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Q1 premium fall unlikely to dent China Taiping's new business value, CFO says

Declining life insurance premium in early 2018 is having a "negligible" impact on Taiping Life Insurance Co. Ltd. as it shifts its growth strategy in 2018, said Zhang Ruohan, CFO and secretary of parent China Taiping Insurance Holdings Co. Ltd.

Gross written premiums at Hong Kong-listed Taiping Life fell 7.3% to 41.90 billion yuan during the first two months of the year from 45.21 billion yuan in the year-ago period.

China's entire life insurance market has been taking a hit after local regulators tightened rules targeting the sale of insurance contracts that customers are using as wealth management-style products rather than long-term life protection. Gross written premium for the sector fell 25.5% year over year in January, according to figures from the China Insurance Regulatory Commission.

Products sold in the first quarter of every calendar year, known as the kickoff sales period, are generally low-value, Zhang told reporters at a March 23 media briefing in Hong Kong. "[Sales in the period] are more about achieving volume and generating cash flow," he added.

"China Taiping does not deliberately pursue sales volume and cash flow, because our long-term life insurance business brings us stable cash flow," Zhang said. "What I really care about is the sale of long-term protection and health insurance businesses throughout the year."

Despite the sector's premium drop during the kickoff sales period, Zhang said it is too soon to say whether premiums will continue declining for the rest of the year or whether the early decline is a short-lived trend.

The industry will have a "more sober understanding" of the situation in the second quarter, when the kickoff sales period ends and insurers begin to focus more earnestly on protection-oriented business, Zhang said, even though the company has prepared in case its protection business in China faces a sales ceiling imposed by regulators.

Meanwhile, Cheng Yonghong, deputy general manager of Taiping Life, told S&P Global Market Intelligence that she expects the life insurer to achieve double-digit premium growth by year-end.

Annuity insurance products, a major product sold by the company in the kickoff sales period, generally contribute little to the overall value being generated by new business in contrast to the longer-term products sold throughout the year, Cheng said.

Taiping Life's gross written premium increased 20.7% to 113.92 billion yuan in 2017. The value of new business grew 49.6% to HK$13.64 billion.

As of March 22, US$1 was equivalent to 6.33 Chinese yuan.