The Top 25 Biggest Earning Insurance Companies in the World

Although the worst of the 2008 financial crisis has passed, the insurance industry still faces numerous challenges in 2010. A weak economy is limiting growth opportunities and making capital preservation an ongoing priority for many companies.

Because of these pressures, insurers continue to closely monitor their people, processes, systems, and markets in order to find competitive advantages. In the midst of this, they also face potentially major changes to accounting standards, capital requirements, and regulation that may affect their business for years to come.

Although the worst of the 2008 financial crisis has passed, the insurance industry still faces numerous challenges in 2010. A weak economy is limiting growth opportunities and making capital preservation an ongoing priority for many companies.

Because of these pressures, insurers continue to closely monitor their people, processes, systems, and markets in order to find competitive advantages. In the midst of this, they also face potentially major changes to accounting standards, capital requirements, and regulation that may affect their business for years to come.

The good news for consumers? In a competitve environment, insurance industry players have to lower their premiums and offer better coverage and policies.

These are the top 25 insurance companies in the world:

Rank	Company	Market Value (Billions)
1	China Life Insurance	118.74
2	Ping An Insurance Group	52.80
3	Allianz	52.74
4	AXA Group	46.02
5	ING Group	35.46
6	Generali Group	35.19
7	Zurich Financial Services	34.71
8	Manulife Financial	32.56
9	China Pacific Insurance	32.21
10	Munich Re	30.12
11	MetLife	29.93
12	The Travelers Companies	27.26
13	Prudential Financial	24.86
14	Aflac	23.47
15	Tokio Marine Holdings	22.29
16	Prudential	20.05
17	QBE Insurance Group	19.74
18	ACE	16.97
19	Allstate	16.94
20	Chubb	16.77
21	Swiss Re	16.44
22	Sun Life Financial	16.24
23	Cathay Financial	15.86
24	CNA Financial	15.64
25	Aviva	15.51

Rankings Source: Forbes

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International tax reform principles affecting foreign multinational insurance companies

International tax reform principles affecting foreign multinational insurance companies doing business in the US are directed generally toward preservation and expansion of the US income tax base. Multiple principles impacting non-US multinational insurance companies come from proposals and public statements issued through the end of 2009, and the February 2010 Green Book including:

Tax Treaty Override

Various proposals would override US treaty obligations and impose the statutory (30%) withholding tax rate on deductible payments paid to intermediary entities when the payment to the top holding company would not qualify for US treaty benefits.

The intent of these proposals is to mitigate perceived abuse of intermediary intellectual property holding companies or financing companies to erode the US income tax base through royalties, interest or other payments that are deductible for US tax purposes.

US Management & Control

Various proposals, including ones most recently put forth by Senator Carl Levin of Michigan, would amend US domestic law to treat publicly traded foreign corporations and non-public foreign companies having at least US$50 million in gross assets that are managed and controlled in the US as domestic corporations for US Federal income tax purposes. Among other considerations, earnings of non-US subsidiaries of the foreign parent company may ultimately become subject to US taxation, despite legal ownership outside the company’s US group.

Related Party Reinsurance

The February 2010 Green Book contains a proposal that permanently disallows

a deduction for reinsurance premiums (with respect to US risks) paid by a US insurance company to affiliated foreign reinsurance company to the extent that

(1) the foreign affi liated reinsurance company is not subject to US income tax with respect to such premiums it receives and

(2) the amount of reinsurance premiums (net of ceding commissions) exceeds 50% of the total direct insurance premiums received by the US insurance company by line of business.

This proposal is somewhat similar to a bill introduced into the House of Representatives by Congressmen Richard Neal in 2009 (“Neal Bill”). There

are some potentially signifi cant diff erences in the Obama Proposal from the Neal Bill including:

(1) On its face, the Obama proposal would apply to life insurance which was excluded from application under the Neal Bill;

(2) The Obama Proposal reduces the reinsurance premium amounts subject to deduction limitation by ceding commissions;

(3) the 50% amount of the Obama Proposal is likely more generous to taxpayers than the Neal Bill’s restrictions based upon industry averages; and (4) the Obama Proposal does not include third party reinsurance premiums as part of the amount subject to deductibility limitation as was the case in the Neal Bill. Note that the netting of the ceding commission against the reinsurance premium allowed under the Obama Proposal may not be as generous as it seems for some lines of business where there is a large up-front ceding commission and much smaller ceding commissions in subsequent years.

In such cases where little new business is being written in later years that generate large upfront ceding commissions, insurance companies may face limitations on deductions for reinsurance premiums in later years when the ceding

commissions are low.

Earnings Stripping Reform

The Obama Administration’s February 2010 Green Book includes provisions that are

intended to impose greater restrictions on interest earnings stripping for certain expatriated groups of corporations.

US Nexus Exposure

In the fall of 2008, the Internal Revenue Service indicated its heightened awareness

of and intent to pursue US nexus considerations with greater scrutiny. Since then, the IRS has hired over 700 agents and appears to be increasing its focus on whether

or not the US activities of non-US companies create direct permanent establishment or trade/business considerations and whether or not US affiliate activities create agency considerations for non-US affiliates with whom US affiliates may do business.

Transfer Pricing

A wide variety of informal public statements and media reports indicate a general perception that taxpayers are aggressively employing transfer pricing principles to related party payments. These considerations are consistent with worldwide transfer pricing trends and increased governmental focus, but recent comments indicate an even closer scrutiny from a US tax perspective.

Each of these considerations is concerned with preserving or expanding the US tax base. Foreign insurance companies doing business in the US should monitor the evolution of these proposals, assess their exposure in these topical areas and consider countermeasures.

PWC report on insurance market 2010.