Jan
9
Ongoing Confusion over Foreigners’ Inclusion in China’s Social Security System
Filed Under China, China insurance, Expat Insurance, Health Insurance, Income Protection, Life Insurance, Medical Insurance | Leave a Comment
There continues to be continued uncertainty over whether, as well as how, China is going to include foreign workers in the nation’s social security scheme, with only 3 cities so far, including the nation’s capital, having committed themselves to registering and taxing foreign employees.
The inclusion of foreigners in China’s social security taxation structure is part of China’s health care reforms and the modernization of the country’s social welfare structure to accommodate such reforms. Through taxing expatriates, China offers them access to a number of things through the social security system such as unemployment insurance, pensions and basic medical cover. The scheme requires that the employer pays a tax of 37 percent of the employees’ salary to the state, while the employee contributes a further 11 percent, although contributions are supposed to be capped at three times the average salary in any city.
The plan to include foreign expatriates in China in the social security taxation scheme was initially announced by the central government in July of 2011, and foreigners were supposed to have commenced paying into the social security scheme in October. However, while the Chinese central government announced the new taxation on expatriates, it is the local authorities who are supposed to be implementing it through the registration of foreigners and a mechanism for how to actually pay into the social security system.
The lack of clarity over how the process should work, as well as the relatively short timeline to put necessary frameworks in place in many localities, has resulted in much confusion all around. Beijing was the only city ready to begin registering foreign workers, and even that has been rumored to be fairly unorganized.
However, two new cities have begun registering foreigners to comply with the new tax law, namely Tianjin and Suzhou. Other large centers of commerce in China, such as Shanghai, Guangzhou and Shenzhen have so far not begun to implement the new taxes for the social security scheme.
On top of the general bureaucratic chaos, both companies and their foreign employees have great concerns over the new tax and its implications. Many companies are concerned that in a business climate where it is increasingly more expensive to do business in China, the tax on expatriates’ salaries would become a drain on both business growth and foreign investment.
Foreign employees on the other hand are concerned that since much of their rights as workers are linked to their work visas, they will most likely never see the benefits they have been paying for. When expatriates lose or finish their employment in China, they must leave the country, largely rendering the benefits of the social security scheme moot.
Only in December did state media outlet Xinhua cite an unnamed social security official in Beijing as saying that foreigners who leave China will have their pension accounts kept, until they return to the country, retire, or submit a written application to drop the scheme. Although given the fact that this came out three months after people were supposed to have started paying into a scheme which they may or may not see the benefits from, it may only serve to further the sense of confusion surrounding the new taxes. While the social security scheme is similar to many other countries which include both citizens and foreigners, much needs to be done in order to clarify the scheme in order to make it reasonable.
Jan
6
CIGNA’s China JV Adds New Product to Health Insurance Lineup
Filed Under CIGNA, China, China insurance, Health Insurance, Medical Insurance | Leave a Comment
Cigna & CMC Life Insurance Co., Ltd., Cigna’s Chinese joint venture company, is adding a new product to its portfolio. The new health management product named Cigna & CMC CARE+ will afford policyholders of Cigna & CMC’s high end health insurance plans access to a number of new services and benefits.
As a joint venture between Cigna and China Merchants Group, Cigna & CMC operates as a health, life and accident insurance company in China. It was announced shortly before the end of 2011 that they would be including the new health management product as a value added service for new clients immediately and that existing clients can avail themselves of Cigna & CMC CARE+ benefits upon renewal.
The Cigna & CMC CARE+ health management product is composed of three tools and services. These are the International Employee Assistance Program (IEAP), Expert Second Opinion services and a health and wellbeing assessment.
The Expert Second Opinions section of Cigna & CMC CARE+ can help clients that have received a serious medical diagnosis by providing them with an online diagnosis analysis as well as treatment recommendations. Cigna & CMC have partnered with the Cleveland Clinic to provide clients access to experts who can provide second opinions and medical advice.
The health and wellbeing assessment offers policyholders access to an online survey which will generate a personal report with suggestions for improving their health in areas such as sleeping, nutrition and stress. After completing the assessment policyholders can receive advice and tools that can help them affect a positive change in their state of health.
The International Employee Assistance Program is one of the services that clients can use to begin improving their circumstances, as it provides confidential short-term counseling services and resources at no additional charge that policyholders can use to help resolve personal issues.
The announcement of the Cigna & CMC CARE+ product came shortly after the company had a new General Manager and CEO appointed in mid-November, 2011, named Mr. Fernando Moreira. The company currently offers 4 types of health insurance plans, titled jade, silver, gold and platinum, and the addition of the new health and wellbeing tools and services in Cigna & CMC CARE+ enable clients to stay healthy and possibly prevent future health issues.
Cigna & CMC’s Senior Vice President of Healthcare Products, Ken Vaughan, said that “Cigna’s mission is to improve the health, well-being and sense of security for the customers we serve. Building the foundation for health and well-being starts with access to the right tools and services.”
Insurance Companies Mentioned
Cigna
CIGNA Health Insurance is a global health service company dedicated to helping people improve their health, well being and sense of security. CIGNA Corporation’s operating subsidiaries provide an integrated suite of medical, dental, behavioral health, pharmacy and vision care benefits, as well as group life, accident and disability insurance, to approximately 46 million people throughout the United States and around the world.
Cigna & CMC
Cigna & CMC is a joint venture in China, established in 2003 by Cigna and China Merchants Group. The company offers life, accident and health insurance products in China. It was awarded the Best Foreign Life Insurance Company Award in China in 2008 and 2009.
Dec
20
Chinese Insurers See Premium Income Growth Amid Mixed Markets
Filed Under Asia, China, China insurance, Insurance Company | 1 Comment
Despite mixed stock movements in China recently, Chinese insurance companies have seen premium income grow over last year’s results, including China Life which recently begun trading in Hong Kong and Shanghai.
China Life Insurance, China Pacific Insurance Group and Ping An Insurance Group, which includes Ping An Life Insurance, Ping An Health Insurance, Ping An Annuity and Ping An Casualty Insurance, all saw positive growth on premium income over 2010.
China Pacific Insurance Group reported total premium income of CNY 143.8 billion (US$ 22.67 billion), demonstrating year-on-year growth of 12 percent. China Pacific’s life insurance business earned CNY 87.9 billion (US$ 13.86 billion) in the first 11 months of the year, while the property and casualty business reported CNY 55.9 billion (US$ 8.81 billion) for the first 11 months of 2011.
