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New China Life’s IFS rating affirmed at A by Fitch; Outlook stable

Fitch Ratings has affirmed New China Life Insurance’s (NCI) Insurer Financial Strength (IFS) Rating at A (Strong). The Outlook is Stable.

“Fitch considers NCI’s operating performance as Strong despite a moderate decline in new business value (NBV) in 1H19,” the agency said in a statement. NCI “has been able to consistently produce profitable operating results given its current asset management strategy and product mix.”

The China Banking and Insurance Regulatory Commission allowed foreign investors to raise their stakes in life insurance companies to 100% this year from the previous ceiling of 51%. This is expected to intensify competition as foreigners will bring risk management, corporate governance and capital management expertise.

NCI’s pre-tax return on assets between 2017 and 1H19 averaged 1.7%, which is better than the guideline for IFS A rated life insurers.

Fitch does not expect NCI to maintain its NBV margin above the 2018 level as it plans to strike a balance between business value and premium volume. 

Fitch expects the outbreak of the Covid-19 novel coronavirus, which was first detected in Wuhan in China, to moderate the operating earnings of Chinese life insurers, including NCI, this year due to capital market volatility, slower new business generation and higher claims from health and protection policies. 

Nonetheless, while the outbreak is still developing, its impact on NCI’s capitalisation is expected to be manageable.

Umesh Desai

Umesh Desai is the Executive Editor at Asia Financial. Prior to this he spent over two decades with Reuters News as Asia Pacific Chief Correspondent in Hong Kong and Bureau Chief in Bombay. Before becoming a journalist Umesh was a credit ratings analyst with Moody's arm in India - ICRA. A chartered accountant by training, Umesh began his career as an equity analyst. His Twitter handle is @umesh_desai


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