Moody's changed its outlook on China's life insurance industry to stable (A1 stable) from negative, as it expects that further deterioration in Chinese life insurers' creditworthiness will be prevented in the next 12 to 18 months.
Moody's attributed this belief to the current moderate economywide buildup in leverage, a shift to a more sustainable product mix and a slowdown in investment allocation to high-risk assets.
The rating agency said the government's economic policies will remain dedicated to containing leverage and improving the quality and strength of growth.
Moody's is of the view that over the next 12 to 18 months, life insurers will report stable profitability and solid solvency metrics. Meanwhile, profitability will be balanced by lower investment yields and improving underwriting profit. Additionally, a continued product shift toward more profitable protection-type products will provide capital relief and strengthen underwriting profit, the agency added.
Furthermore, the industry's solvency ratios will stay solid, backed by lower reserve recognition, resulting from rising liability valuation rates, the agency said.