Ping An reported large gains for the first 11 months of the year, with each of its four main insurance businesses reporting over 20 percent year on year growth. Ping An Health Insurance saw the largest rate of growth in premium income of Ping An’s business segments, reporting 92.08 percent year-on-year growth to hit CNY112 million (US$ 17.66 million). Ping An Casualty Insurance grew 34.42 percent, earning CNY 74.68 billion (US$ 11.77 billion). Ping An Annuity earned premium income worth CNY 4.773 billion (US$ 752.48 million) showing a 21.62 year-on-year growth, while Ping An Life Insurance with the highest premium income of the group earned CNY 110.03 billion (US$ 17.35 billion) at 29.36 percent growth year-on-year. The Ping An Insurance Group saw overall premium income reach CNY 189.55 billion (US$ 29.89 billion) for the first 11 months of 2011, demonstrating year-on-year growth of 31.12 percent.
China Life Insurance earned premium income worth CNY 301.2 billion (US$ 47.49 billion) for the first 11 months of the year, showing more meager growth of 0.63 percent over last year’s CNY 299.3 billion (US$ 47.19 billion) for the same period. China Life Insurance has also recently had held their IPO for both the Hong Kong and Shanghai bourses in December, 2011.
So far, China Life has had mixed trading results, with stocks in China growing at 13.7 percent during its first day of trading on the back of a 2 percent rally of the Shanghai Index. China Life’s stock closed at CNY 26.44 (US$ 4.17) on Friday December 16th. China Life’s Hong Kong listed stocks started trading on Thursday, when they dropped 9.8 percent, although it rallied on Friday in light of Shanghai’s strong percent, rising 2.7 percent to close at HK$26.45 (US$ 3.40). Trading in the near future may be difficult to predict, as stock markets in Asia are already on edge due to the unexpected death of North Korea’s Kim Jong Il.
Companies Mentioned
China Life Insurance
China Life Insurance Company Limited (China Life) is a People’s Republic of China-based life insurance company. The products and services include individual life insurance, group life insurance, accident and health insurance. The Company operates in four business segments: individual life insurance business, group life insurance business, short-term insurance business, and corporate and other business.
China Pacific
China Pacific Insurance (Group) Co., Ltd. (CPIC) is a insurance company providing, through its subsidiaries, a range of life and property and insurance services and pension products to individual and corporate customers throughout the country. CPIC was founded on May 13, 1991, and is headquartered in Shanghai. The company was listed in Shanghai Stock Exchange on Dec. 25, 2007, with the stock code of 601601 and the stock name of “China Pacific”. The Company was listed in the Stock Exchange of Hong Kong Limited on Dec. 23, 2009, with the stock code “02601” and the stock name of “CPIC”.
Ping An
Ping An Insurance is the first integrated financial services conglomerate in China that blends its core insurance operations into services including securities brokerage, trust and investment, commercial banking, asset management and corporate pension business to create a highly efficient and diversified business profile. The group was established in 1988 and headquartered in Shenzhen, Guangdong Province, China.
Dec
6
AON Note Chinese Market Progress, Challenges
Filed Under China, China insurance, Reinsurance | 1 Comment
China’s share of the world insurance market has quadrupled over the past decade, owing to a strong economy, surging demand and evolving industry regulations. A new report published on Monday by Aon Benfield, the global reinsurance intermediary of Aon Corp, acknowledges the opportunities the Chinese market now presents to the international insurance industry as well as the challenges now apparent after years of rapid growth.
The Chinese insurance industry has experienced phenomenal growth over the past decade and still has much to look forward to due to favorable economic conditions and an under-penetrated market. China now represents close to 4 percent of all life and property insurance premiums worldwide at CNY1.45 trillion (US$226 billion), moving up from just a 1 percent share decade ago. Industry analysts in the world’s second largest economy are now targeting a 15 percent compound annual growth rate over the next five years.
Aon’s report, titled ‘The China Property & Casualty Insurance and Reinsurance Market Report,’ is chiefly concerned with the slow development of the Chinese catastrophe insurance and reinsurance sector, which has become particularly glaring given the country’s increased exposure to widespread catastrophic risk. Indeed, given recent events in Thailand and Japan, the potential for supply chain disruptions in China due to natural disasters has become a growing concern for executives at large multinational corporations. According to the report, China’s property and casualty (p&c) insurance market is now growing only at the same rate as GDP, whereas the insurance sector overall is still growing much faster. Over the last ten years, the Chinese p&c market had grown by over 20 percent annually, outpacing the country’s GDP growth in that period and reaching CNY402 billion (US$63.4 billion) by 2010. While this has occurred, Chinese government subsidies have also been working to support the growth of agriculture premiums and have doubled in size since 2005, now amounting to CNY13.6 billion (US$2.15 billion)). Aon observed a similar growth pattern in aggregate reinsurance premiums acquired by China’s p&c insurers, which have seen a 67 percent compound annual growth rate since 2005, now totaling CNY44 billion (US$6.9 billion).
Aon’s findings indicate that insurance will continue to be a necessity in the country. The China Insurance Regulatory Commission (CIRC), the Mainland’s chief industry oversight body, recognizes that the insurance sector will keep on facing structural challenges due to the tremendous scale of the market combined with the recent speed of its development, and is planning considerable action over the next five years to address this. Aon notes that China has been hit by 5 of the top 10 most deadly natural catastrophe events in history, with recent disasters (earthquakes, mudslides, blizzards) affecting more than 70 percent of the country’s total land area and over half the population in some way as well. The CIRC is aware of this persistent catastrophe protection risk shortfall and is thus establishing a national natural disaster risk transfer program (similar somewhat to Japan’s in design) as part of its upcoming 5-year plan. According to Aon’s report, this new risk pooling program could lead to a spike in the uptake of catastrophe insurance and reinsurance policies and work to better address overall protection issues in the country for years to come.
Commenting on their new report, Malcolm Steingold, Aon Benfield CEO for the Asia Pacific region, explained that while China’s insurance industry would no doubt continue to expand, being able to solve explicit coverage gaps in the market quickly would enable the country to realize its sizeable commercial potential. “Over the past 10 years, China has emerged as an insurance and reinsurance market that cannot be overlooked. However, when we look beyond the macroeconomic growth, underlying opportunities and challenges are not necessarily what they first appear to be. For example, a detailed analysis of the property market shows that growth has been more in line with gross domestic product than with the faster overall market growth, which is largely driven by motor business,” Steingold said. Indeed, China’s motor vehicle insurance market could be subject to its own revision efforts, with the introduction of foreign insurance players potentially on the horizon.
