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Huatai Life Insurance Co Ltd became the first national life underwriter in China set up by a property insurer when it opened for business Wednesday.
This marks a key step by Huatai Insurance Co Ltd in its plan to restructure into an insurance group, to improve effectiveness.
Huatai Insurance, which owns 93 percent of Huatai Life, is a major property and casualty insurer.
Other major shareholders in the new life insurer, which has 220 million yuan (US$26.5 million) in paid-in capital, include US insurer ACE Group and China Resources.
Huatai Insurance unveiled its asset management arm earlier this year, and has said it will spin-off property insurance operations before setting up an insurance group that covers life and property insurance, as well as asset management.
Wang Zimu, chairman of Huatai Insurance, said his company made the decision to branch out into the hugely promising life insurance field five years ago, but postponed the plan to improve management and profitability.
But he insisted the company did not delay for too long.
"We are certainly aware of the huge challenges and competition that lie in front of us, but we also see huge potential and opportunities," Wang told reporters at the launch of the life insurer.
"It's not too late for us to enter life insurance now," he added. "Rather, the timing is quite opportune instead."
After suffering a few years of losses in underwriting, Huatai Insurance initiated a strategic reform in 2003, suspending high-risk operations such as vehicle loan insurance, halting the expansion of branches, and trimming its staff head count.
Substantial improvements were achieved last year. Premiums rose by 22.85 percent to 1 billion yuan (US$120 million), while the quality of underwriting also improved significantly - with the combined ratio, or losses and expenses divided by premiums, registering a robust 91 percent.
The company also chalked up a 1.7 percent return on investments last year, the lowest in its history but the highest last year among Chinese insurers, many of which suffered heavy losses amid protracted capital market weakness.
With relatively small underwriting operations, the solvency margin of the firm stands at 13.8 times the minimum regulatory requirement, one of the highest levels of any Chinese insurer.
Although the number of market players is growing rapidly as new companies continue to emerge and foreign insurers accelerate their entry into the market, a few months after China lifted restrictions on foreign capital, there remains plenty of room for growth.
"China is still a new market," said Evan Greenberg, president of ACE Group, which owns a 22 percent stake in Huatai Insurance.
"There are still few companies" in the market relative to the long-term potential of China's life insurance sector, he added.
The sector has grown by an average 20 percent over the past two decades, and still promises more given personal savings of more than 10 trillion yuan (US$1.2 trillion).
Among other products, Huatai Life is launching Kangquan, a package that covers 28 illnesses and which the company said provides the broadest coverage among all comparable products in the marketplace.
(China Daily April 7, 2005)
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