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Major insurers' earnings take a beating

By Hu Yuanyuan (China Daily)
Updated: 2008-10-28 16:38

China's largest insurance companies posted a hefty loss in their third-quarter reports yesterday, due to a slump in investment returns after the country's stock market plummeted nearly 70 percent so far this year.

China Life, the country's biggest life insurer, saw its net profit for the third quarter drop 46.91 percent year-on-year to 2.34 billion yuan. Its earnings per share (EPS) fell 46.91 percent to 0.08 yuan, the company said in a statement to the Shanghai Stock Exchange yesterday.

Ping An, the country's second largest insurer, reported a loss of 534 million yuan in the first three quarters, after allowing for impairment provisions on its investment in troubled Belgian-Dutch financial group Fortis. The company has invested 23.87 billion yuan in Fortis shares since November last year and suffered a loss of 18.6 billion yuan by Sept 30.

Ping An's net profit from January to September fell 88.3 percent on a yearly basis to 1.8 billion yuan. And its EPS also decreased 89.6 percent to 0.22 yuan.

China Pacific Insurance (Group) Co, the nation's third largest insurer, had a net loss of 1.64 billion yuan, or 0.21 yuan a share, compared with last year's net income of 1.93 billion yuan, or 0.28 yuan a share, the Shanghai-based company said in a statement to the city's bourse yesterday.

The company made a nine-month profit of 3.8 billion yuan, down 33 percent from a year earlier.

Meanwhile, its plan to float shares on the Hong Kong stock exchange expired, becoming the latest in a series of delays or cancellations of share offer plans due to the sluggish market.

"The company's plan to issue shares on the Hong Kong bourse expired on Sept 14, 2008, and any future plan for such an offer must be resubmitted to a shareholders' meeting for approval," China Pacific Insurance said in a statement published in Shanghai Securities News.

"The prospects for the whole insurance industry remain gloomy next year, if the stock market downturn persists," said Wang Xiaogang, a senior analyst with Shanghai-based Orient Securities.

Insurance companies' performance largely hinges on their investment returns as premium growth's contribution to profitability is not so direct and usually a long-term process, he added.

"The returns for universal insurance and participating insurance are probably below 4 percent, making them not so attractive for customers," said Wang, adding that a 20 percent drop in bancassurance was not surprising at all.