In­sur­ance prof­its fall sharply in first half

China Daily (USA) - - BUSINESS - By CAI XIAO caix­iao@chi­nadaily.com.cn

The prof­its of China’s three lead­ing in­sur­ance com­pa­nies all dropped sharply in the first half as a weak cap­i­tal mar­ket dragged down in­vest­ment re­turns.

China Life In­sur­ance Co, China’s largest in­surer, re­leased a state­ment on Sun­day that its profit in the first half of the year may fall 65 per­cent to 70 per­cent from a year ear­lier. It at­trib­uted the fore­cast to lower in­vest­ment in­come and changes in the as­sumed dis­count-rate re­quired for re­serves for tra­di­tional in­sur­ance con­tracts.

China Pa­cific In­sur­ance Hold­ings Co also pro­jected a first-half profit drop of 46 per­cent, ac­cord­ing to its state­ment on Sun­day, for the same rea­sons as China Life.

New China Life In­sur­ance Co also said on July 23 that its first-half prof­it­may fall about 50 per­cent, cit­ing de­clin­ing in­vest­ment re­turns.

“The gloomy stock mar­ket is the main rea­son for the de­cline in prof­its and in­vest­ment re­turns and the trend will con­tinue in the sec­ond half,” said Duan Haizhou, a deputy di­vi­sion chief of the in­for­ma­tion and sta­tis­tics de­part­ment at China In­sur­ance Reg­u­la­tory Com­mis­sion.

Gao Jian, an in­sur­ance an­a­lyst at North­east Se­cu­ri­ties, said that the cap­i­tal mar­ket is not good so the profit de­cline of listed in­sur­ance com­pa­nies was to be ex­pected.

“Listed Chi­nese in­sur­ance com­pa­nies are see­ing steady busi­ness op­er­a­tions growth. For ex­am­ple, China Life keeps grow­ing its premium rev­enue at a rate higher than 20 per­cent,” said Gao.

The bench­mark Shang­hai Com­pos­ite In­dex has slumped 16.6 per­cent this year, as of Mon­day, be­cause the na­tion’s eco­nomic growth slowed, hurt­ing the value of in­sur­ance com­pa­nies’ stock in­vest­ments.

China Life shares fell 0.96 per­cent to 20.74 yuan ($3.1) on Mon­day, while the China Pa­cific dropped 0.34 per­cent and New China Life de­clined 0.28 per­cent.

The China In­sur­ance Reg­u­la­tory Com­mis­sion said on July 28 that to­tal prof­its ofChi­nese in­sur­ers would drop by 54.1 per­cent year-on-year to 105.6 bil­lion yuan in the first half. To­tal in­vest­ment re­turns in the eq­ui­ties mar­kets dur­ing the pe­riod was only 24.1 bil­lion yuan, a huge drop of 261.2 bil­lion yuan from the same pe­riod last year.

Wang Guo­jun, an in­sur­ance pro­fes­sor at the Univer­sity of In­ter­na­tional Busi­ness and Eco­nomics, said Chi­nese in­sur­ance com­pa­nies could try global as­set al­lo­ca­tion to im­prove in­vest­ment re­turns and lower risks.

China Life is a leader in the mar­ket be­cause it pays at­ten­tion to over­seas and pri­vate eq­uity in­vest­ments. In June, it in­vested more than $600 mil­lion in Didi Chux­ing, China’s largest mo­bile car hail­ing ser­vice. China Life also an­nounced in May that it took a siz­able but undis­closed stake in a land­mark New York of­fice block, in a deal worth $1.65 bil­lion.

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