Aug
31
Strong Growth for ManuLife and BUPA
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While yesterday’s news of a potential insurance slowdown in the Middle East may have concerned some of our readers, news of a different sort has come about today with both Manulife Vietnam and BUPA showing strong profits in the second quarter and first half of the year, respectively.
Manulife Vietnam’s life insurance division saw 32 percent growth during Q2 2011, compared to the same quarter in 2010. Company officials attributed the strong showing to the expansion of the local Vietnamese sales force, and the development of a new Hospitalization and Critical Illness policy named My Family.
Senior Vice President for Manulife ASEAN operations, David Wong, is extremely positive about the My Family product, stating “Shortly after the launch, the My Family product generated record sales, making June 2011 the strongest sales month in the company’s 12-year history. The My Family product has been well received by our customers and our agency force.”
Manulife has been highly successful with their Vietnamese growth strategies; the company has focused on expanding sales channels, in addition to innovating the range of their core offerings in tandem with a maturing market. If the Q2 results are able to continue moving forward, the emerging demand for more comprehensive insurance products in Vietnam should see the company do well for the rest of the year.
Vietnam’s Insurance Market has shown strong growth potential over the course of the last year, with a number of major international insurers indicating interest in tapping into the sector.
On the other side of the world, BUPA has announced that its profits for the first half of the year are up by 6 percent over the same period in 2010, leaving the company with increased revenue of GBP 3.9 billion (US$ 6.36 billion).
BUPA’s international division, which includes BUPA Hong Kong, BUPA Thailand, BUPA International as well as the company’s divisions in Australia, New Zealand, India, and Latin America, saw revenues increase by 14 percent for the first half of the year to GBP 1.872 Billion (US$ 3.053 Billion).
While BUPA has faced some challenges within Europe due to uncertain, and unstable economic conditions in a number of EU countries, the Company has indicated that its businesses in Oceania and Asia are poised to see further growth due to the relatively stable economic conditions in these locations.
With BUPA actively looking to enter underserved markets, by continuing to innovate the products it offers, and by including a number of value-added services on its international health insurance offerings, the company expects to improve performance over the long term.
Insurance Companies Mentioned
BUPA
Bupa was established more than 60 years ago in the UK and now has ten million customers in over 190 countries, and over 52,000 employees around the world. Bupa is a leading international healthcare provider, offering personal and corporate health insurance, workplace health services and health assessments. As a provident association Bupa has no shareholders, because of this it uses its profits to invest in healthcare and medical facilities around the world. Bupa has operations around the world, principally in the UK, Australia, Spain, New Zealand and the US, as well as Hong Kong, Thailand, Saudi Arabia, India, China and across Latin America.
Manulife Vietnam
Manulife Vietnam was the first 100 per cent foreign-owned life insurance company in Vietnam, beginning its operation in September 1999 as a joint-venture called Chinfon-Manulife Insurance Company (CMIC). Manulife in Vietnam has grown rapidly to become a world class company providing a competitive array of financial protection products and services to Vietnamese customers. Since commencing operations, Manulife has helped more than 300,000 middle to upper-income Vietnamese plan right for their life.
Aug
30
Middle East Insurance Slowdown Sees Development of New Products
Filed Under Expat Insurance, Insurance Company, Middle East, Reinsurance, UAE Insurance, general insurance | 1 Comment
A number of financial reports released by Qatari insurance companies on Monday indicate that the country’s insurance sector may be poised to experience a significant slowdown. Five Qatari insurance companies, operating mainly in the non-life insurance market, have indicated that the sector’s total net profits have risen by only 2 percent during 2011, compared to 9 percent for the same period in 2010.
The companies, which include Qatar Islamic Insurance, Qatar General Insurance and Reinsurance, Al Khaleej Takaful, Qatar Insurance, and Doha Insurance, saw the sector’s net profit for January – June 2011 reach QR 545.96 million (US$ 149.91 million), compared to the QR 537.11 million (US$ 147.48 million) in profits seen for the same reporting period in 2010. The data on the general profitability of these five Qatari insurance companies was released by Qatar Exchange data.
One of the primary reasons cited by the insurers with regards to the lower than expected profits in the first half of 2011 is due to the rise in premiums yielded to reinsurance companies. Reinsurance premium yielding has risen by 8 percent for Qatar’s insurance companies in 2011, with three companies actually yielding more than 55 percent of total written premiums to reinsurers. With the levels of premiums being yielded to reinsurers outstripping the total growth in premium revenue for the market, profits have inevitably come in at lower than expected levels.
Profit growth for the first half of 2011 for the five companies, compared to the same period in 2010, stood at:
Qatar Islamic Insurance: 1.83 percent growth in 2011, up from 0.43 percent in 2010.
Qatar General Insurance and Reinsurance: 1.83 percent growth in 2011, up from -7.31 percent in 2010.
Al Khaleej Takaful: 11.29 percent growth in 2011, down from 46.85 percent in 2010.
Qatar Insurance: 10.74 percent growth in 2011, down from 65.77 percent in 2010.
Doha Insurance: -8.80 percent growth in 2011, down from 60.55 percent in 2010.
While the slowdown of the non-life insurance sector in Qatar does not pose major concerns at present, it has highlighted the need to create innovative policies with which to cover underserved segments of the Middle Eastern insurance market.
One company taking notice from the Qatari slowdown is the Dubai Islamic Insurance and Reinsurance Company, also known as Aman, which is headquartered in Dubai, UAE. Aman’s CEO, Hussein Al Meeza, announced the creation of two new types of protection policy which would focus on affording medical cover to Indian expatriates working in the United Arab Emirates.
The Indian Expatriate Medical Insurance plans from Aman are being run in conjunction with ICICI Lombard, one of India’s leading insurance companies. On creating the plans, Hussein Al Meeza said;
“If you check the structure of the population in the UAE and what relation it has with Emiratis, they are our partners; they are our brothers. They are also the people who (are) behind all the work that has been done here. The relationship that we have with the Indian population was not (built) today or yesterday. Also, we have (an agreement) with ICICI Lombard, which is one of the top names in the Indian market.”
Mr Hussein went on to say;
“Europeans already have the culture of insurance. They have very advanced products. We are looking to see where the opportunities are to provide services. We are looking at the Arab world, Pakistanis, Bangladeshis and Filipinos. It needs a background from the countries, because India has a platform for service providers… The Indian (expatriate population) is a big market and there are a lot of opportunities. Also, we got the right partner for the products.”
