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Capital boost vital for mainland insurers
( 2003-10-30 09:48) (China Daily HK Edition)

The mainland's life insurers need to boost their capital by 15-20 billion yuan (US$1.81 billion-US$2.41 billion) to achieve an adequate level of capitalization, Standard & Poor's (S&P) said yesterday.

The non-life insurance sector needs 7-10 billion yuan (US$843.37 million-US$1.2 billion), the rating agency said, adding the estimates were based on limited information.

Citing public listings as the most likely method of raising new capital, S&P said the planned HK$4.3 billion (US$551 million) Hong Kong listing of PICC Property & Casualty Co is a positive development for the mainland non-life sector.

Given PICC P&C's 70 per cent market share, "a successful equity offering by the company would certainly boost the financial strength of the overall non-life sector," said Connie Wong, a credit analyst of S&P.

Meanwhile, S&P assigned a developing outlook to the mainland insurance sector. The positive factors behind the outlook include the expected strong growth of the market given its low penetration, tougher regulatory control, development of new products, improving technical expertise and risk management, increasing distribution channels and more focus on profitability.

The challenges before mainland insurers, however, include poor financial strength, restriction on investment channels, negative spreads of life insurers and competition from foreign entrants, S&P said.

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