FOUNDATIONMMorgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.+= Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be associated persons of the member and may not be subject to NASD/NYSE restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.Asia PrimerChina P&C's $100bn Non-Auto OpportunityThe auto segment fuelled China's P&C growth for over a decade. But the industry is now at an inflection point, with non-auto lines starting to contribute the majority of incremental premiums. We estimate that the country's P&C revenue pools will expand by 40%, to US$250bn, by 2021.July 5, 2019 10:42 AM GMTFOUNDATIONMMORGAN STANLEY ASIA LIMITED+Jenny Jiang, CFAEquity Analyst+852 2848-7152Jenny.Jiang@morganstanley.com Contributors MORGAN STANLEY ASIA LIMITED+Green CaiResearch Associate+852 2848-5686Green.Cai@morganstanley.comMORGAN STANLEY ASIA LIMITED+Birlina QiResearch Associate+852 3963-4087Xiaoyue.Qi@morganstanley.comFOUNDATIONMUS$100bn revenue opportunity in China's non-auto segments is too big to ignore. China's P&C industry lags behind developed mar-kets, with an overall penetration rate of 1.3% and non-auto penetra-tion of just 0.4% compared to more than 2% in the developed world. With auto insurance decelerating after more than 10 years of strong growth, P&C insurers must focus on non-auto segments to meet growth targets. In 2018, for the first time, non-auto contributed 75% of new premiums – and we believe this trend will continue. We esti-mate that non-auto lines represent a US$100bn premium opportu-nity that would expand the current P&C revenue pool by 40%, driven by policy-supported agriculture and liability lines as well as innova-tion-driven personal lines.An industry with steady growth and attractive RoE. P&C pre-miums grew at a CAGR of 18% in 2000-18 and are likely to maintain 10%-plus growth going forward, underpinned by the development of largely untapped non-auto segments. As insurers diversify into these new lines, growth and profitability should experience greater sta-bility, which is a key characteristic of well-developed P&C markets. Helped by a relatively high domestic rate environment, large scale and a vast geographical area for risk diversification, Chinese P&C operators have been enjoying high underlying RoEs of at least 20%, compared with global peers at 15-18%. While we do expect Chinese P&C insurers to be more exposed to...