The policies, named “Rishtey” and “Health on Return,” aims to give Indian expatriates in the UAE a wider choice with regards to their medical cover than they have previously been afforded. The Rishtey plan would see UAE expatriate workers obtain medical insurance cover for their families in India, while the Health on Return policy would provide health insurance protection to those same expatriate workers in the event that they return to India for a short stay. Additionally, the Health on Return plan also offers the expatriate Indian workers the option of having retirement health insurance cover, creating a far more flexible and comprehensive health insurance product than any which currently cater to this niche market segment.
While a slowdown in Qatar’s general insurance market may pose a concern for the region, industry analysts are aware that there exists significant potential with regards to developing ever more unique products for the GCC insurance sector.
Insurance Companies Mentioned
Qatar Islamic Insurance
Founded in 1995, Qatar Islamic Insurance, also known as QIIC, operates a number of lines of insurance coverage. Offering insurance based on Islamic principles QIIC offers coverage for all risks from Aviation to personal protection.
Qatar General Insurance and Reinsurance
Qatar General Insurance and Reinsurance was founded in 1979, and is a Qatari national company. Qatar General Insurance and Reinsurance offers both individual and business insurance products in Qatar.
Al Khaleej Takaful
Founded in 1978, Al Khaleej Takaful operates primarily in the general insurance and reinsurance markets. Covering risks including Property, Engineering, Liability, General Accident, Marine Transit, and Marine Hull, Al Khaleej has proven time and again to be an innovative insurer.
Qatar Insurance Company
Founded in 1964, Qatar Insurance Company, also known as QIC, is Qatar’s oldest insurance provider. Operating a number of personal and business insurance products across the GCC, QIC is one of the most established insurers in Qatar.
Doha Insurance
One of the younger insurance providers in Qatar, Doha Insurance was founded in 2000. Establishing a Takaful products company in 2006, under the name Doha Takaful Insurance, Doha Insurance company offers a range of general insurance products.
Dubai Islamic Insurance and Reinsurance Company
Dubai Islamic Insurance and Reinsurance Company, also known as AMAN, was established in 2002 to provide comprehensive Islamic insurance products to residents of the UAE. Offering Motor, Home, and Medical Islamic insurance products, AMAN is one of the leading insurance providers in the UAE.
Aug
29
China Pacific Profits Up for 1H 2011
Filed Under CIGNA, China, China insurance, Uncategorized | Leave a Comment
China’s insurance boom is set to continue in the wake of a stellar first half of the year by the nation’s third largest life insurer; China Pacific Insurance (Group) Co (CPIC). China Pacific released a report on Monday which revealed that the insurers total net profits for the first half of 2011 had risen by 44.7 percent to RMB 5.82 billion (US$ 911.04 million), while sales revenues grew by 14.2 percent to RMB 86.88 billion (US$ 13.6 billion).
Despite the recent gains made by China Pacific, the company’s shares on the Hong Kong Stock Exchange fell by 1.9 percent on Monday, to HK$ 28.15 (US$ 3.61) per share.
China Pacific Insurance, a Shanghai based insurance provider, realized the highest first half profits of all three major Chinese based insurance providers, including China Ping An and China Life, in 2011. The biggest gains for China Pacific were made in the life insurance and property insurance markets, with total life insurance premiums for the period in question yielding RMB 2.79 billion (US$ 437 million) in net profits, a 28.5 percent year-on-year gain.
The company’s property insurance offerings yielded net profits in the region of RMB 2.34 billion (US$ 366 million), a 54 percent gain over the previous year.
China Pacific Insurance’s recent results mirrors the success achieved by two other major Chinese insurance industry players; China Life and China Ping An. The high levels of growth seen by all three of these companies since the start of 2011 fully reveals a maturing market, and sets the stage for even more profits in the near term future.
However, the business potential of the Chinese insurance market has attracted foreign notice, and increased activity by foreign insurers has become increasingly evident in the past few months. Cigna, a well regarded American Health Insurance company, recently revealed plans to launch a new, targeted China health insurance plan in conjunction with its local partner, CMC.
The Cigna CMC health insurance product, named The Jade Plan, is a product specifically designed for the high end mainland market.
While competition may be growing inside China’s insurance market, China Pacific is well positioned to experience even higher levels of growth moving forwards. At the end of June 2011, CPIC had RMB 490.51 billion (US$ 76.8 billion) in assets under management, up by 12.6 percent from 2010.
Insurance Companies Mentioned
China Pacific Insurance Group
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”.
China Ping An
Ping An Insurance (Group) Company of China, Ltd. (Ping An) is engaged in providing a range of financial products and services. The Company focuses on three businesses: insurance, banking and investment. The Company operates in five business segments: life insurance business, property and casualty insurance business, banking business, securities business, corporate and other businesses. The Company’s subsidiaries include Ping An Life Insurance Company of China, Ltd. (Ping An Life), Ping An Property & Casualty Insurance Company of China, Ltd. (Ping An Property & Casualty), China Ping An Trust & Investment Co., Ltd. (Ping An Trust), Ping An Securities Company, Ltd. (Ping An Securities), Ping An Bank Co., Ltd. (Ping An Bank), Ping An Annuity Insurance Company of China, Ltd. (Ping An Annuity) and Ping An Health Insurance Company of China, Ltd. (Ping An Health), among others.
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 are committed to providing medical, dental, behavioral health, pharmacy and vision care benefits, as well as group life, accident and disability insurance, for 46 million people throughout the United States and in other communities around the world.
Aug
26
Merger and acquisition activity in two of Asia’s largest insurance industries has continued this week, with regulatory authorities in India and China approving new measures to allow foreign firms access to their lucrative emerging markets.
India’s Finance Ministry made an important move in granting local insurance firms greater flexibility in selling their shares. Indian insurance companies will no longer have to complete the prerequisite 10 years of operations before divesting and selling their domestic shares to foreign enterprises. The foreign direct investment cap will remain at 26 percent maximum ownership in India, but companies will now be able to meet those measurements, dilute their stake, and access greater overseas capital on their own timetable. The decision to adjust the requirement came after talks with the Ministry of Law and the Insurance Regulatory and Development Authority of India (IRDA).
