• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
Georgetown MBA Presentation - Zurich UAE Analysis of Central Asia 3.5.12
 

Georgetown MBA Presentation - Zurich UAE Analysis of Central Asia 3.5.12

on

  • 138 views

 

Statistics

Views

Total Views
138
Views on SlideShare
138
Embed Views
0

Actions

Likes
0
Downloads
3
Comments
0

0 Embeds 0

No embeds

Accessibility

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    Georgetown MBA Presentation - Zurich UAE Analysis of Central Asia 3.5.12 Georgetown MBA Presentation - Zurich UAE Analysis of Central Asia 3.5.12 Presentation Transcript

    • Georgetown MBA Residency Final Project Report Michelle Kim, Suvo Nandi, Patrick Ottenhoff, Oscar Scolari 5 March 2012
    • Table of Contents Executive Summary Project Objectives and Scope Objective One: Market Analysis by Country Objective Two: Entry Method Recommendations Objective Three: Product Offerings Objective Four: Forecasting Model Recommendations: Business Plan by Target Market Evaluation & Summary 2
    • Table of Contents Executive Summary Project Objectives and Scope Objective One: Market Analysis by Country Objective Two: Entry Method Recommendations Objective Three: Product Offerings Objective Four: Forecasting Model Recommendations: Business Plan by Target Market Evaluation & Summary 3
    • Executive Summary • Our project examined Zurich’s potential entry into eight Central Asia republics. Scope Analyses Market Analysis Entry Method Product Offering Forecasts Business Plans 4 • Methodology included analysis of the broader market, regulatory environment, and competitive landscape (insurers and product offerings). • Preliminary scoring based on broad market outlook yielded a highest priority group of Azerbaijan, Kazakhstan, and Mongolia. • Survey of regulatory environments and entry precedents informed entry method recommendations and revised the highest priority group to include Azerbaijan, Kazakhstan, and Pakistan. • The state of insurance markets across target countries indicate that short-tail business would be a sensible entry point for Zurich, along with other niche opportunities. • Our high-level forecast model used steady-state assumptions to generate financial performance benchmarks upon entry via greenfield, acquisition, and reinsurance into priority markets. • Recommendations are presented as individual business plans by target market (timeline, entry method, product offering, and benchmark).
    • Table of Contents Executive Summary Project Objectives and Scope Objective One: Market Analysis by Country Objective Two: Entry Method Recommendations Objective Three: Product Offerings Objective Four: Forecasting Model Recommendations: Business Plan by Target Market Evaluation & Summary 5 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Our project explored Zurich’s potential entry into eight target markets in Central Asia Target Markets: • • • • • • • • 6 Project Scope Market Analysis Entry Method Products Forecast Recommendations Azerbaijan Kazakhstan Kyrgyzstan Mongolia Pakistan Tajikistan Turkmenistan Uzbekistan Summary
    • Our approach used market analyses with various focuses to develop plans by country Entry Method: Regulations & Case Studies General Market Analysis Political & Economic Metrics Social / Consumer Factors Overall Stability for Business Insurance Regulations Past Market Entrants Insurance Market Product Offerings Market Size & Concentration Competitive Analysis Lines of Business Offered Forecasting Model Estimates of premium/losses Market Share, Acquisition drivers Business Plan by Target Market Recommendations of: •Entry Phase •Method •Product Offerings 7 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Table of Contents Executive Summary Project Objectives and Scope Objective One: Market Analysis by Country Objective Two: Entry Method Recommendations Objective Three: Product Offerings Objective Four: Forecasting Model Recommendations: Business Plan by Target Market Evaluation & Summary 8 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Our general market analysis examined key environmental metrics to tier target markets • • Goal: Tier target markets in phases according to priority level for potential Zurich entry Methodology: • • • 9 Six different indicators were used to assess the economic, social and political environment in these countries We developed a model to score, weight, and rank countries according to key market indicators We then assigned preliminary designations (“Tiers”) • • • Market Analysis Entry Method Political and Social System Openness Labor Markets Product Markets Tier I (immediate entry) Tier II (entry in ~5 years) Tier III (entry in ~10 years) Project Scope Macroeconomic Indicators Capital Markets Products Forecast Recommendations Summary
    • Diverse drivers of the key indicators were collected to measure each country’s potential • • • • • • • Political Stability Index (includes institutions, corruption, factionalism and nine other criteria) • • • FDI, Net Inflow Tariffs Openness to Media • • Education Index Unemployment • • Logistics Performance Presence of Global Firms Product Markets • • • 10 GDP GNI per Capita GDP Growth Oil Production Natural Gas Production Global Competitive Index Insurance & Financial Inflows Total Listed Companies Domestic Credit to Private Sector Capital Markets Project Scope Market Analysis Macroeconomic Indicators Political and Social System Openness Labor Markets Entry Method Products Forecast Recommendations Summary
    • Preliminary scoring determined a Tier I market group of Azerbaijan, Kazakhstan, and Mongolia Based on economic potential and growth, overall country stability, and other parameters, markets are prioritized as follows: Economic Political Criteria Stability Kazakhstan Azerbaijan Mongolia Turkmenistan Pakistan Uzbekistan Tajikistan Kyrgyzstan Project Scope Labor Markets Capital Markets Cumulative 1 1 1 1 1 2 1 2 2 4 4 3 5 2 6 3 1 8 2 1 3 3 4 7 3 4 7 4 3 8 3 6 4 3 5 5 5 8 2 4 7 6 7 6 5 7 8 3 7 8 6 5 5 4 6 8 Tier I Kazakhstan Azerbaijan Mongolia 11 Openness Product Markets Market Analysis Tier II Turkmenistan Pakistan Entry Method Products Forecast Recommendations Tier III Uzbekistan Tajikistan Kyrgyzstan Summary
