New business value in China’s insurance sector show strong growth in 1H23: UOB

It expects NBV growth in domestic and regional life insurance to diverge in the second half of 2023.

Local and regional life insurers showed robust new business value (NBV) growth in the January to June period amidst China’s market reopening, UOB Kay Hian said in a report.

UOB Kay Hian anticipates a divergence in NBV growth for domestic and regional life insurers in the second half of 2023 due to changes in product offerings in China and attractive yields in Hong Kong, particularly in the Mainland Chinese visitor (MCV) segment. 

Life insurers regained momentum in NBV growth after pandemic-related restrictions were lifted in late 2022. Both domestic and regional life insurers saw substantial growth in premium income and NBV in the first half of 2023. 

Key drivers included increased demand for life insurance products at a 3.5% rate, improved agent productivity, and growth in the bancassurance channel. Regional insurers like AIA and Prudential benefited from the return of Mainland Chinese visitors to Hong Kong, resulting in significant NBV growth.

P&C insurers maintained robust premium growth, particularly in non-auto segments. Auto premium growth moderated slightly in the first half of 2023 due to slower new auto sales growth. P&C insurers focused on optimising their product structures, leading to a larger proportion of non-auto premiums in their portfolios.

Life insurers saw a decline in premium growth in August after the suspension of 3.5% rate life products in July. 

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However, some insurers, such as China Life, achieved positive year-over-year premium growth. UOB Kay Hian anticipates a return to normalcy for domestic life insurers in the second half of 2023 due to continued demand for savings insurance products in the low-interest-rate environment.

NBV margins decreased due to a shift in product mix towards lower-margin savings products, particularly for regional insurers operating in Hong Kong. UOB Kay Hian expects NBV margins to improve in the coming quarters as traditional protection product sales increase and commissions to banks decrease.

The MCV segment shows upside potential, with insurance sales to MCVs surpassing pre-pandemic levels in the first half of 2023. UOB Kay Hian expects this growth to continue as MCV arrivals increase.

Also, UOB Kay Hian expects a return to normalcy for domestic life insurers in the second half of 2023. Savings insurance products remain attractive compared to other investment options, contributing to sustained growth.

P&C insurers experienced a higher CoR in the first half of 2023, mainly due to an increase in the claim ratio. PICC P&C outperformed its peers with a marginal increase in CoR due to effective risk management.