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Announcement:

Moody's: Listed Chinese insurance companies show good performance in H1 2017

 The document has been translated in other languages

14 Sep 2017

Hong Kong, September 14, 2017 -- Moody's Investors Service says the H1 2017 results for the six Hong Kong-listed Chinese life insurers show a favorable shift in product mix toward longer-term regular premium products, despite accelerated growth in risky assets.

At the same time, the five listed property and casualty (P&C) insurers showed success in finding new sources of growth as the motor business, on which they have relied heavily for revenue, is now undergoing deregulation.

"The listed life insurers reported strong growth in the value of new business (VNB), which was achieved through a product shift towards longer-term regular premium products," says Kelvin Kwok, a Moody's Associate Analyst.

"However, although the profits of these listed life insurers have stabilized on stronger investment results, the accelerated growth in risky assets -- led by equities and alternative investments -- raises concerns," says Kwok.

Moody's conclusions are contained in two just-released reports, "Chinese Listed Life Insurers: First half 2017 results show improving business mix but increasing exposure to risky assets"; and "Chinese Listed P&C Insurers: Non-motor growth picks up in first half of 2017 amid motor pricing deregulation".

For the listed life companies, profits stabilized on stronger investment results, lifted by a recovery in the A-share market. However, these gains were offset to varying degrees by higher reserve charges from lower valuation rates, and commission expense growth that outpaced premium growth.

The strong VNB growth came from a favorable product shift, and the six reported strong average VNB growth of 52% year on year. VNB is an economic measure of future profits from new policies.

The listed life insurers also scaled back their reliance on single premium products, which resulted in lower topline premium growth compared with H1 2016. This trend also led to a further decline in their combined market share in direct premium income to 50.8% in H1 2017, from 53.0% a year ago.

"The listed P&C insurers also improved their product mix, by quickening the shift to non-motor lines. Their non-motor insurance premium growth was 28% on average in H1 2017, more than double the 13% growth in motor insurance. This compares with average growth of 16% in overall P&C premiums," says Edwin Liu, a Moody's Associate Analyst.

"The listed P&C insurers reported a stable underwriting performance, but a wide variation in investment performance, which drove their net income," says Liu.

The profitability of the listed P&C insurers reflected large variations in investment performance. The five reported net income in H1 2017 ranging from an increase of 13.5% to a decrease of 38.6% compared with a year ago, with the variation driven largely by investment income, which represented the majority (around 67% on average) of the insurers' pretax profits.

At the same time, the listed P&C insurers' underwriting profitability remained relatively stable. The average combined ratio stood at 97.5% in H1 2017, barely changed from 97.3% in H1 2016.

Subscribers can read the full reports:

http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_1087664

http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_1089583

The reports may also be found through Moody's topic page "China's Trilemma: Growth, Reform and Stability", available at http://www.moodys.com/chinarebalancing. This page provides a centralized source for Moody's research related to key credit issues in China as the country's macroeconomic story continues to unfold.

Recent Moody's publications relating to China's Trilemma include:

• Property -- China: Most rated developers have capacity to manager higher bond refinancing risk in 2018

• Securitization -- China: Sector update -- Q2 2017: Issuance volumes up; auto ABS performing well

• China's Plan to Tighten Regulation of Negotiable Certificates of Deposit Is Credit Positive for Banks

• Mass Transit Sector -- China: Strategic importance underpins credit profiles; Heavy capex remains

• NPL Securitization -- China: Chinese NPL deals show solid performance, but short history clouds future

• Internet companies -- China: Finance operations weaken credit quality; most companies have mitigants

• Cross-Sector -- China: Reduced Credit Intensity of Growth Key to Achieving policy Objectives

• Quarterly China Shadow Banking Monitor

• Power Sector -- China: Challenging environment continues, more opportunities in renewable energy

• Moody's changes outlook for China's banking system to stable from negative

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Wing Kei Frank Yuen
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Yat Man Sally Yim
Senior Vice President
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

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