    • Table of Contents Executive Summary Project Objectives and Scope Objective One: Market Analysis by Country Objective Two: Entry Method Recommendations Objective Three: Product Offerings Objective Four: Forecasting Model Recommendations: Business Plan by Target Market Evaluation & Summary 12 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Regulatory barriers and precedents formed the basis of our entry method recommendations • • Goal: Identify most advisable entry strategy by country Methodology: • • • • 13 Research regulatory and other barriers for market entry Research case studies of competitor entrance in target markets Identify criteria to evaluate entry methods given market analysis and barriers research Prioritize entry strategies (acquisition, greenfield, joint venture, reinsurance) based on classification of market Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Zurich’s global competitors provide precedents for entry into some target markets Azerbaijan Kazakhstan Pakistan • AXA purchased majority stake in privately-held MBASK Insurance Co in 2010. • Company rebranded AXA MBASK. • ~$7M share capital company. • Chartis subsidiary registered in 1998 as Closed Joint Stock Company; renamed and registered in 2010. • ACE Home Insurance branch office converted to wholly-owned subsidiary in 2000. • Allianz joint venture with EFU Group in 2000. • Allianz EFU specializes in healthcare. • Generali – Joint Stock Company subsidiary based in Almaty, specializing in life. • Chartis operates via a local branch office of one of the company’s subsidiaries. 14 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Two primary environment metrics were used to prioritize entry methods for each country Metric 1: Established Attractiveness of Market Positive Markets scored high on this dimension due to the following characteristics: • Existing regulations encouraging FDI • Past precedents of market entry • Past reforms to develop insurance / financial services industry • Mandatory insurance lines Metric 2: Positive Market Trends Markets scored high on this dimension due to the following characteristics: • Recent / forthcoming regulation reducing competition (e.g., raising capital requirements) • Recent compulsory insurance lines • Growth focused on private sector and insurance lines of business 15 Project Scope Market Analysis Entry Method Established insurance market AND growing… Pursue: •Acquisitions •Greenfield / Branch Office High Immature market AND poor outlook… Pursue: •Nothing? •Reinsurance Low Immature insurance market BUT positive trends… Pursue: •Joint Ventures •Reinsurance Established BUT constrictive trends… Pursue: •Branch Office •Reinsurance •Joint Ventures Negative Products Forecast Recommendations Summary
    • Entry Method Recommendation: AZERBAIJAN Azerbaijan’s strong established insurance market, combined with its developments in mandatory insurance, past precedent of acquisition, and overall growth trajectory makes this market a prime candidate for acquisition or greenfield entry. Established Attractiveness of Market: • Mandatory Insurance Lines: Azerbaijan requires fire insurance for all commercial premises and third party motor insurance. • Precedent of Success: AXA successfully purchased a majority holding in MBASK in 2010. • Overall Growth: Though the explosive growth in insurance has slowed somewhat over the last couple of years, Azerbaijan remains very much a developing market. Positive Market Trends: • More Mandatory Insurance Lines: Recently, real estate, exploitation of real estate, and motor passenger insurance have all become compulsory lines. • Decreasing Local Competition (?): Recent increases in capital requirements may squeeze smaller local players out of the market and/or leave them vulnerable for acquisition. Areas of Concern: • Confusion in Profit Tax Exemption: Insurers required to pay 10% profit tax despite earlier government promises of exemption • Potential for Global Competition: Opportunities for Zurich are also opportunities for the competition, requiring differentiation and speedy entry. 16 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Entry Method Recommendation: KAZAKHSTAN Kazakhstan enjoys the largest economy in the region with strong macroeconomic trends and created a Financial Supervision Authority to further develop the local insurance industry. This market is a recommended candidate for acquisition or greenfield entry. Established Attractiveness of Market: • Existing Market Strength: Largest economy of the region with established FDI council providing support for foreign companies entering market. • Financial Supervision Authority (FSA): Infrastructure in place to develop insurance industry and bring local legal / regulatory framework to standards of EU and IAIS. • Precedents for Market Entry: Relatively straightforward procedures to establish subsidiaries enabled Chartis and Generali to do so successfully. Positive Market Trends: • Significant Recent Growth: 2011 was a strong year for local insurance, with 25% year-over-year growth in written premiums. • Anticipated Consolidation: With rising capital requirements, smaller companies will be vulnerable to acquisitive activity. • Growing Sophistication: FSA developed earthquake insurance evaluation and risk model in 2010 to better inform decisions of local insurers. Areas of Concern: • Higher Taxes: Insurers have been moved to the general taxation regime earlier this year (4% to 20%). • State Competition: Largest four commercial banks were taken into partial state ownership in 2009; all four have insurance subsidiaries. 17 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Entry Method Recommendation: PAKISTAN Pakistan offers mature insurance legislation, a move towards increased mandatory lines, and growth opportunities in niche areas, on top of being one of the largest insurance markets in the region. However, due to the regulatory environment, Pakistan is better suited for a branch office or JV. Established Attractiveness of Market: • Mature Market with Opportunities: Large insurance market with significant amount of competition, but still presents opportunities in niche lines, such as terrorism covers and micro-insurance, following SECP report on insurance needs of low-income people in response to 2010 floods. • More Mandatory Lines: The World Bank and SECP are forming regulations to provide protection to individual victims of terrorism, rain, flood, and earthquake. • Past Precedents: Successful JV by Allianz to become leader in healthcare; Chartis and ACE able to operate or convert branch offices into subsidiaries to continue growth in this market. Negative Market Trends: • Instability: Social turmoil and lawlessness are prevalent, and the judicial system is not entirely reliable. • M&A Difficulty: High cost of financing can negate any synergistic gains from M&A, and insider trading has led to reluctance among locals in pursuing such deals. 