Mainland insurers likely to see strong 2011 growth
Hong Kong-listed mainland insurers are expected to sustain strong growth this year as the Chinese market continues to see robust growth, a report released Thursday by Swiss Re says.
According to the reinsurer, life and non-life insurance premiums in emerging Asian markets grew strongly in real terms in 2010 at 16.8 percent and 17.3 percent respectively – with a significant contribution coming from the mainland market.
“After adjustment for inflation, the mainland’s life insurance premium grew remarkably by 24.4 percent in 2010, while Indonesia, Malaysia, Thailand and Vietnam also recorded growth in excess of 10 percent,” Clarence Wong, chief economist Asia with Swiss Re said Thursday.
“Emerging Asia is also the growth leader in non-life insurance, where premiums increased by 17.3 percent in real terms in 2010 and is estimated to grow at 12.5 percent this year,” said Wong. He added that the mainland in particular is expected to grow a further 14.1 percent in 2011, albeit down slightly from the 21.5 percent growth rate seen last year.
Asia’s life insurance and personal non-life business lines will benefit from the region’s vibrant economic performance, rising incomes, urbanization and demographic change caused by aging populations, said the report.
The mainland and India are the key engines for global economic growth, with both markets projected to maintain an annual growth rate of 8 to 9 percent in the coming two years. Wong predicted that the insurance business will accelerate in the two economies this year, riding on the recovery of the global insurance industry from the financial crisis.
According to the latest Swiss Re sigma research report updated in December 2010, the mainland’s insurance market is currently the seventh largest in the world and the second largest in Asia.
“We expect the ranking of the mainland market to advance further in the coming years,” Wong told China Daily. “This optimism is supported by the narrow gap between the mainland and markets ranked above it, and the fact the other big insurance markets are all mature markets with slower growth trajectories than the mainland.”
As of the end of 2009, there were 27 domestic and 28 foreign joint venture life and health insurers, and 34 domestic and 18 foreign joint venture property and casualty insurers on the mainland, with domestic insurers continuing to dominate both sectors with market shares of more than 95 percent in each category.
Although the three biggest domestic players, including China Life Insurance Co, Ping An Insurance (Group) Co and China Pacific Insurance (Group) Co have all recorded an increase in their premiums in the past year, the performance of their shares were not necessarily stellar, however.
Throughout 2010, China Life slumped more than 17 percent in comparison with Ping An and China Pacific which gained 27.5 percent and 4.4 percent, respectively, in Hong Kong trading.
“The macro investment environment last year was pretty sluggish, but those insurers who are not heavily reliant on the life insurance business may have seen a better return in the property and casualty sector, assisted by an improving underwriting environment in regulatory discipline which effectively stave off fraud in traffic accident claims,” said Li Wenbing, Beijing-based analyst at Bocom International Holdings.
Li added that he expects this trend to continue this year as well. Nevertheless, Li is bullish on both sectors as these dually listed insurers are still trading at relatively low valuations.
“A sustained growth of the whole insurance industry in the long run is affirmative, but these insurers’ Shanghai-listed shares are more likely to rise faster since they are now trading 40 percent cheaper compared with their Hong Kong-listed shares (H-shares) … if the mainland bourse could bounce back from its current malaise,” Li added.
China Daily
(HK Edition 01/14/2011 page3)
http://www.chinadaily.com.cn/hkedition/2011-01/14/content_11850208.htm