Ping An Insurance

Fitch: China life insurance premium income growth limited

Weak stock markets and rising competition from banks expected to hit mainland insurers' growth

PUBLISHED : Tuesday, 11 December, 2012, 12:00am
UPDATED : Tuesday, 11 December, 2012, 2:55am

Mainland life insurers' premium income growth would continue to be limited as a result of lower returns to policyholders due to weak stock markets and rising competition from banks, Fitch Ratings said yesterday.

The global credit rating agency forecast single-digit growth for next year.

Premium income would not significantly improve next year, as weak investment income would constrain insurers' ability to pay attractive dividends to policyholders, dampening sales, Joyce Huang, a director of insurance ratings at Fitch, said.

The rising competition from banks and other wealth management products would also weigh on insurers' premium income, she said. But Huang expected the growth rate next year to be higher than this year owing to a lower base this year.

Life insurers' premium income grew 2.4 per cent in the first half of this year from the same period last year, a slower pace than the 6.8 per cent growth last year and 28.9 per cent in 2010.

Insurers would add more sales staff and sell products with higher profit margins to weather the slowdown in premium income growth, Huang said, maintaining a stable outlook for insurers' profitability.

A recent research report from Haitong Securities forecasts premium income will improve next year, as investors will look for products offering higher returns in a low-interest-rate environment. Life insurers' new premium income will continue to drop next year but at a slower pace, the report says.

HSBC's recent sale of its stake in Ping An Insurance and rumours about Carlyle Group disposing of its remaining 7.6 per cent stake in China Pacific Insurance cast doubt on the outlook of the mainland's insurance sector.

Huang said the Ping An stake sale was an individual case and part of HSBC's strategic restructuring. Terrence Wong, another Fitch director of insurance ratings, said foreign investors remained interested in the mainland's insurers.