Under current industry regulations, Indian insurance companies are allowed to offer a 26 percent maximum stake to foreign business partners when their joint venture operation is first incorporated. According to the contrasting Section 6AA of India’s1938 Insurance Act however, a preexisting insurance or reinsurance firm owned by an Indian promoter would have to wait to bring in a foreign investor, selling shares within the threshold limit in a lengthy process “after a period of 10 years from the date of the commencement of the said business by such Indian insurance company or as prescribed by the central government.”
D.K. Mittal, banking secretary for India’s Finance Ministry, explained in a briefing that these time restrictions issues placed on Indian companies needed to be cleared up following recent confusion. “Indian promoters can bring their stake down to 26 percent…We are not changing any rule here. We are just making a clarification.”
Mittal then restated the ruling: “The Indian promoter can reduce its equity to a level of 26 percent after 10 years if not done already in a phased manner, for which rules are being issued separately. The limit of FDI will be 26 percent.’’
An order to clarify the uncertainty surrounding Section 6AA of the Insurance Act has been long sought after by both local and international players in the insurance industry. This move will enable domestic insurance companies to more readily facilitate and access much needed fresh capital injections.Now that the matter has been addressed, transactions in the industry are soon to be expected. Among them, was the deal brokered between Reliance Life and Nippon Life to sell a 26 percent stake to the Japanese insurance company for US$680 million, which will now go ahead. The share sale had been agreed to in March earlier this year but hit a hurdle when it emerged that Reliance Life had not yet completed the 10 years of operation necessary for its Indian shareholders to dilute their stake. The IRDA couldn’t approve the deal as it was uncertain whether or not Reliance Life’s promoters could dilute their stake through a fresh issue of shares to a new partner.
Sam Ghosh, CEO of parent company Reliance Capital, was pleased that the government’s clarification would finally enable Nippon Life to invest in their company. He told reporters that the deal would be a positive for Reliance Capital. “The government circular clears the way for IRDA and Reserve Bank of India (RBI) to approve the deal…Reliance Capital will receive over R3,060 crore from Nippon and will infuse R300 crore in Reliance Life. Rest will be invested in other purposes.”
The transaction puts the total value of Reliance Life at US$ 2.6 billion. Reliance Life’s new life insurance partner, Nippon Life, is one the largest private life insurance companies in Asia. Like other Japanese Life insurers, Nippon Life has been looking to bolster its overseas presence, with the new Indian joint venture enabling access to one of the world’s fastest growing life insurance markets. It is estimated that only 10 percent of India’s 1.2 billion population hold any form of life insurance cover. Together with the general economic prosperity and rapidly expanding middle class sector in India, the Indian life insurance market is forecast to expand as per capita wealth increases.
China is the other Asian market that can offer similar growth opportunities and economies of scale for life insurance companies. This week, Prudential Financial became the latest foreign company to establish a presence in the world’s second largest economy through a life insurance joint venture with a unit of Fosun Group, China’s largest private investment conglomerate. The Western financial group received regulatory approval from the China Insurance Regulatory Commission (CIRC) this Wednesday to acquire a maximum 50 percent stake in the Shanghai-based venture, which plans to be launched within the next 12 months.
This is the second joint venture embarked on by the two companies in the past year. In January the two firms agreed to form a US$600 million private equity fund, which enabled Fosun to develop its financial services arm. Now Prudential will be given the opportunity to establish a presence in the country’s CNY1 trillion (US$156 billion) life insurance market. Prudential has attributed much of its growth in the past year to the particularly robust performance of its Asian operations, and has been looking to further develop its business in the region to better protect itself against the current market turmoil engulfing the United Sates and Europe.
Prudential will be entering a Chinese life insurance market dominated by China Life, Ping An Life and China Pacific, with market shares of 29, 13 and 8 percent respectively. These entrenched state-owned companies have extensive strength in terms of branding and infrastructure and operate on a tremendous scale even by the standards of the multinational insurers originating from mature markets. The life insurance market is fast moving however and there has been increased competition in recent years as local and multinational insurers (28 foreign players at last count) attempt to strengthen their reach in the country. While the Chinese insurance market is technically open to foreign companies, they are faced with more restrictions and a more active regulatory authority than in many other large countries. Foreign insurance companies thus tend to find success in China through investing and operating as joint venture partners with local Chinese insurance and financial conglomerates.
Major multinational Chinese insurance company joint ventures include the Sun Life Everbright and the Aviva-Cofco partnerships, as well as recent share purchases made by Goldman Sachs and Starr International in Taikang Life and Dazhong Insurance respectively. The emerging insurance markets in Asia are now widely expected to outperform that of other more mature markets, with China and India leading the way.
Insurance Companies Mentioned
Nippon Life Insurance
Nippon Life Insurance was established in 1889 in Japan. Through its subsidiaries, Nippon Life offers various life and non life insurance products and services. Nippon Life operates in North America, Europe, Oceania, Asia, Central and South America, and the Middle East.
Prudential Financial Inc
Prudential Financial Inc. is a financial services leader, with approximately US$750 billion of assets under management as at September 2010. Prudential Financial operates in the United States, Europe, Latin American and Asia, with approximately 42,000 employees worldwide
Reliance Life Insurance
Indian life insurance company, Reliance Life Insurance, is an associate company of Reliance Capital. Reliance Capital is one of India’s top 3 financial services companies by net worth. Both Reliance Life Insurance and Reliance Capital are part of the Reliance – Anil Dhirubhai Ambani Group.
Aug
25
A new tax report released this week from the Association of British Insurers (ABI) and PricewaterhouseCoopers demonstrates the important role that the domestic insurance industry continues to play in driving the United Kingdom’s economy forward.
The ABI asked 28 of its members to participate in the 2011 study and to provide data on their tax payments for their accounting year ended to 31 March 2011. The 28 members taking part in the study represent roughly 80 percent of all premiums written by the entire ABI membership for the year. The UK trade body asserts that these results can then be held representative for the sector as a whole. The ABI have conducted similar studies in 2007 and 2009 to see how insurance companies have reacted to a difficult period for the UK economy and to provide evidence that contributes to public policy debate.
According to the August 22nd filing, the British insurance sector has now paid a total of £10.4 billion (US$17.21 billion) in tax to the UK Treasury over the past year. The total tax contribution for the industry equates to £4.6 billion (US$7.6 billion) in taxes borne and £5.8 billion (US$9.6 billion) worth of taxes collected on behalf of government, this is inclusive of Insurance Premium Taxes. This overall tax contribution is larger than the entire £10.2 billion (US$16.9 billion) Home Office budget, with over £200 million (US$330 million) to spare.
