Bloomberg News

China Life, PICC Top S&P Insurer Rank; Rating Raised

July 26, 2006

China Life Insurance Co., the nation's largest life insurer, and PICC Property & Casualty Co., China's biggest non-life insurer, received top rankings in a Standard & Poor's survey of 15 insurers operating in the country.

Both companies were rated ``far above average'' in a business profile ranking, which tracks market position, competitive advantage and distribution channels, the report said. New China Life Insurance Co. and China Reinsurance Co. were given the lowest financial profile rankings.

Initial public share sales by China Life and PICC ``greatly helped their earnings and capitalization,'' said Connie Wong, S&P's director of financial services rating. ``After the IPOs, their competitiveness improved.''

Chinese insurers are fighting for premium income that rose 13.7 percent in the first half to 308 billion yuan ($38.5 billion), a faster pace of growth than the economy's 10.9 percent expansion in the same period. Insurance premiums in China grew to 2.7 percent of gross domestic product last year, up from 1.6 percent in 1998, according to S&P's data.

In a separate report covering 21 insurers in the country, S&P said it's raising recommendations for China's insurance industry to ``positive'' from ``developing'' because of the companies' improving prospects, in a move that may help them raise funds.

More Profitable

The ratings company made the change on expectations that insurers will benefit from investments in more profitable fixed- income products, Liao Qiang, an associate at S&P's financial services division, told reporters in Beijing, where the report was distributed.

China's government is encouraging the country's insurance companies to invest in infrastructure projects and buy more equities and corporate bonds to boost returns. The nation is also ending a ban on buying banks, further broadening their business scope.

``Improving operational fundamentals, strong potential growth and regulatory commitments to policy-holders' interests are likely to offset challenges such as tough competition, a lack of talent, weak capitalization,'' the report said.

Total assets of Chinese insurance companies may exceed 2 trillion yuan ($250 billion) by the end of this year, up from 1.73 trillion yuan as of June 30, China Central Television reported yesterday, citing data from the China Insurance Regulatory Commission.

To contact the reporter for this story: Rob Delaney in Beijing at robdelaney@bloomberg.net

To contact the editor responsible for this story: Bruce Grant at bruceg@bloomberg.net


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