18 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Entry Method Recommendation: MONGOLIA Mongolia’s insurance market has recently experienced positive steps in both stabilizing regulation and in industry growth. However, due to the still immature nature of the market and the concentration among few competitors, this market is better suited for JVs and/or reinsurance. Immaturity of Market: • Small Scale: Relatively large number of insurers fighting over small premium pot, without benefit of substantial compulsory insurance driving consumption; over 60% of premium written by top three companies. • Privatization: Two largest insurers, Mongol Daatgal and Tushig Daatgal, were state-owned until 2003, potentially leading to added competition. Positive Market Trends: • Stabilizing Regulation: New insurance laws passed in 2004; Financial Regulatory Commission created in 2006 to oversee insurance companies. • Segment-driven Growth: Motor liability made compulsory in January 2012; volume of mining projects leading to greater standardization for international investors; life insurance growing and encouraged by the IMF and Mongolian government. • Growth in Reinsurance Spend: Mongol Daatgal recently began purchasing reinsurance treaty from Hannover Re; others are anticipated to follow suit. 19 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Entry Method Recommendation: KYRGYZSTAN While Kyrgyzstan may pose a growth opportunity in the future, its current small, undeveloped, and unstable insurance market combined with overall turmoil in the country makes this market too risky for near- or medium-term entry, aside from the possibility of reinsurance. Immaturity of Market: • Instability of Large Competitors: AUB Insurance shot to the top as the market leader in 2009, only to go bankrupt and nationalized following inability to meet obligations in April 2010 uprisings. • Few Compulsory Lines to Drive Adoption: Insurance is not trusted among consumers, and adoption issues are not mitigated via mandating insurance consumption. • Heavy State Involvement: Insurance is tightly controlled by the state, but given the instability of the state government, this presents a very risky situation for insurers operating in the market. Negative Market Trends: • Ongoing Market Turmoil: With high degree of civil unrest and corruption, insurance, among other businesses, remain difficult to penetrate and within which to operate. 20 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Entry Method Recommendation: TAJIKISTAN Tajikistan has proposed several initiatives that would enhance the stability and growth prospects of the local insurance market. As those initiatives have yet to gain momentum, and the current market is dominated by a legal monopoly, this market is not advisable for entry at this time. Immaturity of Market: • Legal Monopoly: State-owned insurer Gosstrakh currently dominates the compulsory lines of insurance, which makes new entry difficult, since overall insurance consumption is not very high in this market. • Relatively Novel Stabilization (?): Anticipate stable and growing market in future, but somewhat early to tell (e.g., local currency is only ten years old; export-heavy economy highly vulnerable to exogenous shocks). Negative Market Trends: • Lack of Momentum: Legislation accompanying ten new compulsory classes proposed in 2010 have yet to be written; market is limited to basic insurance lines and local players. 21 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Entry Method Recommendation: TURKMENISTAN Turkmenistan’s insurance market remains dominated by one state-owned insurer following renationalization about a decade prior. Until the market (that is, the state and the one insurer) show signs of opening up to additional insurers, entry into this market is not feasible. Immaturity of Market: • Monopoly as Relic of Soviet Era: Turkmen Gosstrakh controls all government business and most compulsory lines, without indication of opening up the market; cites mission to promote stability and growth of Turkmenistan. Negative Market Trends: • Renationalization: 15 private insurers/reinsurers closed in 2000 as part of renationalization effort 22 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Entry Method Recommendation: UZBEKISTAN Like Tajikistan, Uzbekistan has proposed reforms to the insurance sector. However, these reforms (among other economic reforms) have been slow to materialize, compounded by the overarching poverty of the country and long-standing state control of insurance. Entry is not advisable at this time. Immaturity of Market: • Lack of Openness: Not only is there a legal monopoly on compulsory lines, but the state insurance regulator is also highly reticent on information / data regarding the insurance market, making due diligence prior to entry very difficult. Neighboring Kazakh investors are unable to enter. • Domination of State Companies: Though the Uzbek government has acknowledged the importance of privatizing the insurance sector, these reforms have been slow to gain momentum. Negative Market Trends: • Poverty Stagnates Insurance Growth: Due to high degree of poverty, insurance is more likely to grow in the commercial sector. However, the commercial sector itself is unable to grow with the current restrictive atmosphere of this market. 23 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Analysis of regulatory environment and entry recommendations led to revised market tiers Priority Entry Mkt Method Tier I Tier II Tier III Acquisition Azerbaijan Kazakhstan Greenfield Pakistan JV Kyrgyzstan Mongolia Tajikistan Reinsurance Turkmenistan ? Going forward, we refer to these tiers as the finalized “Phases” that we recommend. 24 Project Scope Market Analysis Entry Method Products Forecast Recommendations Uzbekistan Summary
    • Table of Contents Executive Summary Project Objectives and Scope Objective One: Market Analysis by Country Objective Two: Entry Method Recommendations Objective Three: Product Offerings Objective Four: Forecasting Model Recommendations: Business Plan by Target Market Evaluation & Summary 25 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Product offerings depend on competition, consumer trends, and market size / growth • • Goal: Recommend products and services for Zurich to offer upon market entry Methodology: • • • • Research insurance market by country (size, concentration, growth, major lines of business) Analyze competitors’ presence, both global insurers and local providers Identify areas of alignment among Zurich’s expertise, market trends, and competition Product Mix Key Outcomes: • • • 26 Market Concentration Sophistication of local insurance market aligns with overall stability of country Target markets have significant room for growth Main concern is high concentration and Project Scope Market Analysis Entry Method Products Forecast Recommendations competition Summary
    • Phase I countries present the best opportunity in size and concentration Market Size and Concentration 2010 Written Premium $M 1,200.00 1,000.00 Phase I Countries have the most substantive insurance markets in terms of written volume 800.00 600.00 400.00 200.00 - Market Concentration Kazakhstan and Azerbaijan have somewhat more fragmented markets than the other countries; concentration is problematic across-the-board 27 Project Scope Market Analysis Entry Method 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Products Other Top 5 Forecast Recommendations Summary