The ABI noted that insurers who provided data for both the 2009 and 2011 studies had seen their Total Tax Contribution rise by an average of 19 percent. This has been expected because the low corporate profits and transaction activity experienced in the immediate aftermath of the financial crisis and recession necessitated reduced corporate tax and stamp duty levels in 2009. What perhaps wasn’t expected would be that tax contributions from insurers are now exceeding pre-recession era amounts.
Insurance companies are distributing more of their revenue to the government than towards their shareholders, staff or lenders. The ABI survey data showed that 50.9 percent of members’ expenditure went to the UK government (through taxes borne and collected) compared to just 26.2 percent spent on employee wages and salaries, 19.6 percent released in dividends to shareholders, and 3.3 percent in interest payments to financiers. Corporation tax was the largest tax type borne, accounting for 59.6 percent of total taxes borne, followed by VAT.
The UK insurance sector has traditionally been a large corporation tax payer. PricewaterhouseCoopers was able to determine that corporation tax paid by insurance companies totaled £2.7 billion (US$4.46 billion), equal to 6.4 percent of total government corporation tax receipts in 2010. This represented a 50 percent jump paid out by members of the Association of British Insurers since 2009. Insurers in the Hundred Group, a compendium of the UK’s largest companies, contributed the third highest corporation tax of any sector. ABI noted that the insurance sector’s corporation tax contribution was now returning to near the level it was at before the financial crisis.
ABI Director General Otto Thoresen commented in a press briefing that said these figures demonstrated the important contribution insurers were making to the UK tax revenues and the economy at large. “The tax paid by the UK insurance industry could pay for the whole of the Home Office budget, or fund the budgets of the Departments for Transport, Communities and the Foreign Office put together. Insurers are crucial to the economy. Our total tax contribution is now higher than it was before the recession showing the important role the insurance industry is playing in the recovery and how resilient the industry is during tough times,” he said.
The insurance industry has remained one of the biggest private employers in the UK, with over 275,000 people working in the sector. ABI member companies account for 152,000 of these employees and had employment taxes borne and collected worth £2.64 billion (US$4.3 billion). Despite the recession, employment rates have not notably dipped in this sector. The insurance companies surveyed as part of ABI’s 2011 study paid an average of £21,793 (US$35,984) into the UK public finances per employee in employment taxes alone, 15.3 percent higher than previous studies. The median salary for an insurance worker in the UK is £42,100 (US$69,515) and compares favorably to the £25,900 (US$42,765) national median wage.
Thoresen concluded the report, saying that further revisions and improvements towards the tax code would improve the business environment in the country and ultimately generate greater returns for the Exchequer. “These figures highlight the importance of consistent, competitive tax rules which could help the industry to grow further so that it can continue to make an important contribution to the UK coffers. We are talking to the government about how to make the UK tax system an asset for the UK when it comes to retaining and attracting insurers to the UK. It is important we encourage our good, successful UK businesses to expand and grow rather than having rules which make the UK a less attractive place to base a business.”
Thoresen’s concerns about the viability of the UK insurance market might be well founded. According to the latest ICAEW/Grant Thornton UK Business Confidence Monitor (BCM), confidence in the country’s banking, finance and insurance companies have all slipped in the past three months to the end of June.
The BCM fell by two-thirds in the last quarter and is now at its lowest level since the middle of 2009, when the UK was still in a recession. For the insurance industry in particular, this downgrade has been largely due to a year of unprecedented catastrophe losses and the continued inability of the pricing market to adjust and harden to enable insurers to recoup expenses. Peter Allen, the head of financial services at Grant Thornton, summarized the index’s findings: “For the insurance industry, 2011 so far has been characterized by a series of expensive catastrophes which have hit profitability – but not sufficiently to create a turn in the pricing cycle.”
The continued uncertainty over the start date and stipulations for Solvency II’s euro-wide capital requirements and other regulatory issues has also hit industry confidence hard. “Solvency II has required a significant investment of both time and money by re/insurers, as they put in place the wide ranging changes to capital and reporting requirements,” said Allen, adding, “The fact that there is still debate as to whether the implementation date will be January 2013, or the start of 2014, is not helping the industry to feel that it can prepare with confidence.”
Confidence in insurance companies may be tested but their services are more greatly required in the UK today than perhaps ever before. In the aftermath of one of the country’s worst riots in decades, insurers are working hard to settle numerous complex claims that will help rebuild battered communities around England. In addition to their work and contribution to the home economy, the UK insurance industry is also one of the country’s main exports, with around a fifth of its net premium income being generated by overseas business. Closing the trillion dollar gap in coverage between the Western and Eastern hemispheres could eventually yield significant dividends for the UK treasury as well.
Groups Mentioned
Association of British Insurers
The ABI (Association of British Insurers) represents the collective interests of the UK’s insurance industry. The Association speaks out on issues of common interest; helps to inform and participate in debates on public policy issues; and also acts as an advocate for high standards of customer service in the insurance industry. Every day, ABI members pay out an estimated £155 million in benefits to pensioners and around £58 million in general insurance claims.
Aug
24
AM Best Counts High US Cat Costs
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Fresh analysis released this week by worldwide insurance and credit rating agency AM Best highlights the pronounced effect natural disasters and catastrophic events have had on insurers’ balance sheets, in what is now perhaps the most influential trend affecting the international insurance industry this year.
AM Best surveyed over a hundred United States-based property and casualty (p&c) insurers and found that, as a whole, the industry had taken US$27 billion worth of pre-tax net catastrophe losses in the first half of 2011, already exceeding the total for the whole of last year which reached US$19.6 billion. According to the contributed data, the insured catastrophe-related losses reported in the first six months of 2011 are US$15.1 billion, or 127 percent, greater than the US$11.9 billion reported for the first half of 2010. AM Best assert that their survey results are representative of 80 percent of the US p&c industry in terms of net written premiums in the first half of 2011.
AM Best notes that the insurance industry’s personal lines business experienced much of these losses with US$15.1 billion in claims, followed by the commercial lines segment reporting US$8.3 billion. Meanwhile, the reinsurance costs for the companies surveyed, which would include losses from global catastrophe events, totaled around US$3.6 billion. Overall, first half cat losses amounted to 12.6 points on the combined operating ratio, a measure of how well insurers can balance their costs against earnings, compared to just 5.7 points measured during the same period last year.
