Life Insurance in China:

1
Life Insurance in China Using Western
"Know-How" Speaker - XinPing
Huang Assistant President Member of Executive
Board TaiKang Life Insurance Co., LTD
2

• Agenda
• The Development of Life Insurance Market of
  China in Recent Years
• Business Opportunity of Life Insurance Market
  of China
• Challenge of Life Insurance Market of China
• Outlook of Life Insurance Market of China
• TaiKang Lifes Profile

3
The Development of China Life Insurance Market in
Recent Years

• Life insurance premium increase speedily
• After 2000, the insurance premium increases over
  30 every year successively. The growth rate is
  obvious higher than the GDP growth rate in the
  same year.
• From 2001 to 2003, the average annual growth rate
  is close to 45.
• After 2003, it slowed down to 10 -15, but still
  higher than other insurance market.
• From Jan to Sep of 2006, the total premium income
  is about 39 billion US.

4
The Development of China Life Insurance Market in
Recent Years
Note The data of 2006 is estimated.Data
resource www.circ.gov.cn
5
The Development of China Life Insurance Market in
Recent Years

• More players enter the market
• As of 2006, there are 27 local Life insurance
  companies and 25 foreign and JV Life insurance
  companies.
• The foreign company (AIG) and the JVs expand
  their business in most larger cities of China.

6
The Development of China Life Insurance Market in
Recent Years
The percentage of premium of local companies and
foreignJVs.
Note The data of 2006 is estimated.Data
resources www.circ.gov.cn
7
The Development of China Life Insurance Market in
Recent Years
The percentage of premium of local companies.
Note The data used here is between January and
September.Data resources www.circ.gov.cn
8
The Development of China Life Insurance Market in
Recent Years
The percentage of premium of the foreign company
and JVs
Note The data used here is between January and
September.Data resources www.circ.gov.cn
9
The Development of China Life Insurance Market in
Recent Years

• Types of life insurance products were developed
  fast
• Most of the products are whole life, endowment,
  PA, medical, term and annuity.
• Since 2000, UL, participating products,
  investment-linked products are exploited.
• The market accepts these products soon and the
  response was very well.

10
The Development of China Life Insurance Market in
Recent Years
The percentage of premium of different types of
products
Note The data of 2006 is estimated.Data
resources www.circ.gov.cn
11
The Development of China Life Insurance Market in
Recent Years

• Distribution channels are diversified
• Agent almost 1.5 million people
• Agency companies 1634
• Broker companies 307
• Others channels bank outlets, post offices,
  airline counters, etc. There are more than 1
  million sites totally.

12
The Development of China Life Insurance Market in
Recent Years

• Regulations mature gradually
• Strengthening the supervision down to provinces
• Adhere to international standards
• Enhance the supervision on insurance asset
  management
• Improve the supervision methods emphasis on
  solvency regulation

13
The Development of China Life Insurance Market in
Recent Years

• The impact of WTO
• In 2001, China joined in WTO. Life insurance
  market is gradually open.
• More and more global insurers enter China market.
• Since 2004, the life insurance market fully
  opened. The foreign insurance company and JVs are
  allowed to set up their sale network all over
  the country and develop group insurance, pension
  business, etc.

14

• Agenda
• The Development of Life Insurance Market of
  China in Recent Years
• Business Opportunity of Life Insurance Market
  of China
• Challenge of Life Insurance Market of China
• Outlook of Life Insurance Market of China
• TaiKang Lifes Profile

15
Business Opportunity of Life Insurance Market of
China

• Support from government
• Notions about Insurance Industrys Innovation and
  development was issued by central government on
  26th June,2006.
• Its a landmark in the development of insurance
  industry of China.

16
Business Opportunity of Life Insurance Market of
China

• The main contents of Notions
• Broaden the investment channels allow insurance
  premium collected invest in more risky area.
• Support insurance companies to be main
  stockholders of banks, fund companies and other
  financial institutions.
• Encourage the business mix of different financial
  institutions and encourage the life insurance
  companies provide better financial services.
• Encourage the development of the commercial
  pension insurance and health insurance.
• Encourage the construction of special insurance
  companies.
• Popularize the insurance education.

17
Business Opportunity of Life Insurance Market of
China

• Social security system reform
• --The government encourages the construction of 3
  pillar system.
• Pillar 1 Social security, replacement ratio
  50-60
• Pillar 2 Enterprise annuities, replacement
  ratio 20-30
• Pillar 3 individual savings, replacement
  ratio 10
• The growing of cities more people move to the
  cities and need insurance coverage
• Peoples income level is increasing fast

18
Business Opportunity of Life Insurance Market of
China

• The growth of GDP per capita
• 1996-2000, the growth rate was 7.6
• 2001-2005, the growth rate was 8.6
• In 2005, the GDP per capita was 1,700 US.
• The penetration and density of insurance is low
• In 2005, total insurance premium was 8.7 of
  the GDP, the penetration rate was 2.7 and the
  density was 47.38 US.
• There is a great gap between China and other
  developed countries.

19

• Agenda
• The Development of Life Insurance Market of
  China in Recent Years
• Business Opportunity of Life Insurance Market
  of China
• Challenge of Life Insurance Market of China
• Outlook of Life Insurance Market of China
• TaiKang Lifes Profile

20
Challenge of Life Insurance Market of China

• The pressure of solvency
• The life insurance business is developing very
  fast
• The return period of insurance capital
  investment is long.
• Hence, solvency is always a pressure to the life
  insurance companies.

21
Challenge of Life Insurance Market of China

• Challenges from Banks
• Banks have abundant capital and assets
• Some banks plan to set up its own life
  insurance companies
• Banks have big advantages in distribution
  channel
• Banks have good brand and better images

22
Challenge of Life Insurance Market of China

• The management of agents
• The number of agents is too big to be well
  managed
• High turnover rate of agents
• Agents average production is low
• Difficult to recruit high level agents

23
Challenge of Life Insurance Market of China

• The difficulties of investment
• The investment channel is getting more
  diversified
• Most of life products are interest guaranteed.
• How to balance the risk and return?
• Investment strategy must be cautious.

24

• Agenda
• The Development of Life Insurance Market of
  China in Recent Years
• Business Opportunity of Life Insurance Market
  of China
• Challenge of Life Insurance Market of China
• Outlook of Life Insurance Market of China
• TaiKang Lifes Profile

25
Outlook of China Life Insurance Market

• China has population of more than 1.3 billion
• The growth of economy and living standards
  provide abundant insurance source.
• As a developing country, insurance demands is
  rising fast
• It is estimated that China insurance market will
  keep a 15 or above growth in the following 10
  years.

26
Outlook of China Life Insurance Market

• Life Insurance premium will keep increasing
• More players will enter the market
• The types of products will increase fast
• Distribution channels will be more diversified
• Regulations will be more developed

27

• Agenda
• The Development of Life Insurance Market of
  China in Recent Years
• Business Opportunity of Life Insurance Market
  of China
• Challenge of Life Insurance Market of China
• Outlook of Life Insurance Market of China
• TaiKang Lifes Profile

28
TaiKang Lifes Profile
29
TaiKang Lifes Profile
--Ranked 5th in the life insurance market of
China --Last years premium income more than
2.2 billion US --Last years total asset
amount 7 billion US --Last years investment
return more than 5 --Our aim to be a large
insurance and financial service company which is
the most admired in the market. For more
interest, please visit our website
www.taikang.com
30
Thank you !