In an earlier article, we have made it clear why insurance is one of the best-positioned industries in China for a wide range of reasons, from demographic ones (the elephant in the room, perhaps) to smaller-scale variables. Re-addressing this issue would not constitute a proper use of our (limited) time, so we will limit ourselves to stating that if you have not read the article in question yet, it would be a good idea to start there and then move on to this post.
With that behind us, it is worth noting that yes, the insurance industry represents yet another example of the “Pareto Principle of steroids” paradigm in China. In other words, it is indeed true that the largest players account for the lion’s share of the domestic insurance pie. However, given the sheer size of the industry at this point and the projected increases mentioned in our previous article, it makes sense to provide a brief overview of a fairly large number of insurance market players.
Without further ado, we will do just that:
- China Life Insurance Co. Ltd. represents the leader when it comes to life insurance in China and a company more than willing to embark on long-term journeys with the big picture in mind, even if this sometimes means neglecting short-term opportunities. It has access to ample liquidity from both debt and capital markets, with a track record that dates back to 2003, the year in which it was established. Its #1 ranking when it comes to both direct premium and total written policy speaks for itself
- Ping An Life Insurance Co. of China Ltd. represents the second largest player in the life insurance field, an insurer with excellent distribution and a solid performance which includes many high margin products. More than respectable earnings correlated with high dividend yields and excellent access to capital markets (both domestically and abroad) make it clear why it deserves its #2 ranking when it comes to both previously-discussed metrics
- Anbang Life Insurance Co. Ltd. is third in line, a company which has experienced a remarkable growth rate but, unfortunately, one built on shorter-term insurance products on which the authorities have been cranking down. With a deteriorating brand, questionable legislative perspectives and increased dependence on debt/leverage, “caution” is the operative word
- Next, we have China Pacific Life Insurance Co. Ltd., a company with a more sustainable growth pattern than the previously-mentioned one. Focused on long-term growth, with a sound risk management track record and reasonable access to domestic capital, it most definitely represents an interesting option
- PICC Life Insurance Co. Ltd., ranked #5 from the perspective of direct premiums and #6 from that of total written policy, is a Shanghai-based entity launched in 2005 which benefits from the solid reputation of the PICC Group. In terms of financing potential, its low capital base represents a limiting factor and, the same way, its comparative over-exposure to risky assets is also problematic
- Taiping Life Insurance Co. Ltd., with a solid position #6 in terms of direct premiums and a still-robust #9 for total policy written, is another Shanghai-based player, established all the way back in 1984. Once again, it benefits from the reputation of its parent company as well as from being a government-related entity. Hardly a contender one can consider explosive, rather a solid average but robust insurance market player
- Taikang Insurance Group Inc., with a respectable #7 rank when it comes to the two metrics we keep mentioning, a better than average performer when it comes to the business itself (profitability, branding, etc.) but a less than stellar one with respect to financing, with relatively low liquidity and improper capitalization channels
- New China Life Insurance Co. Ltd., a decent company which occupies position #8 in terms of direct premium and #10 as far as total written policy is concerned. Reasonably diversified, with earnings that are improving, solid solvency and a better overall financial position than the previously-mentioned player
- Huaxia Life Insurance Co. Ltd., an over-performer when it comes to total policy written (position number five) and less so with respect to the direct premium dimension (position #10), a company less robust than it may seem due to its top-10 position. Inadequate business performance and over-leveraged
- ICBC-AXA Assurance Co. Ltd., which isn’t bad from a business performance standpoint, capitalizing on the strong AXA/ICBC brand. However, its deteriorating capitalization perspectives can be considered worrisome. An interesting option, should its financial perspective improve to go along with the business performance dimension
- Sunshine Life Insurance Corp. Ltd., another example of a company experiencing reputation issues due to regulatory action. This, corroborated with excessive leverage and inadequate capitalization makes the overall appeal less than impressive. We would strongly advise exercising caution whenever regulatory uncertainties reach potentially problematic proportions
- ABC Life Insurance Co. Ltd., overly-dependent on universal life policies and vulnerable to regulatory action from this direction. Low financial leverage, but insufficient capitalization potential. Not the worst choice on the market but its lack of diversification doesn’t exactly put it in the spotlight
In a nutshell, these are what we consider to be 12 of the most interesting insurance companies in China. Once again, the top contenders tend to monopolize the spotlight but this doesn’t mean there aren’t decent opportunities to be had when digging deeper. Should you or your organization be interested in doing just that, simply reach out by visiting the Contact section of ChinaFund.com.