Despite mainland insurance giants China Life (2628) and Ping An Insurance (2318) showing a drop in premium income growth, an analyst said it was not necessarily a wrong time for non-life insurer PICC Property to enter the life insurance market.

"Life insurance has been the most profitable business among the insurance market," said Kenny Tang Sing-hing, associate director at Tung Tai Securities.

While the penetration of insurance in China is generally low - about 2 percent compared with 20 percent in Europe and the United States - Tang said the growth potential is high with the mainland's rapid development.

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Tang expects there will be increasing demand for life insurance products in the mainland as consumer spending surges year by year.

Another analyst said the drop in premium income growth in the life insurance market, brought on by more people choosing to invest their money in the stock or property markets instead, gave Beijing-based PICC Property more bargaining power in negotiating the stake acquisition price for its sister company. Both firms are units of state- owned People's Insurance Co (Group) of China.

The analyst said the 812 million yuan is minimal considering PICC Property's market capitalization of HK$22.53 billion. He said it took about 30 years for China Life to penetrate the mainland's rural areas, and now it and Ping An share 70 percent of the life insurance market.

Without a widespread distribution network, PICC will not be able expand business in the life insurance market in the short term, the analyst said.

PICC Property shares closed Monday at HK$6.78, up 4 percent.