Investing using insurance proceeds

Declining profits in the insurance business is the leading incentive for the China Insurance Regulatory Commission (CIRC) to issue new investment policies for insurance proceeds. According to reports, for the first three quarters of 2012, three of the four main listed insurance companies in China faced declining performances and suffered huge losses. In the third quarter, the loss of China Life Insurance stood at Rmb2.207 billion ($3.54 million) and its net profit in the first three quarters declined by 56% year-on-year. The situation of China Pacific Insurance was similar, as its net profit of the third quarter was around Rmb 0.5 billion, down by 58.7% year-on-year. For New China Life Insurance, the net profit of the third quarter also declined by 15% year-on-year.

Both the authorities and insurance companies are desperate to find a way to reverse the negative situation. Among all the possibilities, insurance proceeds investment seems the most feasible, but may not be that effective. According to reports from the third quarter, the total return rates on investments of China Life, China Pacific and New China Life were only 2.17%, 2.12% and 2.20%, respectively. This raises issues about how to effectively take advantage of the insurance proceeds to generate substantial profits.