Insurers reported that a majority of their losses were related to the unprecedented sequence of tornadoes and hailstorms that hit Midwest and South-eastern United States in April and May of this year. Included among the storms were those that caused heavy damage in Tuscaloosa, Ala. and Joplin, Mo. which as AM Best noted, ranked as two of the most expensive tornadoes in history. International natural disasters, most notably the record 9.0-magnitude earthquake and subsequent tsunami in Japan, and the earthquake and flooding in New Zealand, also pushed the claims toll up for American insurers and had a residual effect on the balance sheets of companies with more global portfolios.
The Oldwick, N.J.-based ratings agency has long recognized catastrophic loss as the primary threat to the solvency of property and casualty insurers due to the severe, rapid and unexpected impact that can occur. Global demographic and economic trends have been pushing property values and concentration risk in catastrophe-prone areas upwards and insured exposure has in turn escalated rapidly in the past decade. As more and more people (and clients) inhabit these areas, insurers must take on more responsibility to provide coverage against a wide array of new concerns, including terrorism. As a result, the worldwide insurance industry’s exposure to catastrophe losses continues to rise.
Despite the heavy loss burden presented in this information, AM Best remains confident of the US p&c sector’s operational stability going forward. The ratings agency believes that the overall industry has the capital available to absorb these losses and that any impact from natural catastrophes in the first half of the year would be from an earnings perspective not a long-term capital one. A surge in claims could in fact trigger a rise in insurance rates to offset losses, forcing more exposed players to economize and enabling those still in the market to charge more for coverage.However the general insurance sector will certainly be challenged through the remainder of 2011 as the budgets for catastrophe losses are exhausted and the industry hasn’t been tested by any hurricane related losses yet. US Insurers are now entering the quarter that has traditionally been hit the hardest by hurricane losses and forecasters are predicting an above average Atlantic storm season.
“AM Best believes a potentially devastating hurricane season would make catastrophe-related losses climb even higher and may be enough to impact the market cycle,” the ratings agency concluded.
While some insurance analysts confirm that the industry has performed better than expected given the circumstances, the prevailing soft pricing market has contributed to significant drops in net income being reported by individual insures during the first half of the year despite continued reserve releases. Insurance companies have found themselves unable to raise rates at all for three years due to intense competition, overabundant supply and lower investment yields. Analysts warn however that a significant hurricane could be enough to trigger premium hikes at long last.
Natural disasters can not be held accountable for all insurer woes worldwide however. China Life Insurance Co, China’s and indeed world’s largest life insurer by market value, posted a larger than expected 28.1 percent drop in first-half net profit. China Life has attributed the decline in earnings to sluggish investment returns from volatile stock markets and a spike in traditional insurance contract liabilities. A large wave of China Life’s written policies matured in the first-half of this year, which lead to the insurer into committing a large proportion of its income to settle payouts to clients. This could place some pressure on the Chinese insurer’s profitability going forward.
What wasn’t included in the company’s briefing was the impact increased foreign competition could be playing on the entrenched state-owned insurer’s bottom line. This is perhaps the second major development occurring in the international insurance industry this year, companies who will now be looking to expand in emerging Asian economies to offset insured losses felt in mature markets.
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.
Aug
23
QBE Revises Margins Outlook Despite 1H Profits
Filed Under Acquisition, Uncategorized, general insurance | Leave a Comment
Australian insurance giant QBE has reported a significant rise in half-year profits, but have, at the same time, also been quick to downplay their full-year margin expectations due to the unprecedented string of heavy catastrophe claims incurred in 2011.
In a statement released to the Australian Stock Exchange, QBE posted a 53 percent rise in net profit for the six months of 2011 to June 30, up to US$673 million from the US$440 million reported a year earlier. The increase in QBE’s half-year profits was primarily attributed to a substantial rise in investment income, which rose from US$116 million in 2010 to US$657 million, as the insurance group expanded its portfolio of corporate bonds. Premium revenue from recent acquisitions completed over the past year also exceeded expectations, and have been able to bolster the bottom line at a critical time to largely offset the sharp influx of severe natural catastrophe claims. QBE acquisitions so far this year have included including the American crop insurers, NAU Country and Renaissance Re, the Balboa insurance business, the Europe-based insurer Secura NV and CUNA Mutual from Australia. According to QBE, over the past six years over 90 percent of the insurer’s growth in premium income has been achieved through its acquisitions. QBE’s gross written premiums were up 30 percent to US$8.9 billion, while the insurance group’s net earned premium also increased 29 percent to US$6.78 billion. The Australian insurer’s balance sheet has remained strong with excess capital of US$3.3 billion, 1.7 times the minimum requirement, leaving considerable flexibility to fund further acquisitions in the future.
QBE Chief Executive Frank O’Halloran asserted in the statement that the company would continue to look towards acquisitions to increase revenue and diversify its risk profile. “QBE’s strategy to build product diversification and geographic spread by acquisition continues to be successful. We are particularly pleased with our recent US acquisitions which contributed strongly to the significant increase in profits from our US operations in the first half.”
While QBE has been able to successfully expand and generate revenue from its overseas operations, the insurer’s profit margin for the first half of the year fell from 15.8 per cent to 11.2 per cent, due to a record number of natural disaster claims that added 6.6 percent to the large individual risk and catastrophe claims ratio for the half year. The largest catastrophe and individual risk claims that have affected QBE relate to Cyclone Yasi and subsequent flooding in Australia, the New Zealand Christchurch earthquake, Japan’s earthquake and tsunami, and half a dozen major tornadoes that struck the United States in the spring. Total insured losses went up US$250 million in June and already amount to US$1.08 billion for the year, matching 2010’s total in half the time. The company has been forced to downgrade its insurance profit margin expectations to between 11 and 14 per cent for the rest of the year, down from a 15-18 percent forecast in June.
“The record level of catastrophes experienced by the worldwide insurance industry during the first half and the recent fall in risk-free interest rates necessitates that we lower our insurance profit range for the full year,” QBE Chief Executive Frank O’Halloran explained.
The lower than expected insurance margin affected QBE share price in trading, dropping to a low of US$12.25 before the stock bounced to close down 5.6 percent at US$12.98. Indeed, the insurer’s underwriting profit for the first six months of 2011 dipped by a remarkable 46 percent to US$291 million from a year earlier. Australia’s largest insurance company would have suffered US$217 million in further costs from claims and reinstatement premiums this year if it had it not renegotiated its prime reinsurance protection contracts last year. Under their current reinsurance deal, seventy percent of all costs incurred will be fixed to the growth in premium income, with the only the remaining 30 percent being variable to inflation. Due to the current claims environment, QBE has taken out an additional US$150 million worth of reinsurance to cover for any further large risk and catastrophe claims over US$675 million.