    • Target markets currently exhibit low insurance consumption with relatively few local insurers Market Penetration Market Premium as % of GDP Per Capita Expenditure USD No. of Local Insurers Azerbaijan 0.37% 21.71 25 Kazakhstan 0.67% 60.29 15 Kyrgyzstan 0.27% 2.10 10 Mongolia 0.60% 6.10 6 Pakistan 0.72% 6.05 20 Tajikistan 0.44% 3.47 15 Turkmenistan 0.56% 10.44 1 Uzbekistan Developed Markets 0.33% 3.47 15 10% - 14% 3,000 – 5,000 All target markets have relatively low insurance spend, which suggests both room for growth as well as potential adoption issues. 28 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Zurich’s global competitors have largely focused expansion efforts on Phase I countries Global Competitor Presence in Central Asian Countries Company Zurich Insurance ACE AIG (Chartis Insurance) Allianz SE AXA Assicurazioni Generali S.p.A. ING Groep N.V. Mitsui Sumitomo Insurance Group Tokio Marine Group PHS ($M) FY2010 converted 31,900 23,000 27,000 58,958 65,848 23,173 55,646 21,158 24,618 Munich Re Project Scope Pakistan Kazakhstan, Pakistan, Uzbekistan Azerbaijan, Pakistan Azerbaijan Kazakhstan Kazakhstan - Structured finance products No presence No presence 30,473 Azerbaijan, Kazakhstan - out of Moscow office Azerbaijan, Kazakhstan, Turkmenistan, 25,300 Uzbekistan - out of Munich office Swiss Re 29 Central Asia Locations Market Analysis Entry Method Products Forecast Recommendations Summary
    • Property, Liability, Motor, and Marine lines are all widely purchased across target markets Current Primary Lines of Business Market Property Motor Azerbaijan X X Kazakhstan X X Kyrgyzstan X Mongolia X X Pakistan X X Tajikistan X Turkmenistan X Uzbekistan WC & EL Marine PA & HC (NonLife) X X X X X Liability X X X X X X X X X Split not valid; insurance classified as compulsory vs. voluntary Property and Marine Lines make sense for short-term entry tactics: • Widely purchased, short-tail business • Opportunities across personal, commercial, and public customers • Build client base and expand into casualty lines with maturing market 30 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary X
    • Preliminary business plans by country incorporate potential partners and products Phase of Entry (1, 2, or 3) Products Currently Written Predominant lines of business of example target firms, which Zurich in turn will write through targets Potential Partners / Targets Examples of existing firms on the ground in target market to consider buying / pursuing joint venture / reinsuring Other areas of opportunity in market based on example firms’ areas of expertise and market conditions Comments… Notes / Rationale / Caveats regarding comments above 31 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Preliminary Business Plan: AZERBAIJAN Phase One: Immediate Entry Potential Partners / Targets Ateshgah (possible capability for financial products) Products Currently Written Property / Motor Workers’ Compensation Healthcare Marine Azersigorta Opportunities in diverse industries (major player, especially in energy) International Insurance Co. (energy, agriculture, food, construction) (personal lines powerhouse) Comments… No state insurance companies currently Acquisition seems highly feasible 32 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Preliminary Business Plan: KAZAKHSTAN Phase One: Immediate Entry Potential Partners / Targets Kazkommerts-Policy (Strong underwriting operations) Products Currently Written Property / Motor Workers’ Compensation Liability Marine Numerous small players Growing property cat R/I market (2nd largest; bank-owned) Nomad Insurance (reinsurance potential) Comments… Main competition likely to be Allianz and Eurasia 33 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Preliminary Business Plan: PAKISTAN Phase One: Immediate Entry Potential Partners / Targets National Insurance Products Currently Written Property / Motor Marine Miscellaneous (potential for privatization) EFU General (JV with Allianz) Uptick in terrorism covers Numerous small players (including branches of competitors) Comments… Reinsurance market may be difficult due to statesponsored Pakistan Reinsurance Co Ltd. 34 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Preliminary Business Plan: MONGOLIA Phase Two: Medium Term Entry (3-5 years) Products Currently Written Property / Motor Marine Liability CAR Potential Partners / Targets Mongolian Insurance Group (need fac capacity for large engineering risks) Bodi Daatgal (possible life insurance partner) Growth in mining sector necessitates large loss protection Banks / Other Businesses (provide insurance for local operations) Comments… Reinsurance is as yet not well understood among insurers, but likely to grow due to Mongol Daatgal. 35 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Preliminary Business Plan: KYRGYZSTAN Phase Three: Long-Term Entry, if any Potential Partners / Targets Kyrgyzinstrakh Products Currently Written Property Liability (reinsurance needs in P&C and aviation) Kyrgyzstan Insurance (largely property writer) Personal & Small Business New players as market stabilizes long-term Comments… Reinsurance is likely the best bet for entry, barring rapid reduction in poverty / increase in consumption. 36 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Preliminary Business Plan: TAJIKISTAN Phase Three: Long-Term Entry, if any Products Currently Written Property Liability Marine Potential Partners / Targets Orien Insurance (competing with state co.s for lead; Believed to be politically connected) New players as market opens up to additional competition long-term Some specialty lines in construction and engineering, financial and business risks Comments… Very small volume of business makes both insurance and reinsurance for Zurich not very attractive. 