8,00% GDP annual % growth (left) 20,00% 18,00% 16,00% 2,00% 14,00% 2006 12,00% 10,00% -4,00% Unemployment rate -6,00% agosto 2007 2004 2002 2000 1998 1996 1994 1992 1990 1988 -2,00% 1986 0,00% 1984 GDP 4,00% Source: DANE 8,00% Fasecolda Unemployment rate 6,00% Consumers’ Confidence Consumer Confidence Index 40 9 June – 07: 25,1 (left axis) 8 30 7 6 5 0 4 CCI 10 3 -10 2 -20 1 Household’s Consumption (right axis) Abr-07 Ene-07 Oct-06 Jul-06 Abr-06 Ene-06 Oct-05 Jul-05 Abr-05 Ene-05 Oct-04 Jul-04 Abr-04 Ene-04 Oct-03 Jul-03 Abr-03 Ene-03 Oct-02 Jul-02 Abr-02 0 Ene-02 -30 Fuente: Encuesta de Opinión del Consumidor Fedesarrollo agosto 2007 Fasecolda % annual change 20 Confidence Index Future Personal Ecconomic Situation (Totals by country, 2006) Future Personal Economic Situation (Latin America 2001-2006) 50 48 49 46 44 42 43 40 41 38 36 37 36 34 35 32 30 2001 2002 2003 2004 2005 2006 Brazil Colombia Venezuela Argentina Panama Boliva México Guatemala Dominican Rep. Chile Honduras Uruguay Costa Rica Peru Nicaragua Paraguay Ecuador El Salvador Latin America 0 10 20 30 40 50 60 70 In the next 12 months, do you think your economic situation and that of your family will be much better, a little better, about the same, a little worse or much worse than now? * Answer shown ‘Much better’ plus ‘a little better’. agosto 2007 Source: Latinobarometro Report 2006 Fasecolda Public Finance Government Balance 2002 2003 2004 2005 2006 0 -1 % GDP -2 -3 -4 -5 -6 -7 Central Administration Balance agosto 2007 Nonfinancial public sector balance Source: Banco de la República Fasecolda Current Account (1997 – 2006) Current Account and Gross International Reserves (Millions $US) 2 18.000,00 1 16.000,00 14.000,00 0 12.000,00 % GDP -1 10.000,00 -2 8.000,00 -3 6.000,00 In 2007 international reserves are worth 19,708 million dollars. -4 -5 4.000,00 2.000,00 -6 0,00 1997 1998 1999 2000 2001 Current Account agosto 2007 2002 2003 2004 2005 2006 Reserves Source: World Economic Outlook Database, Banco de la Republica Fasecolda 3 Abr-03 May-03 Jun-03 Jul-03 Ago-03 Sep-03 Oct-03 Nov-03 Dic-03 Ene-04 Feb-04 Mar-04 Abr-04 May-04 Jun-04 Jul-04 Ago-04 Sep-04 Oct-04 Nov-04 Dic-04 Ene-05 Feb-05 Mar-05 Abr-05 May-05 Jun-05 Jul-05 Ago-05 Sep-05 Oct-05 Nov-05 Dic-05 Ene-06 Feb-06 Mar-06 Abr-06 May-06 Jun-06 Jul-06 Ago-06 Sep-06 Oct-06 Nov-06 Dic-06 Ene-07 Feb-07 Mar-07 Abr-07 May-07 Jun-07 Jul-07 Cambio anual(%) Inflation 9 July´s annual persentage change in inflation is 5.77% 8 2007 cumulative inflation 4,72% 7 Total inflation 6 5 Inflation excluding food prices 4 Inflation target in 2007 Fuente: DANE. Cálculos de Fedesarrollo agosto 2007 Fasecolda Capital Markets (2004--2007) (2004 agosto 2007 Source: FTSE Fasecolda OUTLINE • Economic Outlook • Colombian Insurance Sector: International perspective • Evolution of the Colombian insurance sector • Economic growth and insurance demand agosto 2007 Fasecolda Latin America’s Share in the World’s Insurance Market, 2006 1,57% 1,92% 1,33% 39,88% 21,51% 33,79% Europe agosto 2007 Noth America Asia Latin America Source: Sigma Magazine 2007, Swiss Re Oceanía Africa Fasecolda Colombia’s Share in the