The Sydney-based global insurer is confident that these extra costs can be absorbed by greater demand and more beneficial policy terms and premium rates for its own business, particularly in catastrophe affected areas. A close sequence of natural disasters can often become an earnings event for insurers as it ultimately makes more people aware of the importance of proper coverage. “We believe the pricing increases that we will get in the door will more than offset any price increases that we expect on the buying of that 30 per cent of reinsurance,” Mr O’Halloran told analysts, adding in the statement that “our philosophy has always been that our reinsurers are entitled to a positive return on their commitment to QBE over time.”
QBE, of course, have not been the only prominent property/casualty insurer to suffer through two quarters of sizeable catastrophe losses. Several multinational insurance companies, including Allstate and MetLife, have been forward with their concerns about the effects these increasingly prevalent natural catastrophes, not to mention the impending Solvency II requirements in Europe, will have on the international insurance industry. Reinsurance companies have already begun lifting rates on insurers to recoup their sizeable losses and it is yet to be determined if these extra expenses can be passed on entirely to policyholders.
Insurance Companies Mentioned
QBE
QBE Insurance Group Limited is one of the top 25 insurers and reinsurers worldwide. Headquartered in Sydney, Australia, QBE operates out of 49 countries around the globe, with a presence in every key insurance market. The Americas Division, headquartered in New York, conducts business through various property and casualty insurance subsidiaries in eight countries.
Aug
22
Gulf Insurance Industry Set to Take Off
Filed Under UAE Insurance | 5 Comments
A new report released this week by investment banking firm Alpen Capital LLC has highlighted the tremendous potential for growth within the Gulf insurance industry due to the relatively low insurance penetration levels, positive demographic trends and pronounced infrastructure development occurring throughout the region.
According to the GCC Insurance Industry report, insurance business in the Gulf region is set to grow 20 percent annually on average over the next 5 years, moving from US$18 billion in gross premiums in 2011 to over US$37 billion by 2015. The United Arab Emirates and Saudi Arabia will continue to be the two largest insurance markets in the region, with Alpen projecting a 75 percent market share between them by 2015, however Qatar is forecast to be the biggest mover, with a 30 percent compound annual growth rate over the next 5 years.
The Gulf’s insurance industry is undergoing an important transitional period, according to Alpen. These countries are comprised of predominantly small, youthful populations, including in them a high proportion of expatriates, with a high per-capita income and substantial government spending and involvement throughout most business sectors. However, despite their small and relatively affluent population base, the insurance penetration and density level in the region has remained lower than that of their global peers from both emerging and mature market economies.
Alpen Capital believes that the Gulf markets have now reached critical volume and the discrepancy between a rising GDP and stagnant insurance growth will correct itself quickly in the coming years. As the economies in the region mature it will then be incumbent on insurers to better prepare themselves to capitalize on this business opportunity and become competitive on a global scale. “The confluence of economic and structural factors have created an environment conducive for steady growth of the insurance sector,” Alpen Capital surmised.
Each GCC member was broken down and assigned a specific forecast by Alpen. Although the region at large is poised for substantial insurance growth, some countries are more prepared to expand than others.
Bahrain’s insurance industry covers a small, well regulated market that is forecast to expand by 16 percent from 2011-15. The penetration rate in 2010 for both life and non-life insurance policies have remained high in comparison to other GCC countries. The kingdom is also developing a mandatory national health insurance policy for all expatriates, which when completed in 2013 could play a substantial role in driving the growth of the domestic insurance sector. Unlike most other countries in the region, Bahrain has no native citizen employment quotas for business. This will give Bahrain a competitive advantage in attracting business from foreign insurers.
According to the report, Kuwait’s insurance sector is poised to grow by a considerable 17 percent in the next 5 years, in line with a similar double digit rise anticipated in the nation’s GDP over the same period. Kuwait’s insurance industry hasn’t progressed as quickly as others in the region, with the lowest non-life insurance penetration recorded at 0.4 percent. However, recent moves made by the national government to promote takaful, or Shariah-compliant Islamic insurance, is expected to boost growth in this sector considerably. The growing acceptance of Islamic insurance and compulsory motor insurance laws in the country will compliment each other to facilitate demand. The life insurance sector is not expected to progress as quickly, given the extensive social security system available to citizens in Kuwait. Overall, Alpen expects the life insurance industry to grow by 13 percent in Kuwait while the non-life sector expands by 18 percent.
Oman’s insurance industry is the smallest in the region but is forecast to grow by 18 percent in the coming years. By 2015 the total contribution from premiums is expected to reach US$1.7 billion. In 2010 cyclone Phet hit the country’s north coast and drove up awareness and demand for cover. The Oman government is now taking similar steps to others in the region to encourage insurance as a valuable savings tool for its citizens. A compulsory medical insurance scheme is being discussed for expatriates, which could further contribute to industry growth. The country’s demographics also present distinct opportunities. Oman’s median age is 18.8 years old, one of the lowest averages in the region, and this will be beneficial to the domestic insurance sector because a younger population will more likely become aware of and/or purchase insurance policies in the future.
Saudi Arabia is the largest market in the GCC and one that has developed substantially since insurance business was first permitted in the 1990s. The total written premium in the insurance sector is forecast by Alpen to reach US$9.24 billion by 2015 at an 18 percent combined annual growth rate. Due to an ageing population and regulatory initiatives, Saudi Arabia will be the only GCC market in which sales of new life insurance policies are expected to grow faster than that for non-life products. Takaful insurance companies also have a significant presence in the country, and their continued development will help develop awareness and acceptance towards other lines of insurance in the region. Increased participation from the private sector will yield positive additional positive returns.
The UAE insurance sector is already the most developed in the GCC and is forecast by Alpen to grow by 19 percent annually, totalling US$18.3 billion in combined premium by 2015. Insurance penetration and density in the UAE is at the highest levels in the gulf region, and an increase in both native and expatriate populations is expected to only improve upon this trend. Over the past few years, the local insurance and financial markets have been made more open. This has reduced the presence of entrenched national insurance companies and enabled more foreign competitors to operate in the country and rejuvenate the market. Another key factor driving the expansion of the insurance industry has been the massive UAE government-funded infrastructure projects, which were previously stalled or cancelled due to the 2008 global economic crisis. Many of those projects are now underway again and their success could boost the local economy and insurance sales along with it.