37 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Preliminary Business Plan: TURKMENISTAN Phase Three: Long-Term Entry, if any Products Currently Written Property Liability Other Personal Lines Potential Partners / Targets None available at this time Comments… Will need to monitor potential developments leading to opening of market to additional competitors 38 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Preliminary Business Plan: UZBEKISTAN Phase Three: Long-Term Entry, if any Products Currently Written Information not available, but likely concentrated around Property Motor Construction Potential Partners / Targets None available at this time (all state-owned), but potential for new players writing diverse lines if/when reforms take effect Comments… Market worth monitoring to see if openness problem indicates any signs of relaxing 39 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Table of Contents Executive Summary Project Objectives and Scope Objective One: Market Analysis by Country Objective Two: Entry Method Recommendations Objective Three: Product Offerings Objective Four: Forecasting Model Recommendations: Business Case by Target Market Evaluation & Summary 40 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • High-level benchmarks were estimated via market share and acquisition target value • • Goal: Perform projected cost-benefit analysis of market entry with five-year horizon • • • 41 Assumptions Overall Market WP Growth Rate Target's Market Share Growth Rate Target's Premium Base Growth Rate Loss Ratio Growth Rate Expense Ratio Growth Rate Acquisition & Integration Costs Investment Hurdle Rate Methodology: Identify comparables for valuation / estimate Zurich’s performance in market upon entry Develop high-level forecasting model to calculate potential profit and conduct Operating Year sensitivity analysis Overall Market Written Premium Target's Market Share Target's Premium Base Estimate investment(s) required and Loss Ratio Ratio performance of Zurich operations within ExpenseMargin Premium Target's Target's Margin % forecast horizon Discounted to 2013 Project Scope Market Analysis Entry Method Products Forecast Recommendations 2010 193.86 7.5% 14.54 34.7% 35.0% 4.40 30.3% - Summary 2011 199.68 7.7% 15.42 35.2% 36.1% 4.43 28.7% - 2012 205.67 8.0% 16.36 35.8% 37.1% 4.44 27.1% - 3.00% 3.00% 6.09% 1.50% 3.00% 9.68 10.00% 2013 211.84 8.2% 17.36 36.3% 38.2% 4.42 25.5% 4.42 2014 218.19 8.4% 18.42 36.8% 39.4% 4.38 23.8% 3.98
    • Steady-state assumptions were used to forecast key markets barring any shocks • General Assumptions • • • • Investment Hurdle Rate Market growth rate, based on trend over last few years Market Average Loss Ratio Growth Rate Market Average Expense Ratio Growth Rate • Greenfield / Branch Office Model Assumptions: Azerbaijan, Kazakhstan, Pakistan • Anticipated Zurich Market Share Growth • Initial Start-up Costs • Acquisition Model Assumptions: Azerbaijan, Kazakhstan • Target’s Free Cash Flows, based on P&L / Annual Report (if available) • Growth Rate of Target’s Business • Reinsurance Model Assumptions: Mongolia • Commission and Cession Percentage (Pro Rata) • Cedant’s Market Share Growth Rate 42 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Table of Contents Executive Summary Project Objectives and Scope Objective One: Market Analysis by Country Objective Two: Entry Method Recommendations Objective Three: Product Offerings Objective Four: Forecasting Model Recommendations: Business Plan by Target Market Evaluation & Summary 43 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Final Business Plan: AZERBAIJAN Phase of entry: Phase ONE; we recommend immediate entry. Azerbaijan ranks number two in our model finishing in the top three spots for half of our model’s indicators. Openness, capital markets, and product markets still show room for improvement; however, the country has mandatory insurance lines and precedent of success of other insurance companies entering the market. Recently, more insurance lines have become mandatory and higher capital requirements have squeezed out smaller competitors. Entry Method: Azerbaijan has a strong established insurance market, combined with development of mandatory insurance. Additionally, it has solid past precedent of acquisition and growth trajectories. Taking into account the high capital requirements in Azerbaijan, we recommend acquisition of a local company. Our research shows Ateshgah (major player in energy), International Insurance Co. (possible capability for financial products) and Azersigorta as potential candidates, due to competitive position in the market, experience writing diverse lines of business, and other niche opportunities. Potential concerns include the need to pay 10% profit tax despite promise of exemption and potential global competition. Product Offering: Predominant lines of business of potential companies to acquire are: i) property / motor, ii) worker’s compensation, iii) healthcare and iv) marine. There are opportunities in diverse industries within Azerbaijan such as energy, agriculture, food, and construction. Forecast 2013-2018: Acquisition of Target Comparable to Ateshgah yields $20.3M in profit, less $9.7M in acquisition and integration costs Greenfield Entry yields $12.4M in profit 44 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Final Business Plan: KAZAKHSTAN Phase of entry: Phase ONE; we recommend immediate entry. Apart from the Capital Market indicators, where it is ranked as number two, this country ranks number one in every sector of our model. It represents the best option among the eight countries that we evaluated. Kazakhstan enjoys the largest economy in the region with strong macroeconomic trends and created a Financial Supervision Authority to further develop the local insurance industry. Entry Method: Given the country’s existing market strength and straightforward procedures for establishing local subsidiaries, we recommend acquisition of an existing company within Kazakhstan or a greenfield entry. Our research shows Kazkommerts-Policy (second largest, bank owned) and Nomad Insurance (strong underwriting operations) as two potential acquisitions. However, there are several other smaller operators that can also represent good opportunities. Potential concerns include higher taxes which have recently been raised from 4% to 20%, as well as state competition which partially owns four of the largest commercial banks. Product Offering: Predominant lines of business of potential companies to acquire are: i) property / motor, ii) worker’s compensation, iii) liability and iv) marine. A secondary potential opportunity is the growing property cat R/I market within Kazakhstan. Forecast 2013-2018: Acquisition of Target Comparable to Kazkommerts-Policy yields $263.3M in profit, less $182.6M in acquisition and integration costs Greenfield Entry yields $155.1M in profit, less start-up costs 45 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Final Business Plan: PAKISTAN Phase of entry: Phase ONE; we recommend immediate entry, as Pakistan is both a mature market and trending towards increased mandatory insurance lines. There are opportunities in niche areas such as terrorism insurance and Pakistan is quickly becoming one of the largest insurance markets in Central Asia. However, serious risks remain in political stability and economic development that might offset gains in the insurance sector policy development. Entry Method: The mergers and acquisitions regulatory environment in Pakistan is not stable and for this reason we recommend opening a branch office or entering into a joint venture. M&A activities are difficult in Pakistan due to lack of industry synergy and large industrial