Insurers to focus on value growth
Pursuit of volume growth helped mainland's big players achieve solid first-half profits but challenges expected to prompt strategy switch
Chinese insurers are poised for a slowdown in premium income growth in the second half as they are expected to pursue higher margins after posting decent first-half earnings cushioned by a significant improvement in investment income.
Net profits of major insurers were buoyed by increases in net realised gains from investment and lower impairment losses in the first half as the capital market improved and they offloaded some of their equity holdings, said Kenneth Yue, director and senior analyst at brokerage firm CCB International.
"If the A-share market doesn't see a substantial drop, Chinese insurers won't need to make significant provisions. Also, they are less sensitive to the volatility in the A-share market after adjustments in their investment portfolio," he said, adding that he expects insurers to maintain stable investment income in the second half.
The insurance business, however, has remained a challenge for both life and non-life players with competition rising.
They will be more focused on new business value growth and margins
Xia Ping, an analyst with brokerage firm Core Pacific-Yamaichi, said the strategy for big players such as China Life Insurance was to pursue growth in "volume" in the first half, but the buzzword will be "value" in the second.
Life insurers boosted premium growth in the first half through bancassurance and selling lower-margin products to achieve top-line growth in premium income, she said. "But I expect they will be more focused on new business value growth and margins in the second half."