[ET Net News Agency, 30 October 2019] Moody's Investors Service said in a new report
that its stable outlook for China's life insurance sector balances improvements in the
sector's product mix and financial management against challenging economic conditions.
"While moderating economic growth will weaken new business growth and investment yields,
this will be offset by the industry's improving business mix and capital management," said
Qian Zhu, a Moody's Vice President and Senior Credit Officer.
"Similarly, while demand for new policies will likely remain subdued over the next 12-18
months, total premium growth will be supported by the growing share of regular premium
products and health insurance products," added Zhu.
Reflecting this trend, original premium income grew 15% year on year in the first half
of 2019, following low growth in 2018.
Meanwhile, the ongoing shift in product mix to protection-type products and the evolving
regulatory framework - including a lower cap of pricing rates on annuities - are reducing
interest rate risk, with the industry less reliant on spread gains.
Asset risk also remains stable, despite declining investment yields. Multiple
risk-oriented regulations, including new asset-liability management rules and the upcoming
China Risk Oriented Solvency System (C-ROSS) Phase II, will limit incentives to take on
excessively risky assets.
Profitability will be balanced between lower investment yields, improving the value of
new business (VONB) margins and lower tax expense. This will support internal capital
generation and help maintain solvency ratios above regulatory thresholds. (KL)