Posted on Mar 29, 2011 by Sergio Ulloa
China Pacific Insurance Group (CPIC Group), mainland China's third-largest life insurer, has posted a 16.3 percent increase in net profit for last year, up to 8.557 billion yuan (US$1.3 billion) from 7.356 billion yuan (US$1.1 billion) in 2009, as premiums expanded.
CPIC Group's Announcement of Audited Annual Results reported income from the insurance business in 2010 at 139.56 billion yuan (US$21.27 billion), an increase of 44.9% over the previous year, with earnings per share of one yuan. At year's end 2010, CPIC Group's share of the Chinese insurance market was 9.9%, a rise of 0.8 points since 2009. The company's total investable assets are 433.4 billion yuan (US$66 billion), having risen 18.4% since last year. Shareholders received a cash dividend of 0.35 yuan (US$ 0.054) for each share held.
In 2010, CPIC prioritized underwriting profitability, the expansion and development of life insurance products and a renewed focus on standard premium businesses.
Net investment income increased 33 percent to 16.95 billion yuan. This was attributable to a significant rise from both interest and dividend income. Premium income was boosted at a rate of 10 share points greater than industry average to consolidate the company's existing market share.
Gross written premium revenue from life insurance, as a result, rose 41.7 % to 87.9 billion yuan (US$13.4 billion) and CPIC held a market share of 8.8% this past year. CPIC expects a more modest growth level of over 15% in the upcoming year. It is also possible that market demand for similar insurance products is gradually approaching a saturation point. The increased competition for customer resources within the industry fosters price wars and the high?cost channel inputs are made increasingly more difficult to sustain due to the profitability pressure.
With that said, the effective demand for insurance business in China is still expected to increase rapidly. Total written premiums in China's insurance market reached 1,452.8 billion yuan (US$221.4 billion) in 2010, a year on year increase of 30.4%.The acceleration of urbanization, increases in per capita income, an improved social security system,
enhanced distribution reforms and service level optimization coupled with stronger insurance awareness, are all positive factors contributing to the brisk development of the domestic Chinese insurance industry.
As interest rates rise, profitability for insurance companies will also be further improved.
2011 is the first year of the Chinese government's twelfth Five?Year Plan and the country has significant decisions to make with regard it's future economic development. In the aftermath of the global financial crisis, China will continue to implement pragmatic fiscal and monetary policies in an attempt to accentuate steady and fast paced economic growth in the country. The insurance sector is looking to match the projected trend of social and economic development in China, with increased comprehensive insurance service capabilities. The Chinese market is pivotal for global insurers to gain access to, not just for its absolute size and growth potential but also the high savings rate of its citizenry coupled with a financial environment in which life insurance remains a particularly attractive investment opportunity.
The leaders in the Chinese life insurance industry are China Life, Ping An Life and China Pacific, with market shares of 29, 13 and 8 percent respectively. These established companies have extensive strength in terms of branding and infrastructure and operate on a tremendous scale even by the standards of multinational insurance companies originating from developed countries. There has been increased competition in recent years as local and multinational insurers attempt to strengthen their reach in the country.
While China is technically open to foreign insurers, they are faced with more restrictions and a more active regulatory authority
than in many other countries. Multinationals normally exist as joint venture partners with another Chinese organization and are often confined by their license to a particular territory or line of business.
Some major current multinational Chinese insurance company joint ventures include the Sun Life Everbright and the Aviva-Cofco partnership. Other notable foreign insurers with partnering agreements in China include Zurich and Generali, with associations involving both New China Life Insurance and China National Petroleum Corporation respectively.
Insurance Company Mentioned
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".