Bangkok--17 Nov--Moody's
Moody's Investors Service says the outlook for the Chinese life insurance industry is stable in view of their strong balance sheets as well as capitalizations and the small impact of their sub-prime-related holdings when entering the weakening operating environment.
"Moreover, while several economic issues may affect the industry's near-term development, they would not have a material negative impact on the sector, given improved insurer credit profiles," says Sally Yim, a Moody's AVP/Analyst.
"Moody's expects that the Chinese life insurers' capital adequacy and profitability will return to a more normalized level; while premium growth will slow comparing to prior year's rapid pace," adds Yim.
Yim's comments coincided with the release of a Moody's report -- which she authored -- on the Chinese life insurance industry, the third largest market in terms of premium income in Asia Pacific (excluding Australia).
It makes up only about 9.4% of the region's life premiums, even though its population comprised 33% of the region's total in 2007.
The Moody's report covers a wide variety of themes, including the impact of global financial market instability, the sector's business and financial profiles and trends.
"In the short term, Moody's expects lower investment yields for the life insurers -- due to lower deposit income and a decline in their value of the fixed-income portfolios," says Yim.
"But over the longer-term, Moody's expects to see continuing improvements in asset-liability management practices with the relaxation of restrictions on investment types, risk management practices, and increasing diversification and sophistication in distribution channels and products," says Yim.
As the market remains volatile, customers are more likely to stay away from investment-linked or variable-type products, the Moody's report says. Traditional life and participating products have been pushed recently in China, as in many other markets in the region.
However, there is potential in new types of products, including investment-linked products, corporate pensions, health insurance, etc, as customers become more sophisticated and comfortable with long-term investments for retirement planning and asset protection, the report says. Hence, Moody's expects to see further diversification in the product risk profiles of Chinese life insurers.
The report is entitled "Industry Outlook -- Chinese Life Insurance". It can be found on www.moodys.com.
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Hong Kong
Sally Yim
Asst Vice President - Analyst
Financial Institutions Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 3551-3077
Hong Kong
Jerry Chien
Managing Director
Financial Institutions Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 3551-3077