Ralph Butterworth, Partner at an Aon Benfield consulting division, added that the Mainland’s transition to more refined and comprehensive risk management strategies would work to the benefit of their overall marketplace. “The evolution of Chinese insurance regulation is bringing the market closer to international best practice. Over time this should support increased transparency and improved profitability, potentially hand in hand with the entrance of more foreign insurers into the Chinese market and the global expansion of Chinese reinsurers,” Butterworth said, adding that “expertise and experience accumulated and tested in the global market are still of much relevance to China as it targets further growth over the next five years.”
In conclusion, Henry To, CEO of Aon Benfield’s China division, expressed confidence in the Chinese insurance industry’s ability to overcome recent hurdles. The CIRC’s latest 5-year plan, which introduces the national natural disaster risk transfer system and improves loss models and underlying data, should encourage sound risk strategy and ensure more protection options are available before disaster strikes. “Over the years from 2001 to 2010, the Chinese insurance market (P&C and life) was the second fastest growing national market in the world behind Malta and now represents close to 4 percent of the world’s total insurance premiums – up from about 1 percent in 2001. Given the still low insurance penetration rate and China’s comparative economic outlook, this share can only be expected to grow,” To concluded.
Companies mentioned
AON Benfield
Aon is a provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. It is based in the Aon Center in the Chicago Loop area of Chicago, Illinois, United States. Aon bought Benfield in 2008. Aon Benfield Analytics is the industry leader in actuarial, enterprise risk management, catastrophe management, and rating agency advisory. Their track record of innovation and world-class position in analytics, modeling and client-facing technology helps companies to optimize their portfolios. Proprietary tools include ReMetrica, CatPortal, and ExposureView. Also, their Impact Forecasting team develops tools and models that help companies understand financial implications of natural and man-made catastrophes around the world.
Nov
30
China Insurance IPO On the Horizon
Filed Under China, China insurance | Leave a Comment
New China Life Insurance, the state-backed insurer part owned by Zurich Financial Services, yesterday embarked on its international road show, which is seeking up to US$2.3 billion for their upcoming initial public offering. While the deal size is below the US$3-4 billion the Chinese insurer was initially hoping to raise this year, the IPO range remains at the top end of expectations given current market conditions.
Last week, New China Life, Mainland China’s third largest life insurer by premium volume, obtained the final securities approval needed for their dual-listing in Hong Kong and Shanghai, with the Hong Kong portion expected to account for around 70 percent of the combined offering.
Citing their most recent IPO term sheet, New China Life plan to sell as many as 158.5 million shares in Shanghai (A-share offering) at an indicative price range of CNY23-28 (US$3.60 to US$4.39) each, and a further 358.4 million in Hong Kong (H-share) at a price ranging from HK$28.20 to HK$34.33 (US$3.62 to US$4.40), with an option to expand it by another 15 percent. According to industry analysts, the A-share market has proven to be more sensitive to New China Life’s IPO, accounting for only 5 percent of the company’s total shares, and is in part why the company has allocated a smaller share to the Shanghai bourse. The insurance company is scheduled to first list in Hong Kong on December 15th, where it aims to raise between HK$10.11 billion and HK$12.3 billion (US$1.3 billion to US$1.58 billion). The Shanghai Stock Exchange listing, is scheduled to occur a day later and could fetch CNY4.5 billion (US$698 million), based on the same pricing as the Hong Kong sale.
As the year-end approaches, many Chinese companies are attempting to sell shares in the Asia-Pacific to fund future business ambitions, braving the mounting concerns over volatile global equity markets. Indeed, China’s two largest insurance companies, Ping An Insurance and China Life Insurance, have already been listed on both overseas and domestic bourses. The Beijing-headquartered New China Life’s dual listing could push the rest of China’s insurers to market sooner that expected. According to market analysts, there may be over US$10 billion worth of new dual share offerings in Hong Kong and Shanghai coming to the market over the next few months from Mainland insurance companies alone. State-backed property insurer PICC said on Tuesday that it planned to raise about CNY5 billion (US$786.5 million) via a rights issue to strengthen its capital base and improve its solvency margin. Taikang Life Insurance, China fifth-largest insurer by premiums, is also looking to list in Hong Kong, with plans to raise between US$3 billion and US$4 billion through an IPO in the next couple years.
New China Life has already secured commitments from four cornerstone investors for a reported US$780 million worth of shares, equivalent to roughly 60 percent of the Hong Kong portion of the initial public offering. Singapore-listed insurer Great Eastern Holdings Ltd will be the biggest investors after agreeing to purchase US$380 worth of New China Life’s shares. Hedge fund DE Shaw & Co and Malaysian sovereign wealth fund Khazanah are each committing US$150 million, while South Korean private equity firm MBK Partners will buy up US$100 million worth of H-shares. Each of the four investors has been guaranteed large allotments in exchange for agreeing to hold onto their shares for at least six months. The fact that New China Life has already received backing from a list of big-name global investors, including existing shareholders Zurich and Standard Chartered Bank, should make other potential buyers more comfortable to commit money to the stock. According to the company term sheet, 95 percent of the remaining shares to be offered will be sold to institutional investors, while 5 percent will go to Hong Kong retail investors.
New China Life will use the proceeds from the dual-listing to bolster its capital position, improving margins in order to better keep pace with the firm’s rapid business growth while adhering to stricter regulatory requirements on adequacy ratios. Indeed, addressing these declining solvency ratios has become a critical issue for the Chinese insurance industry. Shares in China Life Insurance and Ping An Insurance, New China Life’s main rivals, have fallen by about 38 percent in Hong Kong trading this year, on general concerns over a slowdown in profits and whether the continued decline in equity markets will increase mark-to-market losses on insurer balance sheets going forward. Insurance companies tend to invest a large part of their income back into financial markets.
Although share prices of listed Chinese insurers have been suffering through the tough market conditions this year, New China Life expects to benefit overall from the further expansion and development of the country’s insurance market. Last year, the Beijing-based life insurer earned CNY93.6 billion (US$14.3 billion) in premium income, equating to 9 percent share of the country’s insurance market, according to the China Insurance Regulatory Commission (CIRC). New China Life, 15 percent owned by Zurich Financial Services, has been largely successful in adapting to China’s surging demand for insurance and investment products, reporting a compound annual premium growth rate of 40 percent over the past 5 years. The insurer has been able to earn itself a competitive advantage in institutional sales and has fostered a particularly robust presence in the big cities of Beijing, Shanghai, and Guangzhou. Today, New China Life has 1,400 offices in China and serves over 24 million policyholders.
