KUALA LUMPUR, Sept 10 -- AM Best is maintaining its negative outlook on the China non-life sector, owing to persistent pressure on the motor business, execution risks as the market turns toward a non-motor-focused business model and the industry’s dependence on investment returns to support earnings.
The new Best’s Market Segment Report, ‘Market Segment Outlook: China Non-Life Insurance’, also notes that the ongoing United States (US)-China trade war has inadvertently, lowered consumer and business sentiment on the mainland.
For the second quarter of 2019, China reported its weakest quarter-on-quarter GDP growth in decades, registering just 6.2 per cent, according to a statement.
Although the US tariffs are notable, the current slowdown of China’s economy in large part is due to domestic pressures, including a decline in the pace of infrastructure investment, a cooling down of construction industry activity and a decrease in industrial output.
AM Best expects that China’s economic growth will continue to expand moderately in the coming quarters, with GDP growth remaining in the 6.0-6.5 per cent range.
In 2018, the weighted net profit of these insurers declined by 15 per cent year-on-year, while the weighted average return-on-equity dipped by 3.3 percentage points. Overall, the profit margins of the Chinese non-life insurers are likely to remain under pressure in 2019.
Despite some first-half 2019 improvement, the results of China’s non-life insurers are likely to remain relatively volatile, given that earnings are highly co-related to the domestic investment market’s performance.
AM Best is a global rating agency and information provider with unique focus on the insurance industry. More information at www.ambest.com.
-- BERNAMA
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