Stronger growth for China Taiping

PUBLISHED : Saturday, 27 August, 2011, 12:00am
UPDATED : Saturday, 27 August, 2011, 12:00am


Mainland firm China Taiping Insurance Holdings performed better than expected in its life insurance business despite tighter regulations.

The company's net profit, which met market expectations, rose 20.4 per cent to HK$725.78 million in the first half compared with the same period last year. Gross premiums and policy fees dropped by 0.4 per cent to HK$27.16 billion.

Mainland insurance companies have generally suffered setbacks in their life insurance business due to new regulations that ban insurance companies from sending sales people to bank branches to sell their insurance policies and products. Instead, only bank employees with insurance agent licences can sell insurance policies at bank branches.

Although the company's gross premium sales in life insurance declined by 1.1 per cent to HK$21 billion, its 'new business value' (NBV) - essentially the after-tax present-value profits from new business sold - after cost of capital rose 18.8 per cent to HK$1.25 billion year-on-year.

This beat market expectations of roughly 10 per cent growth for NBV, senior CCB International analyst Kenneth Yue said.

The company attributed the stronger-than-expected growth to selling more long-term savings and protection products, which have higher profit margins than short-term ones.

'Long-term savings and protection policies are relatively harder to sell,' Yue said.

About 46 per cent of the first-year premiums sold were for policies and products that extend for 20-29 years.

Taiping Life Insurance chief actuary Raymond Tam said the life insurance business's solvency ratio, a measure of an insurer's ability to pay claims, dropped 39 percentage points to 231 per cent compared to the end of last year, due to expansion needs and bearish sentiment in the A-share market.

China Taiping Insurance deputy chairman Song Shuguang said the life insurance business would continue to face challenges for this year.

The company's premiums in its mainland property and casualty insurance businesses grew by 13.7 per cent year on year in the first half to about HK$3.46 billion. Premiums rose 8.4 per cent to HK$511.11 million from Hong Kong operations.

But analysts said its mainland operation's combined ratio, a measure of operation profitability, was less satisfactory than industry peers that already announced their results.