Anbang Insurance Group has reported a rise in its premiums income, likely due sales of investment-linked policies. The China-based insurer went against the trend of decreasing incomes among its peers caused by a regulatory crackdown on several insurance and investment products.
Premiums increased almost five-fold in June, reaching US$5.1bn, for Anbang Life Insurance, one of Anbang Group’s largest subsidiaries. It’s the third straight month that Anbang Life placed second nationwide in terms of premium income. For the first half of 2016, its income premiums rose to US$34.2bn, exceeded only by China Life’s US$57.4bn.
Another Anbang subsidiary, Hexie Health, also had premiums increase seven-fold to US$2.1bn, according to data from the China Insurance Regulatory Commission.
Anbang’s excellent performance is in stark contrast to the rest of its competitors, which struggle with low demand and low returns from investments. However, Anbang’s critics say that the firm may be relying too much on selling investment-linked policies that promise higher than average returns.
The CIRC has expressed concern
with certain investment practices by insurers and potential liquidity risks, and has moved to limit sales. In March, the CIRC ordered all insurers to stop selling policies with durations shorter than one year and to reduce the sale of policies with one- to three-year durations.
Various insurers such as Huaxia Insurance, Funde Sino Life and Foresea Life Insurance took huge hits to their incomes due to the new regulations. Monthly premiums for these insurers fell by at least 20% each, said the CIRC.
Anbang was founded in 2004, starting with auto insurance before branching out into health, life, and property insurance. It also conducts banking, asset management, financial leasing and brokerage services. In 2014, it acquired the upscale Waldorf Astoria hotel in New York for US$1.95bn.
One of Anbang’s products sold through a Chinese bank has a "guaranteed return" of 4.58% for a two-year investment. This is quite higher than most investment-linked policies with guaranteed annual returns of only up to 3.5%.
An anonymous executive of a large insurance company questioned how Anbang could do this. "Insurance companies wouldn't normally offer returns of this nature," he said. "Right now the industry's general rate of return on investment is falling, which sometimes makes it difficult for a company to even cover its costs."
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