While New China Life’s dual IPO will test shareholder confidence during this time of pronounced market volatility, the Chinese life insurance industry is one of the fastest growing in the world and will continue to target investment going forward. According to the CIRC, gross premium income received by China’s life insurers has increased at a 24.9 percent compound annual growth rate over the past 10 years. The country is undergoing a series of economic and demographic transformations, including widespread healthcare reform and a quickly aging population, and this will present significant growth opportunities for insurance companies.
In order to further capitalize on this considerable market potential, China’s insurers will need to build greater reserves and continue to evolve their business and risk management practices to succeed, a view now shared by not only industry analysts but the country’s top insurance regulator as well. This week CIRC launched a crackdown on rogue insurance agents in the midst of rising complaints of fraud and cheating from policy holders. According to the regulator, around CNY 80.66 million (US$12.66 million) has been taken illegally by insurers or agents from policyholder premiums so far this year, and the misdeed involved over 50 insurance companies and agents. “The main problem is the false, and non-transparent relationship between insurance institutions and agents,” the CIRC said in a statement. Going forward these problems will need to be addressed.
Insurance Companies Mentioned
New China Life
New China Life Insurance Co (NCI) has headquarters in Beijing and was established in 1996 It is a large national insurance company, with products including traditional protection products, bonus products as well as the products that have a strong financial management function. With sustained, healthy and harmonious development of the company, the brand value of NCI is a valuable asset.
Nov
18
New China Life Insurance, the country’s third largest life insurer by premium volume, received approval from the China Securities Regulatory Commission this week for its planned Shanghai initial public offering, kicking off the company’s Shanghai-Hong Kong dual listing that has targeted up to US$4 billion in fresh fundraising before the end of the year. This dual listing could be the first in a series of IPOs by prominent Mainland insurance companies, as firms seek out capital to boost margins and fund expansion plans in the world’s second largest economy.
In their IPO prospectus, New China Life have outlined how they plan to sell as many as 158.5 million shares in Shanghai (A-share offering) and up to 358.4 million in Hong Kong (H-share), with an option to expand it further by another 15 percent. According to industry analysts, the A-share market has proven to be more sensitive to New China Life’s IPO, accounting for only 5 percent of the company’s total shares, and is in part why the company has allocated a smaller share to Shanghai’s bourse. While overall fundraising targets have not been officially set, market forecasts estimate that around CNY6 billion (US$945.4 million) and CNY10 billion could come in from Shanghai from Hong Kong respectively.
Many companies from Mainland China are now attempting to brave volatile global financial market conditions and sell shares in initial public offerings to fund future business ambitions. Indeed, the two largest Chinese insurance companies and New China Life’s chief rivals, Ping An Insurance and China Life Insurance, are already listed on both overseas and domestic bourses. Beijing-headquartered New China Life’s IPO could even lead the rest of Greater China’s insurers to market sooner that expected. According to industry observers, there could be over US$10 billion worth of new dual share offerings in Hong Kong and Shanghai coming to the market over the next few quarters from domestic insurance companies alone. State-backed China Reinsurance and People’s Insurance Company (PICC) announced plans to raise between US$5 billion and US$6 billion through a dual IPO back in July this year. Taikang Life Insurance, the Asian nation’s fifth-largest insurer by premiums, have meanwhile also targeted between US$3 billion and US$4 billion from a Hong Kong listing in the next couple of years.
New China Life will use the IPO proceeds to replenish capital reserves and improve solvency margins and overall profitability in order to better keep pace with the firm’s rapid business growth. The Beijing-based fine insurer earned CNY93.6 billion (US$14.3 billion) in premium income last year, translating to around a 9 percent share of the country’s insurance market, according to the China Insurance Regulatory Commission (CIRC). The company, 15 percent owned by Zurich Financial Services, has been largely successful in adapting to China’s surging insurance market demand, reporting a compound annual premium growth rate of 40 percent over the past 5 years, from 2005 and 2010. New China Life has fostered a competitive advantage in institutional sales and now has a particularly robust presence in the big cities of Beijing, Shanghai, and Guangzhou. Today, New China Life has 1,400 offices in China and serves over 24 million policyholders.
Over the past few years however, the performance of some of China’s most prominent insurers has begun to slow down due to rising competition and unstable stock markets. Indeed New China Life posted a 15 percent decline in net profit last year and has not been able been able to regularly meet regulatory requirements on adequacy ratios. Ahead of their planned dual IPO the company has had to restructure themselves slightly in a bid to meet CIRC minimum solvency requirements, which have restricted dividends and further business development. In March, the life insurer moved CNY 14 billion (US$2.2 billion) worth of shares to twelve existing shareholders through a rights issue. The transaction increased New China Life’s registered capital base, up to CNY 2.6 billion (US$405 million) from CNY 1.2 billion (US$187 million), which in turn raised its solvency margin to above the required minimum 100 percent for listing. After the IPO, the company’s solvency ratio is expected to be above 150 percent.
New China Life’s dual IPO will surely test investor confidence as international financial markets continue to struggle with a potential US recession, Asia Pacific catastrophe losses, as well as the deepening debt crisis in Europe. American and European markets have been in a prolonged slump as concerns mount over Western policymakers’ ability to adapt and revitalize the flagging global economy. This is turn has affected the regional markets in Asia. The Heng Seng Index is down by 15 percent so far this year, while The Shanghai Composite has fallen over 8 percent. This market downturn has impacted Hong Kong’s prominent IPO market, with delays and cancellations worth US$19 billion in share sales from prominent companies already witnessed this year.
Outside of these macroeconomic concerns though, China’s insurance industry remains an attractive investor opportunity due to the country’s huge middle class population, favorable economic indicators and a largely under-penetrated protection market. Market observes will be watching closely to see if New China Life can dual list in Hong Kong and Shanghai successfully this year.
Insurance Company Mentioned
New China Life
New China Life Insurance Co., Ltd (NCI）has headquarters in Beijing and was established in 1996. It is a large national insurance company, with products including traditional protection products, bonus products as well as the products that have a strong financial management function. With sustained, healthy and harmonious development of the company, the brand value of NCI is a valuable asset.
Zurich
Zurich Financial Services Group is an insurance and financial services provider with a network of subsidiaries and offices in North America and Europe and also in Asia-Pacific, Latin America and other markets. Zurich is one of the world’s largest insurance groups, and one of the few to operate on a truly global basis. With 60,000 employees serving customers in more than 170 countries, our business is concentrated in three business segments: General Insurance, Global Life, and Farmers.
