KAZAKHSTAN: in 2023, net profit of the life insurance sector increased by 44.6%

17 April 2024 — Marina MAGNAVAL
In 2023, increased demand for life insurance products, both as a result of the risks and through legislative incentives, ensured growth of all key indicators of the life insurance market, according to the review of the Kazakhstan life insurance market for 2023, prepared by the AFK Analytical Center (Association of Financiers of Kazakhstan).

Among the key trends, analysts emphasized the following:

- Life insurance assets increased to KZT 1,118.7 billion/~EUR 2.23 billion (+21.7% in KZT) and amounted to 44.8% of all insurance market assets.

- As of January 1, 2024, 83.9% of the assets were represented by securities.

- Life insurance liabilities increased to KZT 823.0 billion (+16.2%).

- Concentration in the life insurance sector remains high: 72.2% of assets are held by three large companies: Halyk-Life, Nomad Life and FFLife.

- In 2023, there was a noticeable increase in insurance premiums (+34.0%) due to an increased demand for products such as pension annuity insurance, life insurance and accident insurance.

- Entry of life insurers into the travel market: during the year, 346.7 thousand contracts were concluded for a total amount of KZT 1.7 billion, which led to a decrease in the volume of collected travel premiums for non-life insurers (- 5.6%).

- An increase in paid claims (+60.2%) was mainly associated with such products as life insurance (the number of paid claims rose 14.9%) and employee accident insurance (the number of paid claims increased by 21.7 times).

- A higher increase in paid claims led to a deterioration in the premiums to claims ratio at the end of 2023: 13.7% vs 11.4% at the end of 2022.

- The net profit of the sector over the past year increased by 44.6%, to KZT 92.5 billion, due to an increase in life insurance companies’ income from investment activities (+25.6%) and a reduction in costs associated with termination of insurance contracts (-49.5%).

- At the same time, the return on equity in the life market decreased to 21% vs 30% at the end of 2022.

Summary of the year

In 2023, the growth of the life insurance sector was mainly associated with the introduction of new social products by life insurers, as well as with the increased interest of Kazakhstanis in life and health insurance.

Among life insurance products with a social component, one can highlight pension annuity, the potential of which is estimated by life companies at KZT 30 billion by the fifth year of product introduction.

At the end of last year, the growth of life insurers’ income from insurance activities amounted to 1.7%, with an increase in net expenses for insurance payments by 37.7%, which was associated with an increase in their number (+21.9%) and cost (an increase in the average payment by 31.4 %).

Accordingly, profitability of life insurers was ensured by investment activities, namely income from interest on securities (+39.1%) and a positive revaluation (3.8 times). At the same time, the observed decrease in the average return on equity for the sector occurred both due to the growth of equity capital and a decrease in the net profit of individual market participants.

According to the forecasts of the global consulting company Accenture, the current year will be positive for life insurance companies operating in emerging markets (revenue growth by an average of 5.1%) against the backdrop of increased demand for savings and pension products, as well as minimization of costs with the development of artificial intelligence technologies, the review says.

* 1 EUR = 502.24 KZT (December 31st, 2023)