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Demographic Change in Japan- its Challenges for Financial Service Providers DIJ
International Symposium, 3 October 2008
DIJ International Symposium, 3 October 2008
Uwe Michel,Country
Managerof
AllianzJapan
UweMichel,
ChairmanAllianzLife Insurance Japan Ltd.

Topics

1

Short Introduction of Allianz

2

Demographic Changes in Japan

3

Challenges and Opportunities for Financial Service Providers© Copyright Allianz Life Insurance Japan Ltd. 1/30/2009

Allianz is a Leading Global Financial Service Provider

1890
70181,207

The Year founded in Germany

The Countries providing our services

Our Employees worldwide
as off June
J3030, 2008

€ mn

80,000,000

Our Customers in the world

1,061,149

Total Assets of Allianz Group in FY2007

Source: Annual report 2007, released on March 20, 2008
© Copyright Allianz Life Insurance Japan Ltd. 1/30/2009

Life Insurance Market in Japan
World’s ‘Model’ function regarding challenges and opportunities
 Japan is undergoing fundamental change:- demographics- social systems- investment
itt behaviorb h i
 World’s third largest life insurance market
 Demographic development in Japan is ‘ahead’ ofEurope and the U.S.

Key to success is the capability to serve clients with a wide
range of product solutions for their specific needs
needs.
© Copyright Allianz Life Insurance Japan Ltd. 1/30/2009

Three Major Changes in Japan
Population by Age

 Population ‘twin peaks’

1

The population pyramid shows notabletwin-peaks due to baby boomer
generation and its children.
30-34

Wealth Distribution (2005) 2

 Asymmetrical wealth distribution
More than half (52%) of the nation’s
wealth lies with 33% of elderlyy people’sp phouseholds.

55-59

Under 60 yrsb67%¥48%

60 yrs +

33%
33%

67%

52%
52%

48%

Age Distribution Change Growing 60+ generation
By 2025, this age group will be almost
40% of Japan’s population.

60 yrs +

27%
27%

37%
37%

73%
73%

63%
63%

Under60 yrs
1985

31995

2005

2015

2025

1 Source: 2005 population census; 2 Source: National Census; National Survey of Family Income and Expenditure; 3 Source: National Institute of Population and Society Security Research; National
Survey of Family Income and Expenditure: Ministry of Health, Labor and Welfare, National Census© Copyright Allianz Life Insurance Japan Ltd. 1/30/2009

Ailing Social Systems and New Financial Needs
 Approx. ten million baby boomers bornb t
between
1946 andd 1950 hhave either
ith recentlytl
retired or will soon reach retirement age.
 The remaining life expectancy at age 65 is18.5 years for men and 23.4 years for women.

Lifeexpectancyt

MaleFemale

at birth

79.0 yrs 85.8 yrs

at age 65

18.5 yrs 23.4 yrs
Source: OECD 2006

Elderly generation: Need for pension solutions, financial management
and health care
Younger generation: Faced with double burden of providing for theirfamily and preparing for retirement on the background of shrinking
public pensions© Copyright Allianz Life Insurance Japan Ltd. 1/30/2009

Behavioral Trend - Changing Investment Behavior
 The changing demographics brought a major paradigm shift in life insurance
products from zero interest saving products to both accumulation anddecumulation products
products.

From Saving To Investment
100%
10%

10%

10%

10%

11%

11%

11%

90%
80%
70%
60%

17%

17%

17%

17%

16%

15%15%

14%

11%

9%

12%

12%

16%

17%

6%

6%

5%

5%

5%

6%

7%

50%

PensionReserve
Life Insurance
Reserve
Stock/Mutual
Fund

40%
30%

54%

56%

58%

56%

55%

Bond
52%

50%

20%

Cash/Deposit

10%0%
Source : BOJ

2000FY

2001FY© Copyright Allianz Life Insurance Japan Ltd. 1/30/2009

2002FY

2003FY

2004FY

2005FY

2006FY

Consequences for the Individual- Need for strategies to protect household How much money will I
need to lead a
comfortable life after
retirement?
Regular income after
retirement?

Education costs forchildren /grandchildren

How to protect againstinflation

Care for family

What if I outlive mysavings?

Rising medical
expenses?

What if I need nursing
care?

