[ET Net News Agency, 7 December 2020] Moody's Investors Service said in a new report
that Chinese life insurers' resilient profitability and capitalization, along with
rebounding premium growth, support its stable outlook for the industry in 2021.
"Life insurers' profitability will be supported by stable spread margins, as they should
be able to maintain investment yields of around 5%, given the recent rebound in long-term
yields, as well as continued efforts to cap their cost of liability," said Qian Zhu, a
Moody's Vice President and Senior Credit Officer.
"Solvency ratios, a measure of insurers' capitalization, should also remain strong,
which will continue to be supported by stable earnings generation and stronger capital
management. The new China Risk Oriented Solvency System (C-ROSS) Phase II will likely
widen solvency margin levels among insurers and prompt some to improve their capital
cushion by issuing capital securities," added Qian.
Large recurring premiums, which reflect the industry's earlier efforts to shift its
product focus to long-term regular premium policies, will also improve overall income
stability, while strong demand for health insurance because of the coronavirus outbreak
will support business growth.
Insurers could, however, face investment income volatilities arising from higher equity
investments as they take advantage of easing restrictions and improving stock market
sentiment. Still, the net impact of this is mitigated by the reduced allocation to
alternative investments and the recent rebound in long-term yields, which will prompt
insurers to divert some of their allocations back to bonds.
Moody's outlook for the Chinese life insurance sector reflects its expectations for
fundamental business conditions in this sector over the next 12-18 months and does not
reflect its outlook for individual issuers. (KL)