Latin American Market, 2006 Brazil 42,55% 21,10% Mexico 7,88% Argentina Venezuela 6,84% Chile 6,59% 5,76% Other Countries 4,48% Colombia Trinidad & Tobago 1,76% Peru 1,52% Ecuador 0,86% Panama 0,66% 0% agosto 2007 5% 10% 15% 20% 25% Source: Sigma Magazine 2007, Swiss Re 30% 35% 40% Fasecolda 45% Insurance Penetration Index (Premiums / GDP) % GDP REGION COUNTRY 16,5 UK North America 8,7% 10,5 Japan 8,8 USA 7,8% Europe 6,9% Asia 6,8% Oceanía 4,7% Africa Latin America 2,4% 0 agosto 2007 2 4 3,3 Chile Brazil 2,8 Panama 2,7 Venezuela 2,7 Argentina 2,6 Colombia 2,4 Mexico 1,8 Ecuador 1,6 1,2 Peru 6 8 10 Source: Sigma Magazine 2007, Swiss Re 0 2 4 6 8 10 12 14 Fasecolda 16 18 Density Index, 2006: Premiums per capita 2006 $USD UK $ 6.467 USA Japan $ 3.590 Chile Latin America agosto 2007 $ 3.500 $ 3.000 $ 2.500 $ 2.000 $ 1.500 $ 1.000 $ 500 $ 53 $0 Africa $ 127 Brazil $ 161 Venezuela $ 180 Mexico $ 139 Argentina $ 144 Colombia $ 69 Ecuador $ 46 Peru $ 38 Source: Sigma Magazine 2007, Swiss Re Fasecolda $ 6.000 $ 205 $ 144 $ 3.000 Asia Panama $0 $1.745 $ 4.000 Europe $ 286 $ 2.000 $ 1.787 $ 1.000 Oceanía $ 3.924 $ 5.000 $ 3.804 $ 4.000 North America OUTLINE • Economic Outlook • Colombian Insurance Sector: International perspective • Evolution of the Colombian insurance sector • Economic growth and insurance demand agosto 2007 Fasecolda Earned Premiums and Incurred Losses (% GDP) 2,00% 1,80% Earned Premiums (% GDP) 1,60% 1,40% Incurred Losses (%GDP) 1,20% 1,00% 0,80% 0,60% 0,40% 0,20% 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 0,00% Fuente: FASECOLDA agosto 2007 Fasecolda agosto 2007 Fuente: FASECOLDA Fasecolda 2005 2006 2003 2004 1997 1998 1999 2000 2001 2002 1995 1996 1993 1994 1991 1992 1989 1990 1983 1984 1985 1986 1987 1988 1981 1982 1979 1980 2,5 1977 1978 1975 1976 % GDP Business Lines’ Dynamics (1975 – 2006) 3 Life / GDP Non - life / GDP Total / GDP 2 1,5 1 0,5 0 Combined Ratio (1975 – June 2007) Combined Ratio: (Incurred Losses+Commissions+ Gen. Expenditures)/ Earned Premiums 150.0% 140.0% 130.0% 120.0% 110.0% 100.0% GENERALES P&C agosto 2007 LIFEVIDA Fuente: FASECOLDA TOTAL TOTAL P.E E.P Fasecolda Jun-07 2005 2003 2001 1999 1997 1995 1993 1991 1989 1987 1985 1983 1981 1979 1977 1975 90.0% Technical Results / Premiums 5% -1.9% 2005 Jun-07 -5.4% 2003 2001 1999 1997 1995 1993 1991 1989 1987 1985 1983 1981 1979 1977 -5% 1975 0% -10% -15% -20% -25% -30% GENERALES P&C agosto 2007 VIDA Life Fuente: FASECOLDA TOTAL TOTAL Fasecolda Written Premiums by Business Lines 17.3% 7,496 Dic-05 12.6% 25.6% 3,128 6,379 Dic-06 3,523 16.6% 22.8% 1,714 2,152 1,078 1,258 458 P&C Life Social Insurance 563 S.O.A.T TOTAL Thousand Millions of COP agosto 2007 Fasecolda OUTLINE • Economic Outlook • Colombian Insurance Sector: International perspective • Evolution of the Colombian insurance sector • Economic growth and insurance demand agosto 2007 Fasecolda Penetration Persepectives LATINOAMÉRICA 6% 5,0% 4,9% 4,6% 5% 2005 2010 2015 4% 3% 2,8% 2,5% 2,3% 2,7% 2,6% 2,5% 3,2% 3,0% 2,9% 2,0% 1,8%1,9% 2% 2,2%2,3% 2,0% 1,4%1,4% 1,3% 1% 0% COL agosto 2007 ARG CHI PER VEN MEX LAC Fasecolda GRACIAS agosto 2007 Fasecolda