Capital injection to boost solvency ratio
China Pacific Insurance, the nation's third-largest insurer by market value, said yesterday it was planning a capital injection of about 5 billion yuan (HK$6.1 billion) from major shareholders around the end of this year to support its property and casualty business.
Chairman Gao Guofu said during an interim results briefing yesterday that, after the injection, the company's property and casualty business would have enough capital to run for one to two years and did not plan to raise funds in the near term.
Li Wenbing, an analyst at Bocom International, said the company should be able to boost its solvency ratio, a measure of an insurer's ability to pay claims, to at least 200 per cent with the new capital, up from 175 per cent from the end of June.
Regulators require mainland insurance companies to maintain a solvency ratio of above 100 per cent, with stricter requirements of 150 per cent for larger companies, said Li.
The company's net profit met market expectations and jumped 44.7 per cent year-on-year to 5.82 billion yuan in the first half. This was mainly due to better performances in both property and casualty as well as life insurance, Gao said.
The life insurance division's net profit rose 28.5 per cent to 2.79 billion yuan year-on-year, despite facing more challenges from intensified competition and regulation changes in bancassurance - using banks as the channel to sell insurance.
China Pacific Insurance managed to maintain relatively strong growth in life insurance business, while some of its peers suffered. Xu Jinghui, chairman & chief executive of China Pacific Life insurance, said this was because the company continued to hire more agents and boost training efforts for base-level employees.
The life insurance division had a total of about 282,000 sales agents, up 11.9 per cent from the year-earlier period, while many other insurance companies, such as China Life, slashed their agents. Kenneth Yue, a senior analyst at CCB International, said, however, that most of the hires occurred in the second half of last year. Agents had only increased by around 2,000 since the start of 2011.
Life insurance's solvency ratio dropped 49 percentage points to 192 per cent compared to the end of December, due to business growth and investment portfolio structure fluctuation, the company said.
The company increased allocations to fixed income deposits, as the mainland has been increasing interests since last October. Fixed income investments, including debt securities and term deposits, accounted for 77.6 per cent of total investment assets.
China Pacific's market share of mainland insurance sales, up from 9.9 per cent at the end of last year.