In­sur­ance pre­mi­ums soar in first 3 quar­ters, but re­turn on as­sets re­mains low

China Daily (USA) - - BUSINESS - By LI XIANG lix­i­ang@chi­

The premium in­come of Chi­nese in­sur­ers soared in the first three quar­ters, but their prof­itabil­ity will con­tinue to be un­der pres­sure in the low in­ter­est rate en­vi­ron­ment, of­fi­cial data showed on Tues­day.

The Chi­nese in­sur­ance sec­tor re­port to­tal premium in­come of 2.52 tril­lion yuan ($370 bil­lion) in the first three quar­ters, up by 32.2 per­cent from a year ear­lier. The amount ex­ceeded their to­tal pre­mi­ums from all of last year, ac­cord­ing to data from the China In­sur­ance Reg­u­la­tory Com­mis­sion.

The in­sur­ance reg­u­la­tor said that the in­dus­try’s prof­itabil­ity will con­tinue to face head­winds as the to­tal prof­its of the sec­tor are ex­pected to de­cline by 35.7 per­cent in the first three quar­ters.

But, the de­cline slowed from the sharp fall of 54 per­cent in the first half of this year.

Sally Yim, se­nior vice-pres­i­dent at global rat­ing agen­cyMoody’s In­vestors Ser­vice, said that the slower de­cline in prof­its was mainly due to the low base in the third quar­ter of last year.

“Prof­itabil­ity in Q3 2016 would not drop as much as 1H 2016, be­cause Q3 2015 was a lower base Sally Yim, as the eq­uity mar­ket started fall­ing in June 2015, which im­pacted in­sur­ers’ in­vest­ment in­come,” Yim said.

The of­fi­cial data also show that com­pli­cated mar­ket con­di­tions have weighed on the in­vest­ment re­turns of the in­sur­ers, which re­ported to­tal in­vest­ment re­turns of 482.9 bil­lion yuan by the end of Septem­ber, down by 19.1 per­cent from a year ear­lier.

Felix Luo, an in­sur­ance an­a­lyst at GF Se­cu­ri­ties (Hong Kong) Co Ltd, said that the life in­sur­ance sec­tor will con­tinue to have sta­ble pre­mi­um­growth while prop­erty and ca­su­alty in­sur­ers will see their un­der­writ­ing profit mar­gin re­main un­der pres­sure.

“We have a pos­i­tive view on China’s life in­sur­ance sec­tor. Chi­nese life in­sur­ers are in­creas­ingly fo­cus­ing on agency chan­nel sales and long-term prod­ucts, partly due to stricter reg­u­la­tion of high cash-value prod­ucts,” Luo said.

The rapid growth of health in­sur­ance thanks to low in­sur­ance pen­e­tra­tion as well as Chi­nese peo­ple’s grow­ing con­cern about health is­sues will also boost the premium in­come of Chi­nese life in­sur­ers, Luo added.

For­eign in­sur­ance firms saw faster busi­ness growth than the in­dus­try’s av­er­age rate and man­aged to gain a greater­mar­ket share in­China in the first three quar­ters.

For­eign life in­sur­ers saw their premium rev­enue rise by 51.3 per­cent to 110.5 bil­lion yuan while their to­tal mar­ket share ex­panded to 6.03 per­cent, ac­cord­ing to the of­fi­cial data.

“We saw that a few of the bankowned for­eign life in­sur­ance joint ven­tures have grown quite sig­nif­i­cantly in the first eight months of the year. Sales from the bank­ing chan­nel re­cov­ered slightly this year, and this may have helped for­eign life in­sur­ers in­crease their mar­ket share,” Yim atMoody’s said.

Prof­itabil­ity in Q3 2016 would not drop as much as 1H 2016...”

se­nior vice-pres­i­dent at global rat­ing agency Moody’s In­vestors Ser­vice

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