1. CCIRM2011 The Dilemma of Foreign Insurers in China - By Wang Maoqi, Bingzheng Chen Bingzheng Chen

2. 1. Introduction  The open history of China’s Insurance market  Performance of foreign insurers in China  Potential reasons for today’s dilemma  Suggestions

3. 2. Development of Foreign Insurers in China LifeNon-Life Restrictions upon WTO AccessionRemove of Restrictions Restrictions upon WTO Accession Remove of Restrictions Company Ownership Partnerships with maximum ownership of 50 percent Restrictions still effective Allowed to establish branches or partnerships, with a maximum ownership stake of 51 percent Subsidiaries are allowed after years of accession (2003) Geographic Restrictions Allowed to operate in Shanghai, Guangzhou, Dalian, Shenzhen, and Foshan; Allowed to operate in ten more cities: Beijing, Chengdu, Chongqing, Fuzhou, Suzhou, Xiamen, Ningbo, Shenyang, Wuhan, and Tianjin after two years of accession (2003); all regional restrictions will be removed after three years (2004) same as life insurance Business Restrictions Allowed to provide individual (non-group) life insurance to both Chinese and foreign citizens. Allowed to provide health, group, and retirement/annuity products to both Chinese and foreign citizens after three years of accession (2004) Allowed to provide property coverage, related liability, and credit insurance for subsidiaries of foreign companies operating in China. Allowed to provide nonlife products to both Chinese and foreign clients after two years of accession (2003) Reinsurance Statutory Reinsurance Period, 1995-2006 Domestic Priority Reinsurance Period, 2006-2009 2009-present 20% of the non-life insurance premium should be transferred to reinsurance companies, which mainly referred to China Re Domestic reinsurance companies should be considered with priority when purchasing reinsurance All restrictions on reinsurance have been removed

4. 2. Development of Foreign Insurers in China

5. 3. Measurement of Foreign Insurers’ Performance in China Group Global Market Share in 2004 Market Share in China, 2010 Company in China AIG3.6%0.781% American International Assurance Company (China) Limited Metropolitan Life3.2%0.229%Sino-US MetLife Insurance Co.,Ltd. AXA3.2%0.104%AXA-Minmetals Assurance Co., Ltd. Allianz3.0%0.147%Allianz China Life Insurance Company Ltd. ING2.5%0.116%ING-BOB Life Insurance Co.,Ltd. Generali2.5%0.584%Cenerali China Life Insurace Co.,Ltd. Aegon2.3%0.157%AEGON-CNOOC Life Insurance Co., Ltd. Aviva2.0%0.465%Aviva-COFCO Life Insurance Co.,Ltd. Manulife1.7%0.180%Manulife-Sinochem Life Insurance Co.,Ltd.

6. 3. Measurement of Foreign Insurers’ Performance in China (Ctd.)  Declining Market Share  Losing Confidence  Selling Equity Shares

7. 4. The Possible Reasons for Foreign Insurers’ Market Share Dilemma  Regulatory Environment  The Shareholding Structure Problem  Some Equity Transactions and Bancassurance Business

8. 4.1 Regulatory Environment License of Doing Business maximum shareholding for foreign investors limits before notification of intended participation in an insurance company Average Market Share of Foreign Insurers (2006-2008) Foreign companies through a branch Foreign companies by way of cross border business Are foreign insurers entitled to underwrite all risks? for a single investor for total participation domestic shareholders/ investors foreign shareholders/ investors lifenon-life Slovak Republic √ × √ 100% 20% 90.7594.23 Czech Republic √ × √ 100% 20% 90.6092.25 Mexico √ × √ 100% 5% 70.0952.57 Luxembourg √√√ 99%100%10% 62.5657.78 Poland √ × √ 100% 10% 57.9547.68 Turkey √ × √ 99%100%10% 34.8135.56 Italy √√√ 100% 5% 32.4331.33 Australia √√√ 100% 15% 31.8425.95 Netherlands √√√ 100% 5% 26.7419.92 United States √√√ 100% 10% 25.2411.67 Sweden √√√ 100% 10% 24.1950.70 Japan √ × √ 100% 5% 23.566.28 Austria √ × √ 100% 10% 23.1140.04 Germany √√√ 100% 10% 22.9818.98 Korea √ × √ 100% 10% 20.832.01 Canada √ × √ 100% 10% 19.3037.92 Denmark √ × √ 100% 20% 16.8518.81 Switzerland √ × √ 100% 10% 13.4039.46 Spain √ × √ 100% 10% 8.8225.15 China √×× 50%, 100%50%. 100%5% 6.281.18 [1] [1] Foreign capitals are restricted to maximum shareholding of 50% for life insurance

9. 4.2 The Shareholding Structure Problem

10. number of companies Number of domestic insurers Number of foreign insurers (50-50) Number of foreign insurers (foreign majority) Average growth rate of all companies 2004114347% 20052189415% 200625912412% 2007301115422% 2008361517448% 20093817 411% 20104727173*32% * In 2010 AXA-Minmetals became a domestic insurer

11. 4.2 The Shareholding Structure Problem

12. 4.3 Some Equity Transactions and Bancassurance Business Name of the Company Initial ShareholdersDetails about the Transaction Time of the Transactions Sun Life Everbright Life Insurance Co.,Ltd. Sun Life Financial (Canada): 50%; China Everbright Gruop : 50% China Everbright Gruop injected capital, which reduced the share of Sun Life Financial Services to 20% 2009.07 Tian An Life Insurance Co.,Ltd. Manulife Financial: 50%; Tianan Insurance Company: 50% Manulife Financial withdraw all the capital, Tianan Croup holds all the shares now 2009.09 BoCommLife Insurance Co.,Ltd. China Life Insurance Company: 51%; Commonwealth Bank of Australia: 49% Bank Of Communications purchased all the shares from China Life and injected more capital, holding 62.5% of the shares. 2010.01 Pacific-Antai Life Insurance Co.,Ltd. China Pacific Insurance(group): 50%; ING: 50% ‎China Construction Bank purchased all the shares from ING2010.04 ING-BOB Life Insurance Co.,Ltd. BEIJING CAPITAL CO.:50%; ING: 50% Bank of Beijing purchased all the shares from BEIJING CAPITAL CO. and change the name from ING Capital Life Insurance, to ING-BOB Life Insurance Co. 2010.04 AXA-Minmetals Assurance Co., Ltd. AXA: 51%; Minmetals Group: 49% The Industrial and Commercial Bank of China made a deal with AXA and Minmetals Group, holding 60% of the shares now, while AXA holds 27.5% 2010.10 Haier New York Life Insurance Co.,Ltd Haier Group:50%; New York Life Insurance: 50% New York Life Insurance sold their shares, Haier Group is holding 70.76%, while Meiji Yasuda Life Insurance is holding 29.24% 2010.12

13. 5. Conclusion and Remarks  Current dilemma  Possible reasons  What should we do?

14. CCIRM2011 Thank you!