Nov
14
Manulife Expanding in Hong Kong and China
Filed Under China, China insurance, Hong Kong | 2 Comments
Canadian insurance giant Manulife is looking to increase its agency force in Hong Kong in an attempt to capitalize on the resurgent demand for investment-linked insurance policies throughout the Asia-Pacific region.
In an interview with the South China Morning Post this week, Manulife Hong Kong executive vice-president and CEO, Michael Huddart, explained that while global financial market volatility has slowed down the sale of investment-linked insurance policies considerably over the past few months, insurers by and large remain confident in the long-term growth prospects for these products, and that their performance would no doubt improve when the market rebounds. “The outlook for these investment-linked plans is good, especially if we see some market recovery in 2012 and beyond. There is still a great need for accumulating wealth to pay for living costs and medical costs in retirement and these plans can be a useful vehicle to achieve this goal,” Huddart said in the piece..
Hong Kong – a special administrative region (SAR) of China – is the premier Asian insurance center, and attracts many of the world’s top insurance and financial service companies. Manulife, themselves, have had a presence in the City for over 110 years and now have around 1.6 million clients in HKSAR. Hong Kong has the largest number of authorized insurance companies in Asia at 167, and thousands of supplemental agents and brokers. The level of insurer business activity in 2010 amounted to 11.8 percent of Hong Kong’s gross domestic product (GDP), compared with 11.3 percent in 2009. Insurance continues to be an integral part of the city-state’s economy.
Investment-linked products had proven to be popular in Hong Kong due to their combination of both insurance protection and investment fund savings options. However, in the aftermath of the 2008 global financial crisis, the attractiveness of these insurance policies has now been sternly tested by waning investor confidence across most business lines. Statistics released by the Hong Kong government reveal exactly how closely the sales of investment-linked insurance policies have related to overall market performance. According to the data, when the Hang Seng Index passed the 29,000 benchmark and hit a record high in 2007, sales of investment-linked insurance policies rose in tow to HK$60.04 billion (US$7.72 billion). At that time, sales of new investment-linked insurance products accounted for around three times as many as traditional insurance policies, which totaled HK$20.31 billion (US$2.61 billion) that year.
Sales of investment-linked policies then dramatically declined to HK$15.06 billion (US$1.94 billion) in 2009, or roughly half those of traditional insurance policies, as the prevailing effects of the global financial crisis took hold. Investment-linked policies have since then seen much lower sales figures than traditional life insurance policies and have yet to fully recover as investor fears about the European sovereign debt crisis and a possible recession in the United States continue. Through the first half of this year, investment-linked products still only represent 30 percent of all insurance policies sold in Hong Kong, with traditional insurance policies making up the remaining 70 percent.
Despite this prolonged downturn in consumer confidence, Manulife and other players are continuing to invest in and market the long-term appeal of these investment-linked and other insurance products to clients throughout the Asia Pacific. The Toronto-based firm has planned to increase their insurance agency force in Hong Kong by 10 percent annually for the next 5 years, moving from roughly 4,600 agents at present to a staff of 7,000 by 2015. While this is happening, Manulife will also work to improve sales from non-agency channels, including bancassurance and independents, to hopefully account for roughly a quarter of total sales by the end of 2015, up from 13 percent currently. The company is also looking to promote yuan-denominated products, which have become increasingly in demand amongst investors who expect to benefit from the Mainland currency’s gradual appreciation. The yuan has already risen by some 20 percent since 2004.
Manulife is already reaping the rewards of its expansion strategy. In the third quarter results posted earlier this month, Manulife’s Hong Kong insurance sales were worth US$59 million, representing a 26 percent over the third quarter of 2010. The company has primarily attributed this performance to the increased number of active insurance agents, increased volumes of the popular critical illness product launched at the end of the second quarter, and higher sales made through the company’s expanded bancassurance channel.
Manulife is stepping up its agent recruitment effort primarily to grow their business and better compete in the city’s lucrative mandatory provident fund (MPF) marketplace. The MPF is Hong Kong’s compulsory retirement savings system, and is administered by the Mandatory Provident Fund Schemes Authority. With a 17.6 market share, Manulife is currently the number two insurer in Hong Kong’s MPF market. With an increased sales force, the Canadian firm hopes to successfully raise their share to over 20 percent by 2016, which would put them in a better position to compete with the predominant market leader, HSBC.
The marketplace Manulife is investing in is, however, experiencing some noted volatility at present. According to the latest figures filed by the Office of the Commissioner of Insurance (OCI), sales of retirement-related insurance policies dropped by 35.9 percent to HK$10 billion (US$1.28 billion) last year. At the end of 2010, there were 59,005 MPF contracts in Hong Kong carrying net liabilities worth HK$105.5 billion (US$13.55 billion). Local market observers have attributed this drop to a recent regulatory change regarding pensions. In 2009, The Mandatory Provident Fund Schemes Authority stipulated that all MPF funds must be held through trustees.
You don’t have to venture far outside of Hong Kong to discover one of Manulife’s other priority growth markets – Mainland China. Last week the insurer renewed their framework agreement with Bank of China, the country’s oldest bank, for another two years in a bid to further expand their bancassurance distribution network and ultimately sell more insurance products in the world’s second largest economy.
In his speech at the signing ceremony in Beijing, Mr. Donald Guloien, President and CEO of Manulife Financial, explained that China, with its robust economy and growing middle class, is an important marketplace to be in for all ambitious financial-services companies, especially considering the tepid business forecasts in their mature domestic insurance markets. Indeed, China’s insurance industry, in particular, has grown more profitable and evolved at a tremendous pace over the past decade and still has plenty of room further to develop due to generally stable economic indicators and an under-penetrated insurance and investment market. In 2010, the Chinese insurance industry grew by 30.4 percent, reaching a record US$221.4 billion in total written premiums. This momentum has continued into 2011 despite international financial market volatility and record catastrophe losses in neighboring Asian countries. The China Insurance Regulatory Commission (CIRC) interim report figures show that total premium income reported by Chinese insurance companies had increased to US$123.95 billion during the first half of 2011, maintaining double-digit growth with a 13 percent rise on last year’s interim period. At the moment, China is ranked as roughly the sixth largest insurance market in the world, and the second largest in Asia. Many industry observers fully expect the Chinese insurance market to eventually overtake the United States and become the number one overall protection and investment market in the world, possibly by as early as 2020.
