Lithuania's economy suffered a devastating blow in 2009. Real GDP declined by a record 15.6% year-on-year, placing Lithuania among the world's worst-performing markets. The insurance market followed the trend, following also one of the worst trajectories among European insurance markets with a fall of 22.5%. As a result, after many years of swift growth, in volume terms the Lithuanian market returned to close to its 2006 level.

The Non-life insurance segment saw the most dramatic fall, with the Motor Hull and Property lines losing some 30% of their turnover compared to 2008. So, with a 9.5% fall, Life insurance lines did comparatively well.

The Life insurance GWP volume totalled EUR140.12m, down EUR14m on the year, but the substantially worse decline in the Non-life line meant Life insurance gained 4.5 percentage points in market share. The number of Life insurance policies sold fell more than 27%, to 65,440 units from 89,800. Meanwhile, the number of policies terminated either by surrender or by the payment of the benefits/indemnities grew to more than 55,000 from 48,000. Looking at the Life segment more closely, in 2009 the Unit-Linked segment saw 30,930 contracts concluded and 28,709 policies closed, so the number of policies stayed more or less stable. But compared with 2008 it experienced a significant downturn with the number of policies falling 40% and GWP declining 10%.

But the situation was even more serious in the Non-life market, where the overall number of contracts fell by more than 380,000 to 3,999,054 units. In the same time, Lithuanian insurers had to deal with 14% more claims. In financial terms, this meant that a 27.27% fall in premiums coincided with a 12% rise in paid claims. In all, GWP at EUR306m was down EUR115m on the previous year.

The deepest fall occurred in the Motor Hull and Property classes. This was because on the one hand, as throughout the region, a massive reduction in car sales resulted in a significant decrease in the number of insurance contracts, and on the other hand the owners of old cars responded to reduced purchasing power by dropping their Motor Hull policies. Consequently, 20,000 fewer Motor Hull policies resulted in a 38.8% drop in premiums to EUR71.06m.

On the Property line, GWP fell almost 35% to EUR64.47m, from EUR99.1m, ostensibly as a result of a reduction in the collapse of the share of corporate contracts in the market portfolio. But in fact the overall number of policies grew by almost 38,000. However, the average premium fell to EUR121 per policy from EUR201 per policy in 2008.

Nevertheless, despite the decrease in turnover, the market managed to remain profitable. Thus, the technical result for the Non-life segment managed to stay slightly in the black by posting a EUR0.46m gain, while the Life insurance market turned a EUR18.34m profit. It is worth mentioning in this context that the EUR81m gains made by financial investment of the life insurers’ assets made a serious contribution to this positive result. All in all, the Lithuanian insurance market reported EUR22.3m profit after taxes.