Fitch Ratings gave a stable rating for the Chinese insurance industry, saying it will rebound next year due to the lower comparison base this year and increased demand for protection products as the COVID-19 pandemic and new regulations for the sector spur demand for insurance products.
Large-scale Chinese insurance companies will benefit from the rising demand for long-term protection products while the low investment yield will drag down their profitability ratios, the US-based credit rating agency noted.
Fitch however assigned a negative outlook for the country’s insurers, saying capital market volatility, a low interest rate environment and potential loss in provisions will narrow profit margins of insurers.
Daiwa Capital Markets expected a re-rating for the Chinese life insurance sector next year, citing a recovery in consumer confidence, the progress on vaccine development, the upcoming changes in critical illness definition and thus “last-call” sales campaign in January 2021, and more sustainability in agent retention due to the strong jumpstart and recovery in offline activities.
If there are upside surprises in interest rate rises over the first quarter next year, this would bode well for the insurers’ investments, net profit growth, and valuation of embedded values, Daiwa Capital Markets added.
This sector at a regional perspective also enjoys a positive rating from Moody’s Investors Services, another US-based credit rating company.
Strong capitalization supported by stable underwriting profit, steady product margins, resilient premium growth, and the pace of digitalization underpin its stable outlook, Moody’s said.
