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