Indeed, much of what may determine the future success of the Chinese insurance industry could come to a head in the coming months, as multiple Mainland insurers apply for their IPOs. More capital is needed for Chinese insurers to both capitalize on their home market and expand overseas if need be. Despite global financial market volatility, Chinese insurers remain attractive investment targets for large multinational insurance companies and investors from the financial-services sector. Over the next year, almost US$25 billion worth of dual share offerings in Hong Kong and Shanghai could be coming to the market from Chinese insurance companies alone. New China Life Insurance, China’s third-largest life insurance firm applied to the Hong Kong stock exchange for a dual listing, which could go through this week. The insurer is looking for US$4 billion in fresh funds by the end of the year. Taikang Life Insurance, China’s fifth-largest insurer by premiums, has also targeted between US$3 billion and US$4 billion from a Hong Kong listing in the next couple of years. PICC meanwhile have also expressed IPO interest and would look to raise between US$5 billion and US$6 billion in a dual listing by the end of 2012. Market analysts will be watching closely to see if these Chinese insurers and more can dual list successfully and build on their enormous domestic customer base to establish a more robust presence on the global stage.
Outside of China and it’s holdings, Manulife of course recognizes Asia as the most important market for the company’s sustained future growth and development. The region, as a whole, now accounts for over half of the company’s total insurance sales worldwide. The Canadian insurance company has seen its insurance sales across Asia jump by 22 percent to US$902.4 million in 2011, with budding businesses in less-established insurance markets like Vietnam, Indonesia and the Philippines being particular highlights. Going forward, Manulife has said they will focus on expanding insurance sales channels in these Asian countries, and will continue to upgrade the range of their core policy offerings, as the emerging middle class consumer demand in these markets matures and evolves.
Insurance Companies Mentioned
Manulife
Manulife (International) Limited is a member of the Manulife Financial group of companies. Manulife Financial is a leading Canadian-based financial services group serving millions of customers in 22 countries and territories worldwide. Operating as Manulife Financial in Canada and Asia, and primarily through John Hancock in the United States, the Company offers clients a diverse range of financial protection products and wealth management services through its extensive network of employees, agents and distribution partners.
Nov
10
Manulife and Bank of China Solidify Partnership
Filed Under China, China insurance, Life Insurance | 1 Comment
Manulife Financial Corporation, Canada’s largest insurance company, has signed a new two-year cooperation agreement with Bank of China in a bid to further strengthen their bancassurance distribution network and sell more insurance products in the world’s second largest economy.
The deal was announced at a signing ceremony in Bank of China’s Beijing headquarters on Wednesday. The agreement will expand upon the existing partnership between the two firms, which has begun to bear fruit for both parties over the past 12 months. Through the terms of their updated venture, Manulife and Bank of China will strengthen their cooperative efforts on insurance and bancassurance distribution in Mainland China. At the same time, Bank of China will also be able to realize other business opportunities in North America. The framework of the new partnership agreement come into force immediately and the pact will continue for a minimum of two years.
Manulife has already established a presence in China through its joint venture wealth management and life insurance company, Manulife-Sinochem Life Insurance (MSL), which the Toronto-based insurer formed alongside China Foreign Economy and Trade Trust Co in 1996. Today, Manulife-Sinochem, which remains 51 percent owned by Manulife, has around 11,500 insurance agents, 1,100 employees, and branches in 49 cities throughout China. In May, the company signed an agreement with Bank of China, the country’s oldest bank, to distribute life insurance products through their bank branches in Beijing, Guangdong, Jiangsu, Shanghai, Shenzhen, and Zhejiang. The Bank has also become the custodian bank and distributor for Manulife’s other joint venture fund company in China, Manulife-TEDA Fund Management.
In his speech at the Beijing signing ceremony, Mr. Donald Guloien, President and CEO of Manulife Financial, explained that this new deal would enable both companies to grow their business and would build upon the bancassurance deal signed last May. “As more and more Chinese and Canadian companies and citizens look to each other’s home country for business opportunities, academic pursuits or simply as a holiday destination, we view closer cooperation between Bank of China and Manulife as an opportunity to realize business opportunities together.”
Mr. Guloien also noted that China, with its robust economy and growing middle class, will continue to be an important marketplace for all financial-services firms across Canada, especially considering the stagnant forecasts for growth in their mature domestic insurance markets. Indeed, Manulife’s decision to recommit to Bank of China follows similar moves made Canadian firms this season. In August, Power Corp. of Canada decided to enter China’s emerging fund-management industry with the purchase of a 10 percent stake in China Asset Management Co. for US$271 million. This was followed by Bank of Nova Scotia’s move in September to acquire a 19.99 percent stake in China’s Bank of Guangzhou for US$707 million. For Manulife, the bancassurance partnership between their joint venture life insurance company MSL and Bank of China will be an important source for growth in the future.
Xu Chen, a Bank of China General Manager of the Financial Institution department, was also on hand at the signing ceremony to express a similar degree of confidence in the business arrangement between the two firms. “I strongly believe that, Bank of China will continue to adhere to its customer-oriented banking philosophy, constantly and consistently offering high quality and efficient financial services to all customers. We are confident that this mutually beneficial cooperation will further promote our business development and achieve win-win prospects for both institutions,” Chen said.
China’s insurance industry has experienced rapid growth and development over the past decade and still has ample of room to grow as a result of generally stable economic forecasts combined with an under-penetrated protection market. Despite the volatility of the global financial market, Chinese insurers have remained attractive investment targets for large multinational insurance companies and investors from the financial-services sector. In 2010, total written premiums in the Chinese insurance industry reached US$221.4 billion, a 30.4 percent year-on-year increase. This considerable momentum has been able to continue through 2011 despite persistent international financial market turmoil and record catastrophe losses. According to the China Insurance Regulatory Commission (CIRC) interim report figures, total premium income reported by Chinese insurance companies exceeded US$123.95 billion during the first half of the year, a 13 percent rise on 2010 amounts. At the moment, China is ranked the sixth biggest insurance market in the world and as the second largest in Asia. Many industry observes expect the Chinese insurance market to overtake the United States and become the number one overall protection and investment market, possibly as early as 2020.
Manulife recognizes Asia as the most important market for the company’s future growth. Asia now accounts for over half (55 percent) of Manulife’s total insurance sales worldwide. Over the past nine months, the Canadian company has seen its insurance sales across Asia jump by 22 percent to US$902.4 million, with operations in Vietnam, Indonesia and the Philippines being the particular highlights. Going forward, the Toronto-based company will continue to focus on expanding insurance sales channels in these countries, in addition to innovating the range of their core offerings as the middle class consumer demand in these markets evolves and matures. Further investor involvement in this part of the world is only set to increase, as the emerging insurance markets in Asia are widely expected to outperform those in Europe and North America, with China likely leading the way.
