Asia’s rising riches protect insurers against China’s policy shifts

{"text":[[{"start":5.1,"text":"For Hong Kong businesses from tourist hotels to high finance, China is both opportunity and threat. Insurers Prudential and AIA have recently felt the rough side of that. "}],[{"start":15.95,"text":"China, after all, is an important source of funds and fees. So investors were rattled earlier this month by reports that Beijing had begun levying mainland income tax on the returns from offshore savings-like insurance products sold to Chinese customers. In May, new rules making it harder for mainland customers to open offshore accounts had pushed shares in banks and insurers down as much as 15 per cent. "}],[{"start":null,"text":"

"}],[{"start":42.45,"text":"Although banks soon recovered, the insurers haven’t: at near two times book value, they are trading roughly in line with peers elsewhere such as Chubb and Allianz. That’s down from a multiple nearer three before the pandemic when investors were still keen to buy into Asia’s rising middle classes as they got wealthier and older, but remained underinsured."}],[{"start":62.85,"text":"Should China shut down access to Hong Kong’s insurers, the damage would indeed be immense. A fifth of AIA’s business is generated in the mainland itself, but mainland clients also account for about half of the 40 per cent of business generated in Hong Kong. Prudential has a smaller business in China, but relies more heavily on Hong Kong. "}],[{"start":null,"text":""}],[{"start":83.6,"text":"The question is whether Beijing would — or could — really come down that hard given how much wealth mainland Chinese have parked in the city. Any such curbs would also imperil Hong Kong’s standing as China’s international gateway. "}],[{"start":98.39999999999999,"text":"Indeed, Chinese officials have insisted that taxing returns generated from Hong Kong savings products was not a change, but the worldwide application of an existing policy. The May crackdown, which involved tighter checks on the source of funds, was indeed aimed at the city’s financial industry. However, reducing legal grey areas may paradoxically encourage legitimate funds to flow to well-established brands. "}],[{"start":122.5,"text":"The underlying theme of Asia’s rising and ageing middle classes is still intact, too. At least a fifth of China’s population will be 65 or older by 2033, up a whopping 6 percentage points from 2023 according to McKinsey forecasts. Western countries face a far more gradual shift: retirees in the UK will account for 22 per cent by then, up 3 points. Asia is also forecast to generate more than half of the growth in global premiums that insurer Allianz expects by 2036. So long as the region’s wealth accumulation continues to outpace that of most developed economies, its most established insurers are likely to grow richer too."}],[{"start":173.20000000000002,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1787310574_4734.mp3"}