But I do not know what to do...
Yet: lack of knowledge, unawareness about individual financial planning© Copyright Allianz Life Insurance Japan Ltd. 1/30/2009

Two Basic Customer Needs
depending on life stage and personal circumstances
Accumulation

Decumulation

Earnings,Savings,
I
Investments
tt

Expenses…daily, medical,
social etc…

Assets© Copyright Allianz Life Insurance Japan Ltd. 1/30/2009

LegacySpecific Insurance Needs
 First baby boomer and elderly generations (55 – 65 yrs):
PensionNeeds
DECUMUULATION

FinancialManagement
Needs

Health Care&NursingSolutions

 Guaranteed and constant pension income stream

 Secure but opportunity-related wealth management
 Tax-optimized inheritance concepts
 Proper decumulation of wealth ‘Affluent’ health coverage
 Need for supplementary products to fill the gap of non-covered
health expenses
 Financing of nursing and other services for the elderly ‘Luxurious’ medical products for wealthy clients© Copyright Allianz Life Insurance Japan Ltd. 1/30/2009

Product Solution Example: Variable Annuities (1) Annuities with a variable rate of return through exposure to investments Periodic payments for a period of time in exchange for the customer’s upfront
investment
 Popular as a retirement solution to receive predictable payments© Copyright Allianz Life Insurance Japan Ltd. 1/30/2009

Product Solution Example: Variable Annuities (2)Basic Product Example - Life Annuity with 10-year
Period Certain (single premium, fixed installment)

Four basic types
yp of gguarantees:

Account value exceeds premium paid
Account ValueGuaranteed
Period Guaranteed Minimum Death Benefit

10yrs

DeathBenefit Guaranteed Minimum Accumulation Benefit

Lifetime

Annuity Guaranteed Minimum Withdrawal Benefit Guaranteed Minimum Income Benefit

Issue Date
Annuitization Date
Accumulation
PayoutPeriodPeriodAccount value lower than premium paid
Account Value
Guaranteed
PeriodDeathBenefit

Issue Date

10yrs

Lifetime
Annuity

Annuitization Date
Accumulation
PeriodPayoutPeriodSource: Japan Institute of Life Insurance© Copyright Allianz Life Insurance Japan Ltd. 1/30/2009

Reaching Out to the Silver Market The ‘Universal’ Company:

 Sponsoring Activities:- Providing customers with an appropriate
selection of p
products that areflexible to meet diverse needs,
accessible for everyone,easy to understand andsustainable.

Offering comprehensible products for every individual.
Delivering optimum services to every one.
We aim to be such a universal company
company.

© Copyright Allianz Life Insurance Japan Ltd. 1/30/2009- Supporting AED (Automated External Defibrillator)

program in 40 Tokyo metropolitan parks:

Specific Insurance Needs
 Second baby boomer generation (35 – 45 yrs):

AC
CCUMULAATION

ExistingNeeds

 Higher education needs/costs of children
 Preparing
pg for retirement on the backgroundgof shrinking
gp
publicpensions

 Education
Edti fifinancing
i iinsurance

DevelopingNeeds

 Pension insurance, annuities Flexible whole life cycle products
 Medical supplementary insurance for all household members© Copyright Allianz Life Insurance Japan Ltd. 1/30/2009xProduct Solution Example: Regular Payment Annuity

Basic Product Image

Account Value

Death Benefit

Annuitization Date

Issue Date

Premium Payment Period© Copyright Allianz Life Insurance Japan Ltd. 1/30/2009

PayoutyPeriodFuture Outlook

 Individuals will increasingly need to take care of theirfinances personally.
 Risk of two-class society has to be avoided.

 Government / state will have to encourage and foster

private post
post- retirement planning.
planning© Copyright Allianz Life Insurance Japan Ltd. 1/30/2009

Disclaimer
Cautionary Note Regarding Forward-Looking Statements
The statements contained herein may include statements of future expectations and other forward-looking statements thatare based on management's current views and assumptions and involve known and unknown risks and uncertainties thatcould cause actual results,results performance or events to differ materially from those expressed or implied in such statements
statements.
In addition to statements which are forward-looking by reason of context, the words "may", "will", "should", "expects","plans", "intends", "anticipates", "believes", "estimates", "predicts", "potential", or "continue" and similar expressions
identify forward-looking statements. Actual results, performance or events may differ materially from those in suchstatements due to, without limitation, (i) general economic conditions, including in particular economic conditions in theAllianz Group
Group'ss core business and core markets, (ii) performance of financial markets, including emerging markets, (iii) thefrequency and severity of insured loss events, (iv) mortality and morbidity levels and trends, (v) persistency levels, (vi) theextent of credit defaults, (vii) interest rate levels, (viii) currency exchange rates including the euro / US dollar exchange
rate, (ix) changing levels of competition, (x) changes in laws and regulations, including monetary convergence and theEuropean Monetary Union, (xi) changes in the policies of central banks and/or foreign governments, (xii) the impact ofacquisitions, including related integration issues, (xiii) reorganization measures, and (xiv) general competitive factors, ineach case on a local, regional, national and/or global basis. Many of these factors may be more likely to occur, or more
pronounced, as a result of terrorist activities and their consequences.
The matters discussed herein may also be affected by risks and uncertainties described from time to time in Allianz SE’sfilings with the US Securities and Exchange Commission. The company assumes no obligation to update any forwardlooking statement.
No duty to update
The company assumes no obligation to update any information contained herein.

商（069-080924）© Copyright Allianz Life Insurance Japan Ltd. 1/30/2009

F2-00055-0

ThankTh
k youfor your attention
attention.