Insurance Companies Mentioned
Manulife
Manulife (International) Limited is a member of the Manulife Financial group of companies. Manulife Financial is a leading Canadian-based financial services group serving millions of customers in 22 countries and territories worldwide. Operating as Manulife Financial in Canada and Asia, and primarily through John Hancock in the United States, the Company offers clients a diverse range of financial protection products and wealth management services through its extensive network of employees, agents and distribution partners.
Manulife-Sinochem
Manulife-Sinochem is a joint venture company between Manulife and China Foreign Economy and Trade Trust Company (a member of the Sinochem group). It was the first Chinese-foreign joint-venture life insurance company established in China. Manulife-Sinochem began operations in November 1996. To date the Company has more than 11,000 professionally trained agents and employees, providing financial and insurance services to over 500,000 customers. The company is now has operations in over 40 cities including Shanghai and Beijing, and in provinces including Guangdong, Zhejiang, Jiangsu, Sichuan, Shandong, Fujian, Chongqing, Liaoning and Tianjin.
Nov
2
A special report released this week by international insurance information and credit ratings agency AM Best has provided fresh analysis about recent developments occurring in China’s powerhouse insurance industry. While the Chinese protection market will continue to provide tremendous business opportunities going forward, individual insurers active in the world’s second largest economy will need to build greater capital and continue to evolve their business practices to succeed, a view now shared by other industry analysts.
The Chinese insurance market has experienced phenomenal growth over the past decade and still has much to look forward to due to favorable economic conditions and an under-penetrated market. While other, more mature insurance markets across the world are stagnating, total gross written premiums in China reached RMB 1,452.8 billion (US$221.4 billion) in 2010, a year-on-year increase of over 30.4 percent. This strong demand for insurance has continued into 2011. According to the latest China Insurance Regulatory Commission (CIRC) figures, the total premium income reported by Chinese insurance companies’ surpassed RMB 1 trillion in the first half of the year, with non-life insurance accounting for RMB 308 billion (US$48.66 billion) in premiums and life policies for RMB 699 billion (US$110.44 billion). China’s continued economic development, pegged at 9.6 percent real GDP growth this year, is providing scope for insurance demand across all business lines.
In the report “Harnessing Momentum in China’s Evolving Insurance Market” AM Best finds that although many Chinese insurance companies are riding the country’s economic development to continued top line growth, underwriting leverages are rising in tow, and additional funds will be required by insurers to keep up with the current pace of market expansion while maintaining healthy operating margins. Companies are thus attempting to fund further growth by quickly raising capital through a variety of means, including planned initial public offerings and the issuing of subordinated debt. Two recent examples of this have been PICC upcoming dual listed IPO, first announced in June, and China Life’s issue RMB 30 billion (US$4.74 billion) of subordinated debt in August. Insurers are then finding their balance sheets under further pressure from increased regulatory efforts to maintain adequate solvency levels. Companies with insufficient solvency levels (usually below 150 percent) in China face restrictions on the creation of new businesses and subsidiaries as well as payment of dividends. As a result, some of the nation’s largest insurers are now focusing increasingly on operational profitability as opposed to increasing their market share further and taking on more liabilities.
For smaller domestic insurance companies, AM Best says that the main challenge remains gaining a foothold in China and achieving the necessary scale to operate successfully in a market dominated by humongous state-backed players, particularly in the compulsory motor third-party liability sector, which has been amongst the most competitive business lines. According to CIRC data, the motor insurance market posted an overall operating loss of RMB 7.2 billion (US$1.14 billion) in 2010, and work is now underway to improve underwriting performance in this sector. Insurers of all sizes are also facing increasing uncertainty in the macro economy, and this could place pressure on future growth. Volatility in the financial markets and the low interest rate environment are also major challenges for Chinese insurers to generate favorable investment returns with the increasing size of their investment portfolios.
The AM Best report notes that insurance companies in China have had to pay attention to recent regulatory developments. The CIRC has been looking to strengthen its oversight over insurer financial matters to mitigate the threat of systemic risk spreading from the insurance industry to the banking sector and vice versa during these volatile macroeconomic times. In the life insurance sector, bancassurance channels have been restricted and this has been responsible for a slight dip in sales, and the subsequent pursuit of new product and distribution mechanisms across the market. In the non-life sector, ending government incentives to purchase cars dampened motor insurance sales but overall the sector has continued growing. Across the board debt rules have been tightened and investment channels have widened. While this will grant more options for insurers and enable them to diversify their portfolios, it may also create greater volatility in insurers’ investments going forward.
The role of international insurance companies in China has also developed over the past few years, with several of the world’s most prominent multinational insurance groups acquiring stakes in domestic Chinese players in order to gain a quick entry into a competitive and potentially lucrative market. By law, overseas companies are permitted to establish representative offices in China, and after two active years they can apply for conversion to branch offices, although there is no guarantee this will be approved. International insurers have normally found success in the country through direct investment and operating as joint venture partners alongside major local insurance and finance conglomerates, which have provided more immediate access to local expertise and distribution networks. Recent foreign investments in Chinese insurers have included Insurance Australia Group (IAG) paying a reported RMB 687.5 million (US$108.62 million) for a 20 percent stake in Bohai Property Insurance in August 2011. In June 2011, Starr International Co became the largest shareholder in Dazhong Insurance Co for an undisclosed sum. This followed Goldman Sachs successful purchase of a 12.02 percent stake in Taikang Life Insurance Co Ltd, China’s fifth-largest insurer by premiums, earlier in the year. Meanwhile, Lloyd’s of London, in addition to obtaining its domestic reinsurance license, began underwriting direct business in China in September 2011.
AM Best found however that not all overseas ventures have proven successful and that some foreign companies have in fact exited China or have reduced their stakes in Chinese insurers. While China’s insurance and reinsurance markets have remained attractive investment opportunities on paper, it has been difficult for many international insurers to compete against the major domestic companies, which all have entrenched extensive branch networks, sales representatives and considerable brand recognition. The international insurers who have invested in domestic companies have also faced challenges, including adapting to markedly different cultural and management practices. Some foreign companies that have recently left China in some capacity, include New York Life, which sold its stake in Haier New York Life Insurance to Haier Group and Meiji Yasuda Life Insurance in 2010, and Zurich Financial Services who reduced its stake in New China Life Insurance by 5 percent this spring. Meanwhile, the large successful Chinese insurers who have found sustainable premium growth attainable in their home market have not shown much interest in expanding their operation overseas, as of yet.
Companies Mentioned
A.M Best
A.M Best Company was founded in 1899 and is a full-service credit rating organization dedicated to servicing the financial services industries, including the banking and insurance sectors.
