Cathay Financial eyes growth in Shanghai unit

Cathay Financial Holdings, Taiwan's biggest financial holding company, expects premiums at its mainland insurance joint venture to jump 52 per cent this year as the venture aims for profitability by 2013.
 
Cathay's joint venture with China Eastern Airlines was expected to post more than 500 million yuan in premiums this year, up from 329 million yuan last year, Chang Fa-te, the venture's president, said yesterday.
 
"Breaking even as soon as 2013 is our long-term plan," he said. "But we hope to achieve that even sooner, if possible, in the next five years."

Cathay, the only Taiwan financial firm with an insurance joint venture in the mainland, has high hopes for the market because fewer than 4 per cent of its 1.3 billion people have life insurance.

"The potential is so huge, with the Chinese economy booming and the people getting more aware of the importance of buying insurance coverage," Mr Chang said.

Overall insurance premiums in the mainland increased 14.4 per cent last year to 564.14 billion yuan.

They are expected to keep growing at double-digit rates for the next five years, in part due to efforts by Beijing to improve its pension system to encourage more people to buy insurance.

Domestic players China Life Insurance and Ping An Insurance are the mainland's top two life insurers.

But foreign firms such as AIG and AXA are gaining wider access to the market since China joined the World Trade Organisation in 2001.

Cathay, which has a 1.5 per cent share of Shanghai's 30 billion yuan insurance market, is a rising star, with this year's expected premium growth coming on the heels of an even stronger 86 per cent growth last year.

Still, competition is heating up.

Manulife-SinoChem Life Insurance, the Chinese venture of Canada's leading insurer Manulife Financial Corp, aimed to double its premiums in the mainland to US$174 million by next year, Manulife chief executive Dominic D'Alessandro said last year.

But some analysts said it might not be easy for Cathay to continue its strong growth.

"Shanghai, as big as it is, is a very crowded market," said Dexter Hsu, an analyst at JP Morgan.

Cathay, which started operations in Shanghai in 2005, hopes to win two more licences soon, possibly in Shandong and Guangdong provinces. It now has licences to operate in Shanghai, Jiangsu and Zhejiang.
 
Source:Reuters