Chinese insurance premiums grew 39 pct in 2008

BEIJING, Jan 21 (Reuters) - Chinese insurance premiums grew 39 percent in 2008, slowing from a 42 percent annual pace in the first 11 months, as the global financial crisis bit into household and corporate budgets.

Premiums reached 978.4 billion yuan ($143 billion) for the year as a whole, marking the fastest annual growth since 2002, China Insurance Regulatory Commission said on its website.

It warned of falling profits for insurers due to the sliding stock market. The benchmark Shanghai Composite Index .SSEC lost 65 percent in 2008.

Hong Kong-listed shares in China Life (601628.SS: Quote, Profile, Research) (2628.HK: Quote, Profile, Research), the top life insurer, fell 7.5 percent on Wednesday after the company said 2008 net profit could fall more than 50 percent due to a significant decrease in investment returns from equity assets.

"We must understand clearly that with the deepening of the global financial crisis, its serious impact on the real economy will gradually appear," Wu Dingfu, chairman of the commission, said in a speech at the end of December, according to a transcript published on the agency's website.

"The insurance sector may face real challenge next year or even the year after," Wu said, referring to 2009 and 2010.

Insurers had only 13.3 percent of their assets in stocks and mutual funds by the end of 2008, down from 27.1 percent at the start of the year. They increased their bank deposit and bond holdings to 84.4 percent from 68.4 percent, the regulator said.

Wu warned insurance executives that rising risks overseas could cross the border via foreign insurers' Chinese branches and joint ventures and Chinese residents could cancel policies as income growth slows and investment returns fail to meet expectations.

"The scope for insurers to invest abroad is also shrinking, in terms of geography and asset classes, while the investment risks are rising," Wu said. (Reporting by Langi Chiang, editing by Dan Lalor)