development base and product markets. The World Bank and the SECP are currently developing newer regulations for individual protection for terrorism, flood, rain and earthquakes to allay government reliance in event of such catastrophic events. In the past competitors such as ACE, Allianzs and Chartis have entered into successful JVs and opened new branches. Product Offering: Predominant lines of business of potential companies to enter into joint venture or branch offices are i) property, ii) motor and iii) marine (transportation) insurance. These represent growing areas in the Pakistani market. Forecast 2013-2018: Greenfield Entry yields $111.4M in profit, less start-up costs 46 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Final Business Plan: MONGOLIA Phase of entry: Phase TWO; we recommend entry within five years. There has been tremendous industry growth in Mongolia and regulations are emerging to stabilize the markets. However, the insurance industry is still small and just beginning to mature. Entry Method: Joint ventures and reinsurance are the two methods suitable in Mongolia, particularly for entry in the nearer term. The immaturity of the markets makes the scope smaller and the rate of privatization has yet to pick up. The mining sector is experiencing a lot of growth and more insurance lines are being made mandatory. There is potential for growth in reinsurance, with Mongol Daatgal setting a purchase precedent. Overall the country shows a lot of potential in the medium term. However the two largest insurers were state owned until recently, enjoy government support still, and might hinder free market competitors. New regulations are in the pipeline and will aid new entrants in the near future. Product Offering: Predominant lines of business of potential companies to enter into joint venture or reinsurance are i) property, ii) motor, iii) liability, iv) marine (transportation) insurance and v) non-life insurance lines such as personal accident and health care. These take into account the trends in the market in Mongolia. Forecast 2014-2018: Pro rata reinsurance treaty with target comparable to Bodi Daatgal yields $4.53M in net premium accruing to Zurich 47 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Final Business Plan: KYRGYZSTAN Phase of entry: Phase THREE. No entry recommended at this time. Necessary Developments for Entry: Before entry is worth considering, political and market turmoil must calm and stabilize. Kyrgyzstan must also climb out of recession, show some signs of sustained growth, and indicate signs of an emerging consumer class Other Areas to Monitor: Expansion of compulsory lines of insurance would also indicate potential growth in insurance consumption. 48 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Final Business Plan: TAJIKISTAN Phase of entry: Phase THREE. No entry recommended at this time. Necessary Developments for Entry: Government first would have to open compulsory lines to competition to Gosstrakh. The unemployment rate must stabilize and recede, eventually sparking growth of consumer class. Other Areas to Monitor: Overall insurance market would need to grow significantly and pending legislation to reform industry must be implemented. 49 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Final Business Plan: TURKMENISTAN Phase of entry: Phase THREE. No entry recommended at this time. Necessary Developments for Entry: Government would first need to relinquish monopoly of insurance, which it has shown no indication of doing. Additionally, the state must relax overall control of economy, and unemployment must stabilize and recede, enabling growth of consumer class beyond elites. 50 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Final Business Plan: UZBEKISTAN Phase of entry: Phase THREE. No entry recommended at this time. Necessary Developments for Entry: Government would first need to open up compulsory lines of insurance to competitors. Inflation must stabilize for sustained periods and the state must harness growth of energy industry in a way that expands overall economy and drives down unemployment. Other Areas to Monitor: Insurance reforms which have yet to take effect need to be implemented so that the business is sustainable within the country. 51 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Table of Contents Executive Summary Project Objectives and Scope Objective One: Market Analysis by Country Objective Two: Entry Method Recommendations Objective Three: Product Offerings Objective Four: Forecasting Model Recommendations: Business Plan by Target Market Evaluation & Summary 52 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Evaluation Discussion Points of Analyses • High degree of uncertainty in target markets, driven by • Increasing competition in more established markets • Regulatory changes (e.g., taxes in established markets, reforms in immature markets) • Instability in immature markets • Limited data / information released by more closed, immature markets • Use of steady-state assumptions underlying recommendations • Assume no shocks, such as new regulations, macroeconomic events, etc. • Realistically can expect consolidation in more established markets • Recommendations and forecast designed as baseline, but need additional evaluation per Zurich’s operating procedures and risk appetite • Zurich’s internal evaluation • Recommendations contingent upon areas of expertise within Zurich’s Dubai and/or Istanbul office • Project hurdle rates and other metrics 53 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • Summary Overview of Recommendations • Tiering of target markets • Phase 1 (Immediate): Azerbaijan, Kazakhstan, Pakistan • Phase 2 (3-5 years): Mongolia • Phase 3 (10 years, if at all): Kyrgyzstan, Uzbekistan, Tajikistan, Turkmenistan • Key regulatory issues & entry recommendations • Acquisition in Azerbaijan is feasible (precedent: AXA) • Largely free foreign entry into Kazakhstan • Pakistan difficult to enter via acquisition, but others have been successful converting branch offices to wholly-owned subsidiaries • Product Offerings • Initial entry: Property for personal and commercial clientele; Marine for commercial / public • Expansion: Liability products for commercial clientele • Maturity: Specialized offerings for larger commercial clients (WC & EL, PA & HC) 54 Project Scope Market Analysis Entry Method Products Forecast Recommendations Summary
    • APPENDIX 55
    • Background Information: AZERBAIJAN Government Structure: Presidential form of government, authoritarian, high corruption GDP (PPP): $90.8B GDP growth rate (real): 5% Population (2010): 9M Investment: 17% of GDP Inflation: 5.7% Central Bank Interest Rate: 3% Commercial Prime Interest Rate: 21% Agriculture: Cotton, grain, rice Industry: Petroleum, natural gas Oil Production: 1.04M bbl/day Industrial Prod Growth Rate: 2.6% Natural Gas: 16.52B cubic meter Exports: $26.5B; Oil and Gas (90%); Italy, USA, Germany Imports: $6.7B; Machinery & equipment; Turkey, Russia, Germany 56
