Assured growth

新闻来源：《China Daily》    作者：  责任编辑：  点击：

The insurance industry has become such an attractive investment opportunity that many companies have been unable to resist the temptation. This has resulted in a number of ventures comprised of seemingly disparate elements.

Many of China's large State-owned enterprises (SOEs) have been drawn to the magnetic allure of a booming insurance sector that has posted 30 per cent annual growth rates over the past two decades.

The latest enterprise to jump on the bandwagon is Sunshine Property & Casualty Insurance Co, which opened to business in early-September. With a registered capital of 1.1 billion yuan (US$135.8 million), the company was the largest of 18 insurers granted approval from the China Insurance Regulatory Commission (CIRC) last year.

Ninety per cent of Sunshine's shares have been carved up by five large SOEs: China Petroleum and Chemical Corp (Sinopec), the country's largest oil refiner; top commercial carrier China Southern Airlines Group; industry-leading China Aluminum Corp; logistics giant China National Foreign Trade Transportation (Group) Corp (SINOTRANS); and Guangdong Electric Development Co, the biggest listed power company in South China's Guangdong Province.

Each of them takes an 18.8 per cent share of 200 million yuan (US$24.7 million). Sunshine's other two shareholders are mid-sized private companies.

"I have talked with 389 enterprises across the country, from (Northeast China's) Heilongjiang Province to (South China's) Hainan Province," says Zhang Weigong, president of Sunshine.

"The first thing to consider when choosing strategic investors is whether their corporate culture is a good match for Sunshine's business and investment philosophy."

Zhang never stopped looking for potential partners before the final deal was clinched.

"In the initial stages of preparation, our shareholders were private companies, but they were more concerned with short-term returns. We changed our shareholder structure by inviting large, capital-rich SOEs that are more focused on long-term returns," Zhang says.

Shareholder restructuring therefore continued unabated until the last possible moment. China State Shipbuilding Co was replaced by the Guangdong Electric Development Co because the latter was a better choice, Zhang says.

Huang Huaming, an insurance professor at the University of International Business and Economics (UIBE), says high profits and huge growth possibilities are attracting many big names to the insurance industry, especially the life insurance sector.

"It is a star sector with great potential," says Wang Gongwei, president of the Great Wall Life Insurance Co. He is also the chief executive officer (CEO) of Beijing Huarong Investment Co, a State-owned company specializing in real estate investment and a shareholder in Great Wall Life.

"Our investment in the insurance sector now is just like our investment in the real estate sector a decade ago. We're looking about another 10 years ahead with this."

A Standard & Poor's (S&P) overseas report indicates that China's life insurance sector has long-term growth potential because of low penetration and increasing demand. The report suggests that profitability is likely to improve as more products are developed, but competition will also intensify.

Li Yi, an insurance expert with Beijing Technology and Business University, says that big name SOEs invest in insurance companies to quietly self-insure their parent companies.

"A company can help its parent reduce insurance expenses, cut down agent and broker fees, and broaden its risk coverage, especially high risks."

Foreign enterprises are also drawn to the group insurance business, says Jeffrey Liew, an analyst at Moody's Investors Service in Hong Kong.

"It's a very quick way to increase market share."

The Boston Consulting Group estimates that China's group life insurance industry is likely to reach 100 billion yuan (US$12.3 billion) by 2006, with most investment coming from big enterprises. Insurers with big SOEs as their shareholders will likely gain the upper hand in this lucrative market.

The trend is more obvious with joint venture insurers. Only one month after foreign insurers were approved to sell group insurance, Aviva-COFCO group policy was valued at 680,000 yuan (US$39,506) by its shareholder China National Cereal, Oils & Foodstuff Co (COFCO).

Generali China Life Insurance Co, a joint venture between CNOOC and Italian insurer Assicurazioni General SpA, obtained a group insurance policy of 20 billion yuan (US$2.47 billion) from CNOOC in March, the highest single policy to date. This provides a stark contrast to the national life insurance premium, which averaged a mere 92.4 billion yuan (US$11.4 billion) in the first quarter.

Generali China Life is now the fourth largest life insurer in the country, analysts say.

Sunshine has also been drawn to group policies. Sinopec, one of its shareholders, has an aggregated policy that is expected to reach hundreds of billion yuan.

"We are actively communicating with our shareholders to find out a proper underwriting plan for them," Zhang says.

Although policies from shareholders are shortcuts to low cost market share, the pattern is controversial among scholars and officials.

"It will oversimplify insurer's businesses and reduce risk prevention capacity," says Li Yi.

"Insurers that rely on their shareholders only hurt themselves in the long run."

Feng Xiaozeng, vice-president of the CIRC, says insurers should pay more attention to exploiting the potential market, rather than relying on policies from shareholders.

"It is impossible for parent companies to give big group insurance policies to subsidiary insurers," says He Yongping, an analyst with the Beijing Branch of China Life Insurance Co.

"Some group insurance products are quite complex, and many new insurers are not up to the solvency requirements for big policies."

发布时间：2005-11-7