In particular, in addition to insurance, Prudential Public Limited Company (ADR) (NYSE:PUK) also provides pension products, and like most eurozone governments, the UK is cutting hard to return to fiscal stability; part of this is a structural shift away from state pensions into privately controlled pension schemes. This shift in policy is driving funds toward Prudential Public Limited Company (ADR) (NYSE:PUK) and should lead to even wider profit margins for the company.
On the other hand…
Two companies that are not set to benefit from the insurance market growth in Asia are Travelers Companies Inc (NYSE:TRV) and American International Group Inc (NYSE:AIG).
American International Group Inc (NYSE:AIG) and Travelers Companies Inc (NYSE:TRV) both make the majority of their income in North America, or more specifically the US.
Revenue split:
| Region | Travelers | AIG |
|---|---|---|
| US | 96.5% | 70.3% |
| Asia Pacific | 0% | 11.7% |
| Rest of world | 3.5% | 18% |
Travelers has almost no exposure to the global insurance market outside of the US. AIG does have some exposure to the Asian insurance market, but once again the company makes more than 70% of its income in the US.
Even though AIG and Travelers have limited international exposure, there is still potential for them to grow as the primary insurance market in the US gains traction and starts to grow in-line with the rest of the economy.
Meanwhile, for investors who are seeking more risk
Genworth Financial Inc (NYSE:GNW)’s main business is mortgage insurance, but the rest of the company’s revenue comes from wealth management services such as life and health insurance. Q1 of this year was the first quarter since 2007 that Genworth Financial Inc (NYSE:GNW)‘s U.S. mortgage insurance division actually turned a profit since 2007. In addition, the number of delinquent US mortgages on Genworth Financial Inc (NYSE:GNW)’s book fell 21% from April 2012 to April this year.
Having said that, mortgage reinsurance for US properties only accounts for 12.5% of Genworth Financial Inc (NYSE:GNW)’s total revenues; 46% of the company’s revenue comes from the insurance of international mortgages, a division that has remained relatively profitable during the past five years.
Genworth Financial Inc (NYSE:GNW) revenue split:
| Division | Revenue | Percentage of total |
|---|---|---|
| International Mortgage Insurance | $737 | 46.10% |
| International Protection | $58 | 3.60% |
| Runoff | $81 | 5.10% |
| U.S. Life Insurance | $417 | 26.10% |
| U.S.Mortgage Insurance | $200 | 12.50% |
| Wealth Management | $107 | 6.70% |
Figures in million of $US
Life insurance accounts for 26% of Genworth Financial Inc (NYSE:GNW)’s revenues as of 2012, so the company is well placed to take advantage of growth in the life insurance market and housing market recovery over the next few years.
Conclusion
The primary insurance market is set to boom in emerging economies over the next few years, and the company that will benefit the most will be Prudential plc. Travelers and AIG will benefit from growth in the general market for insurance, but I do not expect their growth to be as rapid as that of Prudential.
Genworth on the other hand, offers a mix of exposure to the growing insurance market and the housing recovery, albeit with more risk. But more risk = more reward, and Genworth is my personal choice.
The article The Outlook for the Global Insurance Market Is Starting to Pick Up originally appeared on Fool.com.
Fool contributor Rupert Hargreaves owns shares of Genworth Financial. The Motley Fool recommends American International Group. The Motley Fool owns shares of American International Group and has the following options: Long Jan 2014 $25 Calls on American International Group. Rupert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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