    • Background Information: KAZAKHSTAN Government Structure: Presidential, authoritarian rule, little power outside the executive branch; Economic growth was 9% during 2000-2007 GDP (PPP): $196.4B (2010) GDP growth rate (real): 7% (2010) Population (2010): 16.3M Investment: 25.2% of GDP (2010) Inflation: 7.1% (2010) Central Bank Interest Rate: 4.25% (2010) Commercial Prime Interest Rate: 8.161% Agriculture: Grain (Wheat), Cotton Industry: Oil, Coal, Iron ore Industrial Prod Growth Rate: 10% Oil Production: 1.61 million bbl/day (19th worldwide) Natural Gas: 35.61B cubic meter (25th worldwide) 57 Exports: $60.8B; mostly oil (59%); China, Germany and Russia Imports: $32B; machinery and equipment; Russia, China and Germany
    • Background Information: PAKISTAN Government Structure: Presidential, heavily dominated by military and ISI GDP (PPP): $464.9B GDP growth rate (real): 4.8% Population (2010): 173.6M Investment: 13.8% of GDP Inflation: 13.9% Central Bank Interest Rate: 0.07% Commercial Prime Interest Rate: 13.462% Agriculture: Cotton, wheat, rice Industry: Textile and apparel, food Industrial Prod Growth Rate: 4.6% Oil Production: 63,580 bbl/day Natural Gas: 38.4B cubic meter Exports: $21.5B; Textiles, rice, leather goods; USA, Afghanistan, UAE Imports: $32.9B; Petroleum, Petro products, machinery; China, Saudi Arabia, UAE 58
    • Background Information: MONGOLIA Government Structure: Parliamentary form headed by Prime Minister GDP (PPP): $11B GDP growth rate (real): 6.1% Population (2010): 2.8M Investment: 36.1% of GDP Inflation: 10.2% Central Bank Interest Rate: 10.99% Commercial Prime Interest Rate: 17.9% Agriculture: Wheat, barley, vegetables Industry: Construction, mining, oil Industrial Prod Growth Rate: 3% Oil Production: None Natural Gas: None Exports: $2.9B; Copper, Apparel, livestock; China, Canada, Russia Imports: $3.3B; Machinery & equipment, fuel, cars; Russia, China, Japan 59
    • Background Information: KYRGYZSTAN Government Structure: Presidential, republic, very slow pace of democratization, poor mountainous country, dominantly agricultural GDP (PPP): $12.02B GDP growth rate (real): -1.4% Population (2010): 5.4M Investment: 28% of GDP Inflation: 8% Central Bank Interest Rate: 2.5% Commercial Prime Interest Rate: 29.425% Agriculture: Tobacco, cotton, potatoes Industry: Small machinery, Textile Industrial Prod Growth Rate: 9.8% Oil Production: 946 bbl/day Natural Gas: 15.4M cubic meter Exports: $1.78B; Cotton, wool, meat; Russia, Uzbekistan, Kazakhstan Imports: $2.98B; Oil and Gas, Machinery; China, Russia, Kazakhstan 60
    • Background Information: TAJIKISTAN Government Structure: Presidential form, bicameral legislature, Prime minister appointed by the president GDP (PPP): $14.74B GDP growth rate (real): 6.5% Population (2010): 6.9M Investment: 20.6% of GDP Inflation: 6.4% Central Bank Interest Rate: 5% Commercial Prime Interest Rate: 21.7% Agriculture: Cotton, grains, fruit Industry: Aluminum, Cement Oil Production: 220 bbl/day Industrial Prod Growth Rate: 7.5% Natural Gas: 38M cubic meter Exports: $1.3B; Aluminum, Electricity, Cotton; Turkey, Russia, Uzbekistan Imports: $2.9B; Petroleum products; Machinery &equipment; China, Russia 61
    • Background Information: TURKMENISTAN Government Structure: Presidential republic, secular democracy, but actually power concentrated with presidential administration GDP (PPP):$36.9B GDP growth rate (real): 9.2% Population (2010): 5M Investment: 19.7% of GDP Inflation: 10% Central Bank Interest Rate: NA Commercial Prime Interest Rate: 17.5% Agriculture: Cotton, grains, livestock Industry: Natural gas, Oil Industrial Prod Growth Rate: 7.3% Oil Production: 202,400 bbl/day Natural Gas: 38.1B cubic meter (24th) Exports: $10.5B; Gas, Crude, Petrochemicals; China, Turkey, UAE Imports: $8.27B; Machinery & equipment, chemicals; Russia, Turkey, China 62
    • Background Information: UZBEKISTAN Government Structure: Republic, authoritarian presidential rule GDP (PPP): $85.85B GDP growth rate (real): 8.5% Population (2010): 28.2M Investment: NA Inflation: 15% Central Bank Interest Rate: NA Commercial Prime Interest Rate: NA Agriculture: Cotton, vegetables, fruits Industry: Textiles, food processing Industrial Prod Growth Rate: 8% Oil Production: 58,650bbl/day Natural Gas: 61.4B cubic meter (14th) Exports: $12B; Energy products, cotton; China, Russia, Turkey Imports: $8B; Machinery & Equipment, foodstuff; Russia, South Korea, China 63
    • APPENDIX: Market Analysis by Country Economic Factors GDP (PPP) (billion USD) Kazakhstan Kyrgyzstan Tajikistan Turkmenistan Uzbekistan Pakistan Azerbaijan Mongolia Kazakhstan Kyrgyzstan Tajikistan Turkmenistan Uzbekistan Pakistan Azerbaijan Mongolia 64 196.4 12.02 14.74 36.9 85.85 464.9 90.8 11 2 7 6 5 4 1 3 8 GNI per Capita (USD, 2010) 7590.00 2100.00 2140.00 7490.00 3120.00 2790.00 9280.00 3670.00 2 8 7 3 5 6 1 4 GDP/Capita (PPP) 13,000 2400 2000 7,500 3,300 2,800 10,200 4,500 1 7 8 3 5 6 2 4 GDP growth (real) 7.00% -1.40% 6.50% 9.20% 8.50% 4.80% 5.00% 6.10% 3 8 4 1 2 7 6 5 Natural Gas Domestic Oil Production Credit to Production (billion the Private (thousand cubic Sector (% bbl/day) meter) of GDP) Natural Resources 1610 35.61 39.30 0.946 0.0154 0.00 0.22 0.0380 0.00 202.4 38.1 0.00 58.65 61.4 0.00 63.58 38.4 21.50 1040 16.52 18.30 0.0 0.0 39.60 1 4 2 6 7 8 7 5 8 3 3 8 5 1 8 4 2 3 2 6 4 8 8 1 Export (billion USD) Import (billion USD) 60.8 1.78 1.3 10.5 12 21.5 26.5 2.9 1 7 8 5 4 3 2 6 32 2.98 2.9 8.27 8 32.9 6.7 3.3 2 7 8 3 4 1 5 6 Inflation 7.10% 8.00% 6.40% 10.00% 15.00% 13.90% 5.70% 10.20% 6 4 2 5 8 7 1 6
    • APPENDIX: Market Analysis by Country Political Risk in Central Asian Countries 65
    • APPENDIX: Market Analysis by Country Openness Kazakhstan Kyrgyzstan Tajikistan Turkmenistan Uzbekistan Pakistan Azerbaijan Mongolia Kazakhstan Kyrgyzstan Tajikistan Turkmenistan Uzbekistan Pakistan Azerbaijan Mongolia 66 FDI, Net Openness Global Inflow to Media Competitiv 9961.0 65.5 4.18 437.6 103.0 3.45 15.8 87.0 3.77 2083.0 2.3 0.00 822.0 60.0 0.00 2016.0 68.0 3.58 563.1 55.8 4.31 1454.7 107.3 3.86 1 5 2 7 2 6 8 3 4 2 8 8 5 6 8 3 4 5 6 7 1 4 1 3
    • APPENDIX: Market Analysis by Country Product Markets Logistics Performance Index (1-5, low to high) Kazakhstan Kyrgyzstan Tajikistan Turkmenistan Uzbekistan Pakistan Azerbaijan Mongolia 67 2.66 2.09 2.00 2.24 2.54 2.08 2.23 1.94 1 5 7 3 2 6 4 8
    • APPENDIX: Market Analysis by Country Labor Markets UN UN Education Education Index Index Unemploy(expected (expected ment rate and mean and mean years of years of schooling schooling Kazakhstan 0.834 5.40% 1 Kyrgyzstan 0.716 8.20% 5 Tajikistan 0.704 60.00% 7 Turkmenistan 0.739 70.00% 3 Uzbekistan 0.711 8.00% 6 Pakistan 0.386 5.95% 8 Azerbaijan 0.763 6.00% 2 Mongolia 0.722 3.60% 4 68 Unemployment rate 2 6 7 8 5 3 4 1