China Life Insurance
China Life Insurance Company Limited (China Life) is a People’s Republic of China-based life insurance company. The products and services include individual life insurance, group life insurance, accident and health insurance. The Company operates in four business segments: individual life insurance business, group life insurance business, short-term insurance business, and corporate and other business.
PICC
People’s Insurance Company of China (PICC) is a state-owned holding company in the PRC, founded in 1949, that sponsors its subsidiaries: PICC Asset Management Company Limited and PICC Property and Casualty Company Limited (PICC P&C) among others. PICC P&C was established in 2002 and is now China’s largest non-life insurer.
Oct
25
Chinese Insurers to Face Tighter Debt Rules, Foreign Competition in Auto Market
Filed Under Auto Insurance, China, China insurance | 1 Comment
There could be changes afoot in China’s powerhouse insurance industry as the country’s national regulator looks to address the capital position, debt, and other competitive issues amongst players active across multiple business lines in the market.
Last week Mainland China’s insurance regulator, The China Insurance Regulatory Commission (CIRC), released a statement outlining tighter credit rules for domestic insurance companies who have been looking to raise further capital through subordinated debt issues. The CIRC has been looking to strengthen its oversight over insurer financial matters to mitigate the threat of systemic risk spreading from the insurance industry to the banking sector and vice versa during these volatile macroeconomic times. Subordinated debt is a lower priority bond tool, which is only made repayable after all other debts (from government tax authorities, senior creditors etc.) have been collected. While the technique offers investors less insurance in the event an issuer can’t repay, they remain attractive because they provide markedly higher yields than regular bonds due to the increased inherent risk. Subordinated debt has proven to be a popular fundraising mechanism for many Chinese financial institutions. Banks and insurance groups have typically held onto each other’s subordinated debt despite the extra risk. Indeed, China Life Insurance Co, the nation’s largest insurer by premium, was approved to raise CNY30 billion through a debt issue this week.
Under the new CIRC regulations, only insurance companies that have been active in the market for at least 3 years and have not incurred any significant administrative penalties will be eligible to issue subordinated bonds. Previously there had been no such requirements and many insurers used proceeds raised through subordinated debt issues to mask operating losses. The amount of outstanding subordinated debt these Chinese insurers can now hold will be limited to 50 percent of their net asset value going forward, versus 100 percent allowed earlier. Parent companies will also be barred from issuing debt on behalf of any insurance subsidiaries they own. The CIRC are certain these moves will all work to lower the default risk present in the Chinese insurance industry, and prevent contagion with the banking and financial services sector. “The changes were made to prevent systemic risks and maintain financial market stability,” the CIRC statement read.
The Chinese insurance regulator reiterated concerns about insurer capital positions again this week. According to the Wall Street Journal, the CIRC are worried that domestic insurance companies are continuing to struggle to make payments to policyholders. The CIRC is now looking at ways to help insurance companies replenish their capital base and intimated that they may help them tap into the offshore Yuan market in Hong Kong for supplementary funds. Despite the growth potential of the Chinese insurance industry, there remain many challenges to the market due to inflationary pressure, macroeconomic policy changes and weak global capital markets. Insurance companies will need to adapt to changes in the Chinese economy, adjust their business models and increase both equity investments and bank deposits, all while making sure to maintain a healthy solvency ratio.
Insurance companies rely on both bank deposits and securities investments to settle policy claims and payouts. Because of this dependency, a sagging stock market (China’s share market down 16 percent on the year) has affected the ability of domestic insurers to make payments on outstanding policies. When you combine these macroeconomic worries with the rapid rise in demand for insurance business in China, it becomes apparent that more capital is necessary for insurers to maintain their trajectory. This was supported in a July report by credit analysts from Standard & Poor’s Ratings Services, who project that Chinese insurance companies will need to raise more than CNY110 billion (US$17 billion) of fresh external funding to sustain their industry’s further growth and development over the next three years. Although the credit outlook for China’s life and property insurers will remain stable to positive, the ratings agency expects the industry to gradually slow down.
Speaking at a forum in Beijing, Chen Wenhui, CIRC vice chairman, said that the regulator would help domestic insurers raise cash through bond issues in Hong Kong, which would fall in line with existing Chinese government plans to accelerate the development of the Special Autonomous Region into the premier offshore yuan center. Despite their sizeable client base, Chen noted that insurers will face moderate industry risk in the long term without extra capital due to their relatively low capitalization, unrefined risk management practices, limited asset and liabilities management options and any adverse macroeconomic developments. If insurers are able to make their debt appear more attractive they could quickly capitalize on the country’s fast-growing bond market and supplement their operations.
Mr. Wenhui also noted that the CIRC would study the relaxation of certain insurance regulations to promote new channels of business growth in China. Among these regulatory changes could be the potential introduction of foreign entrants into the country’s humongous motor insurance market for the first time.
According to Bloomberg, the CIRC has put forth a measure to China’s State Council which would allow international insurance companies that meet select criteria to sell compulsory third party liability auto insurance. The proposal originated as a response to an American Chamber of Commerce complaint, which alleged that restricting mandatory motor lines effectively blocked AIG and other insurers from competing fairly in the market, as consumers tend to purchase their optional and compulsory motor insurance from the same company. While tightened regulatory price controls have lifted China’s motor insurance sector into overall profitability since 2009, the industry still faces a barrage of infrastructure and service problems, particularly in mandatory lines. In opening the country’s motor insurance market, the CIRC looks to both tap foreign expertise and stimulate domestic competition to address these issues and improve service standards.
The Chinese insurance industry has experienced pronounced growth in the past decade and still has plenty of room to grow due to generally stable economic indicators and an under-penetrated protection market. Despite volatile global financial market conditions, Chinese insurers remain attractive investment targets, for large multinational insurance companies and investors from the financial-services sector, amongst others. Indeed, almost US$25 billion in dual share offerings in Hong Kong and Shanghai could be coming to the market over the next year from Chinese insurance companies. PICC have plans to raise between US$5 billion and US$6 billion in a dual listing this year. New China Life Insurance, China’s third-largest life insurance firm has also recently applied to the Hong Kong stock exchange for a dual listing. The insurer is aiming for US$4 billion in fresh funds by the end of the year. Taikang Life Insurance, China’s fifth-largest insurer by premiums, has also targeted between US$3 billion and US$4 billion from a Hong Kong listing in the next couple of years as well. Market observes will be watching closely to see if these insurers can all dual list successfully and build on their enormous domestic customer base to establish a more international presence.
Join us on Google +
