• Sat
  • Oct 25, 2014
  • Updated: 11:52am

Belt-tightening CIIH vows profit return

PUBLISHED : Saturday, 08 April, 2006, 12:00am
UPDATED : Saturday, 08 April, 2006, 12:00am
 

China Insurance International Holdings (CIIH) has vowed to turn in a net profit this year after posting a higher than expected loss for last year. It will aim to limit expenses at its life and property and casualty businesses to last year's levels while growing their income.


The company yesterday reported a net loss of $433.76 million, up from a loss of $22.93 million in 2004.


The company warned investors in January that the results would be affected by a $250 million goodwill impairment charge associated with its acquisition of China Insurance Group Asset Management in September 2002.


China Insurance Group chief executive Xie Yiqun said the write-down was a one-off and reflected the reality that its mainland business expansion was slower than expected due to regulatory limits.


CIIH said earlier a key customer's redemption of a significant portion of its funds also contributed to the write-down decision.


CIIH, as the only mainland-backed insurance firm with an offshore asset management unit, is well placed to compete with international investment banks to help domestic peers manage their overseas securities investment.


However, the China Insurance Regulatory Commission had only 'preliminarily approved' the company's proposal to do such business, Mr Xie said. 'As soon as we get the final approval, we can start operating right away,' he said.


Another factor behind CIIH's loss last year was a $94.89 million net currency exchange loss, as the appreciating yuan reduced mainland revenues in Hong Kong dollar terms, while a depreciation in other currencies led to a foreign exchange loss on its overseas reinsurance income.


It also made a $35 million provision on potential tax exposure on its international reinsurance arm's offshore investment income in previous years.


Executive director Kenneth Ng Yu-lam, and chief executive of China International Reinsurance, said the firm was in talks with the Hong Kong tax office on the matter, adding the provision was sufficient.


'What we have been doing is in line with industry practice ... as Hong Kong taxes income at source, it is a grey area,' Mr Ng said.


The reinsurance unit saw net profit plunge 62.8 per cent to $73.6 million as catastrophe claims, including those from Hurricane Katrina, wiped out premium growth.


CIIH chairman Feng Xiaozeng said the firm was confident it would be profitable this year, as its mainland life insurance and property and casualty insurance units were aiming to break even by containing expenses at last year's levels.


'It is the darkness before dawn for CIIH at the moment,' Mr Feng said. 'Normally life and property and casualty insurers only turn profitable six to eight years after starting operation, but we are aiming to do so in the fifth year.'


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