    • APPENDIX: Market Analysis by Country Capital Markets Insurance and Total Listed Financial Domestic Sector (% Companies of imports) Kazakhstan Kyrgyzstan Tajikistan Turkmenistan Uzbekistan Pakistan Azerbaijan Mongolia 69 5.0% 3.0% 7.0% 0.0% 0.0% 3.0% 3.0% 4.0% 60 11 0 0 0 644 0 336 Money and quasi money supply (M2) (% GDP) 36.60 0.00 0.00 0.00 0.00 38.50 22.80 44.90 Insurance and Total Listed Financial Domestic Sector (% Companies of imports) 2 4 1 7 7 4 4 3 3 4 5 5 5 1 5 2 Money and quasi money supply (M2) (% GDP) 3 5 5 5 5 2 4 1
    • APPENDIX: Acquisition Forecast - Azerbaijan Target Market Target Comparable Azerbaijan Ateshgah USD Millions Assumptions Overall Market WP Growth Rate Target's Market Share Growth Rate Target's Premium Base Growth Rate Loss Ratio Growth Rate Expense Ratio Growth Rate Acquisition & Integration Costs Investment Hurdle Rate Operating Year Overall Market Written Premium Target's Market Share Target's Premium Base Loss Ratio Expense Ratio Target's Margin Premium Target's Margin % Discounted to 2013 70 3.00% 3.00% 6.09% 1.50% 3.00% 9.68 10.00% 2010 193.86 7.5% 14.54 34.7% 35.0% 4.40 30.3% - 2011 199.68 7.7% 15.42 35.2% 36.1% 4.43 28.7% - 2012 205.67 8.0% 16.36 35.8% 37.1% 4.44 27.1% - 2013 211.84 8.2% 17.36 36.3% 38.2% 4.42 25.5% 4.42 2014 218.19 8.4% 18.42 36.8% 39.4% 4.38 23.8% 3.98 2015 224.74 8.7% 19.54 37.4% 40.6% 4.31 22.0% 3.56 2016 231.48 9.0% 20.73 38.0% 41.8% 4.20 20.3% 3.15 2017 238.42 9.2% 21.99 38.5% 43.0% 4.05 18.4% 2.77 2018 245.58 9.5% 23.33 39.1% 44.3% 3.86 16.6% 2.40 Total 20.28
    • APPENDIX: Acquisition Forecast - Kazakhstan Target Market Target Comparable Kazakhstan Kazkommerts-Policy USD Millions Assumptions Overall Market WP Growth Rate Target's Market Share Growth Rate Target's Premium Base Growth Rate Loss Ratio Growth Rate Expense Ratio Growth Rate Acquisition & Integration Costs Investment Hurdle Rate Operating Year Overall Market Written Premium Target's Market Share Target's Premium Base Loss Ratio Expense Ratio Target's Margin Premium Target's Margin % Discounted to 2013 71 6.00% 2.00% 8.12% 2.00% 3.00% 182.61 10.00% 2010 2011 2012 2013 2014 2015 2016 2017 2018 949.80 1,006.79 1,067.20 1,131.23 1,199.10 1,271.05 1,347.31 1,428.15 1,513.84 8.0% 8.2% 8.3% 8.5% 8.7% 8.8% 9.0% 9.2% 9.4% 75.98 82.15 88.82 96.04 103.84 112.27 121.38 131.24 141.90 10.0% 10.2% 10.4% 10.6% 10.8% 11.0% 11.3% 11.5% 11.7% 35.0% 36.1% 37.1% 38.2% 39.4% 40.6% 41.8% 43.0% 44.3% 41.79 44.16 46.60 49.12 51.69 54.32 56.99 59.67 62.36 55.0% 53.8% 52.5% 51.1% 49.8% 48.4% 46.9% 45.5% 43.9% 49.12 46.99 44.89 42.81 40.76 38.72 Total 263.29
    • APPENDIX: Greenfield Forecast - Azerbaijan Target Market Azerbaijan USD Millions Assumptions Overall Market WP Growth Rate Sub / Branch Market Share Growth Rate Sub / Branch Premium Base Growth Rate Loss Ratio Growth Rate Expense Ratio Growth Rate Initial Start-up Costs Investment Hurdle Rate Operating Year Overall Market Written Premium Sub / Branch Market Share Sub / Branch Premium Base Loss Ratio Expense Ratio Sub / Branch Margin Premium Sub / Branch Margin % Discounted to 2013 72 3.00% 3.00% 6.09% 1.50% 3.00% 3.00 10.00% 2010 193.86 0.0% 34.7% 35.0% 0.0% - 2011 199.68 0.0% 35.2% 36.1% 0.0% - 2012 205.67 0.0% 35.8% 37.1% 0.0% - 2013 211.84 5.0% 10.59 36.3% 38.2% 2.70 25.5% 2.70 2014 218.19 7.0% 11.24 36.8% 39.4% 2.67 23.8% 2.43 2015 224.74 8.0% 11.92 37.4% 40.6% 2.63 22.0% 2.17 2016 231.48 8.2% 12.65 38.0% 41.8% 2.56 20.3% 1.92 2017 238.42 8.5% 13.42 38.5% 43.0% 2.47 18.4% 1.69 2018 245.58 8.7% 14.23 39.1% 44.3% 2.36 16.6% 1.46 Total 12.37
    • APPENDIX: Greenfield Forecast - Kazakhstan Target Market Kazakhstan USD Millions Assumptions Overall Market WP Growth Rate Sub / Branch Market Share Growth Rate Sub / Branch Premium Base Growth Rate Loss Ratio Growth Rate Expense Ratio Growth Rate Initial Start-up Costs Investment Hurdle Rate Operating Year Overall Market Written Premium Sub / Branch Market Share Sub / Branch Premium Base Loss Ratio Expense Ratio Sub / Branch Margin Premium Sub / Branch Margin % Discounted to 2013 73 6.00% 2.00% 8.12% 2.00% 3.00% 5.00 10.00% 2010 2011 2012 2013 2014 2015 2016 2017 2018 949.80 1,006.79 1,067.20 1,131.23 1,199.10 1,271.05 1,347.31 1,428.15 1,513.84 0.0% 0.0% 0.0% 5.0% 8.0% 10.0% 10.2% 10.4% 10.6% 56.56 61.15 66.12 71.49 77.29 83.57 10.0% 10.2% 10.4% 10.6% 10.8% 11.0% 11.3% 11.5% 11.7% 35.0% 36.1% 37.1% 38.2% 39.4% 40.6% 41.8% 43.0% 44.3% 28.93 30.44 31.99 33.56 35.14 36.73 0.0% 0.0% 0.0% 51.1% 49.8% 48.4% 46.9% 45.5% 43.9% 28.93 27.68 26.44 25.22 24.00 22.80 Total 155.07
    • APPENDIX: Greenfield Forecast - Pakistan Target Market Pakistan USD Millions Assumptions Overall Market WP Growth Rate Sub / Branch Market Share Growth Rate Sub / Branch Premium Base Growth Rate Loss Ratio Growth Rate Expense Ratio Growth Rate Initial Start-up Costs Investment Hurdle Rate Operating Year Overall Market Written Premium Sub / Branch Market Share Sub / Branch Premium Base Loss Ratio Expense Ratio Sub / Branch Margin Premium Sub / Branch Margin % Discounted to 2013 74 8.00% 1.00% 9.08% 1.50% 3.00% 12.00 10.00% 2008 1,070.60 0.0% 11.0% 35.0% 0.0% - ~ 2012 2013 2014 2015 2016 2017 2018 1,248.75 1,348.65 1,456.54 1,573.06 1,698.91 1,834.82 1,981.61 0.0% 3.0% 5.0% 8.0% 8.1% 8.2% 8.2% 40.46 44.13 48.14 52.51 57.28 62.48 11.3% 11.5% 11.7% 11.9% 12.0% 12.2% 12.4% 37.1% 38.2% 39.4% 40.6% 41.8% 43.0% 44.3% 20.33 21.60 22.90 24.25 25.63 27.04 0.0% 50.3% 48.9% 47.6% 46.2% 44.7% 43.3% 20.33 19.63 18.93 18.22 17.51 16.79 Total 111.40
    • APPENDIX: Pro Rata Reinsurance Forecast Mongolia Target Market Target Comparable Mongolia Bodi Daatgal USD Millions Assumptions Overall Market WP Growth Rate Cedant's Market Share Growth Rate Cedant's Premium Base Growth Rate Loss Ratio Growth Rate Expense Ratio Growth Rate Commission Quota Share Percentage Investment Hurdle Rate Operating Year Overall Market Written Premium Cedant's Market Share Cedant's Premium Base Loss Ratio Expense Ratio Cedant's Margin Premium Cedant's Margin % Commission Net Premium Accruing to Zurich Net Premium Discounted to 2014 75 10% 0% 10% 0.50% 3% 20% 50% 10% 2009 16.27 20.0% 3.25 10.2% 37.5% 1.70 52.3% 20.0% 0.68 - 2010 17.90 20.0% 3.58 10.3% 38.7% 1.83 51.1% 20.0% 0.73 - 2011 19.69 20.0% 3.94 10.3% 39.8% 1.96 49.9% 20.0% 0.79 - 2012 21.66 20.0% 4.33 10.4% 41.0% 2.11 48.6% 20.0% 0.84 - 2013 23.82 20.0% 4.76 10.4% 42.3% 2.26 47.3% 20.0% 0.90 - 2014 26.20 20.0% 5.24 10.5% 43.5% 2.41 46.0% 20.0% 0.96 0.96 2015 28.82 20.0% 5.76 10.5% 44.8% 2.57 44.7% 20.0% 1.03 0.94 2016 31.71 20.0% 6.34 10.6% 46.2% 2.74 43.3% 20.0% 1.10 0.91 2017 34.88 20.0% 6.98 10.6% 47.6% 2.92 41.8% 20.0% 1.17 0.88 2018 38.36 20.0% 7.67 10.7% 49.0% 3.10 40.4% 20.0% 1.24 0.85 Total 4.53