MetLife China sees strong insurance demand - Marketwatch

By MarketWatch

--Chinese demand for life insurance is set to remain strong in the coming years, says MetLife China CEO

--A fast-ageing society and an increasingly mobile population guarantees the demand, Bob Pei says

--MetLife China eyes China's pension market, with a focus on enterprise annuities

SHANGHAI (MarketWatch) -- Chinese demand for life insurance is set to remain strong in the coming years due to a fast-ageing society and an increasingly mobile population as the country's pace of urbanization accelerates, MetLife China Chief Executive Bob Pei said.

"The insurance market in China isn't saturated and has huge potential down the road, so a slowdown in the economy won't necessarily have an obvious negative impact on the sector," Pei told Dow Jones Newswires in a recent interview.

A slew of monetary tightening measures by Beijing last year saw insurance companies in China report a slowdown in premium growth due to competition from banks in high-yielding wealth-management products, but MetLife China registered a 33.6% increase in gross written premiums last year.

In the first quarter of this year, MetLife China's gross written premiums, rose 34% on year to $160 million, while its annualized new premium grew 46% on year to $63.1 million, according to Pei.

Gross written premiums refer to the revenues that insurance companies expect to receive over the life of insurance contracts.

In China, MetLife Inc. /quotes/zigman/252112/quotes/nls/met MET -0.14% owns 50% of MetLife China, a joint venture it formed in 2011 with Shanghai Alliance Investment Ltd. after combining two separate joint ventures--Sino-US MetLife Insurance Co. and United MetLife Insurance Co.

Pei said he still holds a positive outlook for the insurance market this year despite recent data indicating the world's second-largest economy slowed further last month.

China's industrial production rose 9.3% from a year earlier in April, down sharply from 11.9% in March, and substantially undercutting expectations for an acceleration to 12.2%.

Similarly, April data on bank lending, fixed-asset investment, exports and imports all came in lower than expected, indicating that the Chinese economy was slowing across the board.

"You have to look at the sector separately in that insurance penetration and density are much lower in China than in countries like the U.S., Japan, and South Korea, and with more small families popping up in cities and an ageing population, there's plenty of growth opportunities in areas like pension funds and medical care," said Pei.

Last year, MetLife China was selected by the insurance regulator to participate in a variable annuity trial program for the defined-contribution pension market, Pei said.

In a defined-contribution pension plan, contributions are paid into an individual account for each member. Individual accounts are set up for participants and benefits are based on the amounts credited to these accounts through employer contributions and, if applicable, employee contributions, plus any investment earnings on the money in the account.

The authorities are still working through the framework for corporate pension schemes, known as enterprise annuities, which some call the Chinese equivalent of the U.S. 401(k) plan, according to a KPMG report.

The framework will start small with a prototype in Shanghai, and if successful, will be rolled out elsewhere in the country, the Economic Observer reported last week, citing a person close to China's insurance regulator.

"I think it is great news for the sector," if the prototype does start, Pei said.

"Details will be out soon, and we will certainly go for it. It remains unclear how extensive this trial will be, and we will focus more on future opportunities when details are announced," Pei added.

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May 18, 2012 10:14a