Alpen Capital singled out Qatar’s insurance industry as the fastest growing in the region, with total written premiums expected to grow by 30 percent in the next 5 years. This remarkable growth is being driven predominantly by the country’s continued economic expansion, combined with a concerted attempt by the government to diversify Qatar’s industry away from only hydrocarbon extraction and export into real estate, tourism and other commercial endeavours. In diversifying their economic activity Qatar creates a significant demand for an expanded scope of new insurance product lines in the region. Similar to other GCC countries, an increased focus on promoting takaful as well as a potential compulsory health insurance law for expatriates is thought to contribute to demand in the short term future as well. Alpen Capital also points out that Qatar GDP per capita is both the highest in the GCC region and among the highest in the world. This considerable level of consumer spending presents not only opportunity for insurers but for Qatar itself to become a leading regional hub for insurance and investment businesses.
Companies Mentioned
Alpen Capital Group
Alpen Capital Group is an investment banking firm that provides financial consulting services. The firm’s advisory services focus on equity and debt capital markets, credit ratings, debt syndications, and mergers and acquisition consulting, amongst others. Alpen Capital was founded in 2008 and is based out of Dubai, United Arab Emirates.
Aug
19
New research released today by Max Bupa, a leading India-based private health insurance joint venture between Max India Ltd. and Bupa, has revealed some interesting insights regarding people’s differing attitudes and perceptions towards chronic diseases and other medical concerns around the world. Of particular note has been the poor health and general wellbeing reported for their home Indian population, and Max Bupa are now developing programs to address this.
Bupa Health Pulse 2011 is the second annual international survey commissioned by Bupa. Between 22 April and 23 May 2011, the international healthcare group surveyed over 13,000 people from the following twelve countries: Australia, Brazil, China, Hong Kong, India, Mexico, New Zealand, Saudi Arabia, Spain, Thailand, the United Kingdom and the United States of America. Quotas were set and data was weighted so as to be nationally representative by gender, age and region across all markets involved.
The principle finding made evident in the Bupa Health Pulse 2011 study is the fact that many of the people surveyed, regardless of what country they are from, are not getting enough regular physical activity, even if they were aware or in fact suffering from long-term medical conditions that exercise could aid or help prevent. Over half of the respondents (55 percent) told Bupa that they did less than two hours of exercise a week, with nearly 1 in 5 (18 percent) admitting to usually doing no physical activity at all. This particularly alarming when you consider that more than a third of all respondents (38 percent) claimed to suffer from heart disease, depression, asthma or another common long-term ailment, all of which require some degree of modest physical rehabilitation to treat and ultimately prevent against.
Among the countries surveyed, respondents from Brazil and Saudi Arabia claimed to do the least exercise, with a third of the people from each country saying they did none at all. China and the United States, meanwhile, were the countries where people committed to the most physical activity, with 58 percent of Chinese and 55 percent of American respondents indicating they did at least two hours of exercise a week. These numbers will all hopefully improve as over 60 percent of those surveyed indicated that they wanted to do more to improve their physical condition.
Bupa’s international healthcare survey further disclosed the reasons why people were not getting as much physical activity as they’d liked or hoped. The poll cited work commitments as the chief barrier to exercise, with nearly half (48 percent) of worldwide respondents reporting it as their greatest issue, followed then by a general lack of motivation (18 percent), lack of time to work out (15 percent) and cost concerns (17 percent). These obstacles varied sharply depending on the location of the respondent. Among the developed market countries, such as Australia, the UK and the US, lack of motivation was consistently regarded as the main obstacle to doing more physical activity. In the fast emerging economies like Brazil, China, India and Thailand, time and price were the more prevalent obstructions to exercise. When asked what it would take to get people to exercise more, nearly two thirds of all those polled thought that training with friends or as part of a group could help regulate and improve their health and wellbeing habits. Over 70 percent also thought that improved self reliance in setting specific goals and biometric targets could improve their motivation.
When dissecting the results along gender lines, the study found some interesting contradictions in attitudes towards health. Bupa Health Pulse 2011 showed that while men worldwide are more likely to feel overweight in comparison to women (27 to 23 percent response), women are more eager to shed the pounds, with 52 percent wanting to lose weight versus 45 percent of men. Male respondents were also twice as likely are females to feel personally unhealthy (68 to 32 percent affirm). Women reinforced this data by indicating a greater concern about their partner’s health over their own and were more awareness of mental health issues.
Max Bupa has focused on the data released specifically about the Indian market, where the country’s most productive age group looks to face the most pronounced losses due to health problems. According to Bupa’s international survey, around 40 percent of Indians surveyed were classified as unhealthy, while one out of every 10 was technically obese. More than half of the Indians surveyed (57 percent) did less than two hours of exercise a week last year. Of these respondents, it is believed the 25-34 age group will lose the more productivity due to medical illness in the coming years. Diabetes and heart disease have remained the key health concerns among Indian respondents.
The rapid development of the Indian economy has lead many of the people coming up in the country to neglect their health and wellbeing due to the strenuous hustle of daily life. More than half of Indians polled by Bupa (61 percent) thought that their work commitments were preventing them from exercising more and making healthier lifestyle choices. The report further highlighted that 55 percent of Indians had been for a medical check-up to assess the risk of developing a chronic disease, while 25 percent of Indians had not been for any health checks, below the 31 percent international average of people not seeking medical consultation to assess health risks.
Max Bupa is using these concerning health statistics as a platform to launch its ‘Health Promise’ program. Health Promise was launched this week as the company’s first bold attempt to promote greater health and wellbeing awareness in India. Through its new website, www.YourHealthFirst.in, Max Bupa will provide necessary lifestyle and fitness advice to encourage policyholders to make a promise to improve their health for both themselves and their beneficiaries.
Speaking at the launch of the campaign, Shefali Chhachhi, Marketing Director for Max Bupa explained that the insurer was committed to improving the lifestyle of their clients as well as promoting the idea of living healthy to the Indian populace at large. “Max Bupa wants to help people put their health first and be their health partners for life helping them live healthier and more successful lives. Through this initiative we want people to take the first step towards being healthy by stating their health concern for their loved ones and we will help them in addressing these concerns, by providing them expert advice and access to quality healthcare.”
