Thu, Oct 17, 2019 - Page 12 News List

China Life Insurance ready for new rules

By Kao Shih-ching  /  Staff reporter

China Life Insurance Co (中國人壽) has the financial strength to meet the requirements set by the International Financial Reporting Standards 17 (IFRS 17), which are to take effect by 2025, the insurer’s parent company, China Development Financial Holding Corp (CDFHC, 中華開發金控), said yesterday.

Industry watchers have said that the new accounting standards might have a negative effect on local insurers, as they have stricter requirements on how the companies book their profits, define revenues and calculate liabilities.

While many insurance firms have said that the new rules are a major concern for development, CDFHC president Alan Wang (王銘陽) said the company’s preliminary calculations showed that China Life would be able to cope with the standards and would not need to set aside more reserves.

“IFRS 17 is not that dreadful. I think the local market and investors have overreacted,” Wang told reporters on the sidelines of an investor conference in Taipei.

With a cash injection of NT$9.27 billion (US$31.17 million) in June, China Life has become more resilient amid volatility in the global financial market, Wang said.

The insurer’s risk-based capital ratio rose to 319 percent at the end of June, from 272 percent at the end of last year, he said.

China Life has adjusted its marketing strategy to boost profitability and long-term revenue growth, vice chairwoman Kuo Yu-ling (郭瑜玲) said.

“We have discontinued some single-premium life insurance policies since the beginning of this year, as they are less profitable than the traditional multiple-term life insurance policies,” Kuo said.

That was a tough call, as Taiwanese investors favor single-premium policies, which usually provide higher returns, while the company’s sales partners had difficulty getting used to the transformation, she said.

The insurer’s first-year premiums (FYP) for the first nine months of this year fell 2.4 percent year-on-year to NT$108.6 billion due to the change, Kuo said.

The wealth management business in CDFHC’s banking unit, KGI Bank (凱基銀行), was also affected as a result, as its customers who used to purchase polices did not react well to the change, Wang said.

However, the transformation paid off, as profitability rose on increased sales of multiple-term life insurance policies, which generated NT$40.9 billion in FYP for the first nine months, up 50.36 percent from a year earlier, Kuo said.

China Life would continue to concentrate on multiple-term life insurance products, she added.

Net profit in the first three quarters rose 23 percent from a year earlier to NT$12.95 billion, with earnings per share (EPS) of NT$3.1, the insurer said.

That helped CDFHC boost net profit 26 percent annually to NT$10.69 billion over the same period, with EPS of NT$0.73, the company said.

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