NewChinese insurance firms face headwinds after record growth
Increased stock market volatility and lower interest rates pose challenges to Chinese industry players after strong gains in first half
Chinese insurers posted record-breaking profit growth in the first six months of the year, but increasing market volatility and a rate cut cycle are making the way ahead bumpier.
Dayton Wang, an insurance analyst with Guotai Junan International, said the equity market was the biggest uncertainty overhanging the sector.
"The gold rush in the [Chinese] stock market in the first six months has effectively pushed up companies' revenue and profits," he said. "But I doubt they can maintain that growth momentum in a market hit by major corrections."
Wang also said insurers would find it challenging to achieve high interest and reinvestment income when the central bank was turning to rate cuts as a major tool to kick-start the slowing economy.
Interim reports issued by Ping An Insurance (Group), China Life Insurance, People's Insurance (Group) of China and subsidiary PICC Property and Casualty, China Pacific Insurance (Group), New China Life Insurance and China Taiping Insurance Holdings revealed profit growth of between 62.2 per cent and 202.1 per cent, thanks to booming sales and a feverish stock rally that ran from November last year.
Despite the market's subsequent plunge in June, China's benchmark CSI 300 Index still ended the first half up 26.6 per cent. However, the continued correction now has it down 4.86 per cent in the year to date.