Insurance Companies Mentioned
MaxBupa
Max Bupa Health Insurance is a 74:26 joint venture between Max India Limited and UK-based Bupa. Bupa is a leading private healthcare provider with more than 10 million customers worldwide and over 60 years experience in the health sector. The Max India Group has expertise in both health and insurance related services including hospitals, clinical research and life insurance.
Bupa
Bupa is a leading international healthcare provider, offering personal and corporate health insurance, workplace health services and health assessments. The insurer today has ten million customers in over 190 countries, and over 52,000 employees around the world.As a provident association Bupa has no shareholders, because of this it uses its profits to invest in healthcare and medical facilities around the world. Bupa has operations around the world, principally in the UK, Australia, Spain, New Zealand and the US, as well as Hong Kong, Thailand, Saudi Arabia, India, China and across Latin America.
Aug
18
Ping An Invests in China, As Will Hong Kong Insurers
Filed Under China, China insurance, Hong Kong | Leave a Comment
Ping An Insurance (Group) Co, China’s second largest insurer, announced a 33 percent rise in first-half profits this week, at the top end of market expectations. As the company’s premium income and investment returns have continued to expand, the insurer also plans to increase its stake in a Chinese bank to further strengthen its banking and asset management operations.
In a statement released to the Shanghai stock exchange, Ping An reported that the group’s net income for 2011 had climbed to CNY12.8 billion (US$2 billion), or CNY1.67 (US$0.26) a share, from CNY9.61 billion (US$1.5 billion) a year earlier. The Shenzhen-based company noted that net premiums were able to grow by 39 percent for the period despite a slowdown in automobile sales in China and tightened regulation over bancassurance policies. Individual insurance premiums rose 29 percent, while Ping An’s industrial insurance business reported a 36 percent advance. An improved focus on telemarketing and agents helped contribute to a 38 percent year-on-year rise in revenues to CNY133.81 billion (US$20.9 billion), while total equity was up 20 percent from 2010 to CNY134.33 billion (US$21 billion). The company also reported that total assets hit CNY1.31 trillion (US$200.4 billion) by the end of June, an 11.8 percent increase from the end of last year.
It was the performance of the firm’s banking sector that drew the most attention. Ping An noted that net profit from its banking businesses more than doubled to CNY2.4 billion (US$375 million) in the first half of 2011, accounting for nearly a fifth of the group’s total net profit of CNY12.76 billion (US$1.9 billion). Ping An Bank, a subsidiary of the group, contributed CNY1.21 billion (US$181 million) towards the total net profit, a 34.9 percent increase over last year, with a capital-adequacy ratio (CAR) of 10.78 percent. In an attempt to capitalize on its success in the financial services sector and establish itself as a major player in the Asia Pacific region, Ping An plans to inject up to CNY20 billion (US$3.1 billion) in fresh capital into its other majority-owned banking unit, Shenzhen Development Bank Co. This would be the second time Ping An has injected funds into the bank, having increased their stake to 52 percent from 30 percent at the end of June.
Shenzhen Development Bank has contributed CNY1.18 billion (US$180 million) towards Ping An’s net profits so far this year. The investment will be used to replenish the bank’s capital base, which had lowered to near the minimum levels required by Chinese law to operate. According to the latest figures, Shenzhen Development Bank held capital in June equal to 10.58 percent of total risk-weighting assets, with a minimum CAR of 10.5 required for banks of its size in China. Concerns were raised by a recent regulatory ruling, which could lift capital requirements further to 11.5 percent if Shenzhen Development Bank is declared systemically important. Once the deal is completed, Shenzhen Development Bank expects its CAR will improve to 13 percent, adding in a statement that “The capital replenishment will enable the bank to further expand its assets and businesses, and help it achieve sustainable profit growth.”
Many other banks in China have undergone similar fundraising efforts in order to bolster their capital positions in the face of volatile global financial markets. Chinese insurance companies have duly invested in bank stocks because they believe bargains have begun to surface on expectations that the market has bottomed out following the sharp falls due to the global market turmoil earlier this summer.
For Ping An, the investment in Shenzhen Development Bank comes as part of the company’s ambitious long term plan to become a full-service financial services conglomerate, with equally proficiency in cross-selling insurance, banking and investment operations. Ping An have used HSBC as a model, who in fact hold a 16 percent stake in the Chinese insurer. According to Ping An, it’s business from non insurance operations (banking, securities, trusts) now contribute 27 percent of its net profit, up from 23 percent in 2010, and management are keen to see this continue. Injecting money into Shenzhen Development Bank will further accelerate the development of banking and investment business within the group’s business portfolio. Insurance industry analysts predict that these moves could help Ping An to perform better than its biggest rival China Life. Having a more diversified business portfolio will ultimately help protect the insurance company from adverse market volatility in the future.
The Chinese insurance market itself may become more diverse in the near future, with the introduction of prominent Hong Kong-based companies perhaps on the horizon. Speaking at a financial forum on Wednesday, China’s Vice Premier Li Keqiang told attendees that Beijing has plans to grant greater access for Hong Kong’s services sector on the massive mainland Chinese market. Li, viewed by some as a likely candidate to replace Premier Wen Jiabao, singled out Hong Kong-based insurance companies in particular, and stated that they could soon be allowed to establish separate branches and play a bigger role on the mainland as well as take up ownership stakes in their mainland Chinese subsidiaries. Li closed by saying such implementing such policies would be “consistent with our policy of opening to Hong Kong first under the ‘one country, two systems’ and aimed at taking mainland-Hong Kong economic and financial cooperation to a new high.”
Many Hong Kong insurance companies already recognize the importance of the mainland market. According to The Office of the Commissioner of Insurance (OCI), over ten percent of all insurance premiums collected this year were from policies issued to Mainland Chinese visitors. These mainland customers are expected to drive between a 20 to 30 percent annual growth rate in the country’s total premiums this year alone. China has become the second largest economy in the world, with an emerging middle class population ready to spend on insurance and investment-linked products. This emerging investor class presents significant opportunities to financial markets like those in Hong Kong that are of close proximity and particularly convenient to them. Hong Kong insurance companies that can present innovative, cost-effective and secure insurance products and services not yet entrenched on the mainland will be rewarded with a tremendous potential client base.
Insurance Companies Mentioned
Ping An Insurance (Group) Co. of China Ltd.
Ping An Insurance is the first integrated financial services conglomerate in China that blends its core insurance operations into 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.
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