Chinese insurers largely downbeat in first-half
31 Aug 2012
China's leading insurance companies reported first-half results that tended to disappoint, as a stagnant stock market eroded investment returns and dented profits, while premiums in some cases saw solid growth.
China Pacific, the first listed insurer to release results, set a dismal tone reporting a 54.6% year-on-year drop in earnings to RMB2.6 bn ($408m) on the back of losses from equity investments and a slowdown in income from premiums. Investment income was down 10% at RMB7.58bn while premium growth was hurt by stricter controls on bancassurance intended to combat fraud and misleading sales.
The regulatory tightening saw sales of insurance products via banks in China plunge 40% in the first six months from a year earlier, and the decline is set to continue in the latter half of the year, analysts say.
China Life also disappointed, with the six-month profits falling 25.6% to RMB9.64bn due to the poor performance of the stock market. The world's largest insurer by market value saw a total investment return of only 2.83% during the period, and reported a seventh straight decline in quarterly earnings.
First-half profits for China Taiping meanwhile were down 32.3% at HK$537m ($69.2m).
Among the life insurers that reported a rise in first-half earnings, Ping An Insurance led the pack with better than expected growth of 9% thanks to its diversification efforts. The firm clocked profits of RMB13.96bn, and while premium income grew only 2% during the period, its banking business contributed about a quarter of the earnings, helped by last year's acquisition of a majority interest in Shenzhen Development Bank.
New China Life also delivered a decent performance and saw profits up 7% to RMB1.9bn on the back of 10.4% growth in premiums, along with contributions from its banking business and efforts to boost growth in value terms in the second quarter.
The increase in premiums was faster than the same period last year and continues a streak of strong growth since 2008. The company is focusing on adjusting its business strategy towards a more sustainable pace of development amid a slowdown in the expansion of its sales outlets, it said in its report released on Thursday.
PICC Property and Casualty, China's largest insurer in its class, reported a 23.6% rise in first-half profits on stricter underwriting and strong growth in auto insurance premiums - though income from other business areas declined.
Notwithstanding the performance of the stock market, the industry may see investment returns improve in the second-half. Regulators have moved to relax rules so insurers can target riskier assets with higher potential returns like real estate and private equity, and plans are also afoot to allow them to trade derivatives. A clear effect on earnings, however, may take longer to materialise.
Author: Orlando Bowie