American International Underwriters (AIU), the first foreign insurance company approved to open business in China, has recently closed its auto insurance sector in China for constant losses.
According to the annual financial report of AIU, the China branch's premium revenue from third-party liability insurance reached 536,500 yuan in 2013 while underwriting losses surged to 55.02 million yuan. The figures in 2014 increased to 6.41 million yuan and 70.85 million yuan respectively. AIU said that it would focus on oversea tourism and other cross-border sectors in the future.
For most property insurance companies, about 70 percent of revenues come from auto insurance. But compared with Chinese companies, foreign insurance companies have fewer divisions and have to compete hard by tapping into their service advantages. As for auto insurance, 80 percent of property insurance companies in China experience underwriting losses.
By the end of 2014, all the auto insurance business of foreign companies reported losses. Analysts said that after the launch of domestic auto insurance reform, premium income would fall and foreign insurers might choose to shrink the business.
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