[ET Net News Agency, 15 October 2018] Tighter regulation and widening technology
disruption are pushing China's top insurance companies to craft smart strategies to outfox
competitors and sustain profitability. Meanwhile, volatility in investment markets is
increasing the pressure, according to S&P Global Ratings in a report published today,
titled, "China's Top 30 Insurers: For Midsize Companies, Smart Strategies Could Outwit
Industry Giants."
"Product diversification, multidistribution strategies, and effective expense and risk
controls will differentiate insurers in China's large market," said S&P Global Ratings
credit analyst Eunice Tan.
"Growth prospects remain bright, given strong insurance demand on the back of China's
growing affluence, greater risk awareness, and continued urbanization." she added.
For China's midsize insurers, identifying target customers and providing specialized
products will be key to competing against the sheer size of insurance group giants.
S&P's study of China's leading 30 insurers reveals the continued widening divergence in
credit quality between the insurance majors and midsize players, particularly for the
property and casualty (P&C) sector.
The worsening competitive landscape, exacerbated by excessive commissions paid to
distributors, will further chip away at insurers' thin profitability.
For life insurers, capitalization remains the key constraint on credit profiles as
companies hunt for long-duration investments to keep pace with their focus on protection
products.
The agency examined the financial data of 30 leading Chinese insurers over the past
several years: the top 15 life companies and top 15 P&C companies.
S&P's survey covered their premiums, investment assets, key profitability metrics, and
solvency ratios.
Tan added: "We believe the tight regulatory leash over insurers will stabilize the
credit quality of Chinese insurers. Growth should slow down as insurers shift to
fundamentals of providing protection products, after a boom in volumes over the past
decade."
However, the fast-evolving operating landscape will intensify competition, diluting
underwriting profits. (KL)