Entrenched foe.

STANDARD Life Assurance Co. has 175 employees and one office in China. Those are its weapons against state-owned China Life Insurance Co., which has 650,000 agents and 4,800 offices in a country of 1.3 billion people.

Standard Life--like AXA SA, Manulife Financial Corp. and other overseas insurers--is investing in China to profit from a $47 billion market that will grow as much as 25 percent in each of the next five years. In December, the government will let international insurers sell policies for employees and expand to all of China from 15 cities now.

Chen Qi, who works as a computer engineer in Shanghai, chose AIA, the Chinese subsidiary of American International Group Inc., for his life insurance policy because he saw it as financially sounder than Chinese companies.

"I trust AIA because it's a big company and very unlikely to default," said Chen, 29. "Domestic insurance companies may not be as safe." He pays 6,000 yuan ($725) a year for a policy that offers life insurance and a savings plan.

Even after they are allowed to expand their services from life insurance only, overseas insurers will face restrictions that their local competitors don't. Non-Chinese insurers must have local partners, need separate licenses from regulators in each new city they enter, and must invest at least 20 million yuan in every new branch.

"The day that a company can just walk in and set up and do whatever it wants without a partner, anywhere it wants to go, is a long time off," said Robert Knight, Hong Kong-based chief executive of Standard Life's Asian unit.

Of the 19 overseas ventures already selling insurance in China, only one--Toronto-based Manulife--is profitable, according to Boston Consulting Group Inc. and Manulife.

About 40 overseas insurers have exited China in the past five years, a time when the country's insurance market was expanding an average 40 percent annually by premiums, according to the China Insurance Regulatory Commission, the industry regulator. It was worth 388 billion yuan in 2003.

China holds promise for insurers willing to postpone profits. Household savings surged five-fold in the decade to 2003 to 10.3 trillion yuan. More companies are buying group health and accident insurance for employees as the state reduces cradle-to-grave benefits and sells more government-owned companies.

The Chinese government began phasing out cradle-to-grave benefits to workers and their families in the 1980s.

International insurers seeking to capitalize on the growing market still need a local partner.

"For the foreseeable future, every foreign company has to still be a joint venture," said Stuart Leckie, chairman of Hong Kong-based investment consulting firm Stirling Finance Ltd.

American International Group is the only exception. The company, founded in Shanghai in 1919, was allowed back into the market in 1992 and given control of its business in China.

In big cities such as Shanghai, overseas insurers have gained market share. They wrote 13 percent of Shanghai's insurance policies last year, up from 10 percent in 1999, according to the state-run People's Daily newspaper, which cited figures from the Shanghai Insurance Supervisory Office.

Even so, international insurers will trail for years to come, said Tim Krause, senior manager at International Finance Corp. in Washington.