PICC hits five-month low over disappointing profits
The mainland's top non-life insurer PICC Property and Casualty fell to its lowest level in five months in Hong Kong trading after reporting an annual profit weaker than market expectations as a result of losses incurred in stock investments.
Its shares dropped 3.85 per cent to HK$9.48, on a day the Hang Seng Index fell 1.3 per cent. The insurer said it would not pay a final dividend.
PICC profits came in lower than expected due to higher-than-estimated combined ratio and lower premium earned in the second half of last year, wrote Bocom International analyst Li Wenbing in a research note.
Combined ratio is a measure of profitability in the insurance industry - the smaller the figure, the more profitable the insurer is.
'The underwriting profit of auto and vehicle insurance deteriorated in the second half of 2011, and we expect the rise of its auto and vehicle products' combined ratio to continue, given the liberalisation of the premium rate,' Li wrote.
He downgraded PICC to 'Long-term Buy' from 'Buy', and adjusted its target price to HK$11.90 from HK$15.15.
Net profit surged 52 per cent to 8.03 billion yuan (HK$9.88 billion), and turnover rose 12.7 per cent year on year to 174 billion yuan. Underwriting profit increased 188 per cent to 8.02 billion yuan.
President Wang Yincheng said: 'Going by the first two months, the growth this year might be maintained at two digits.'
PICC lost 2.6 billion yuan in equity investments. The country's key Shanghai Composite Index lost 21.7 per cent last year. In contrast, the company had made a gain of 1.1 billion yuan in 2010 from the equity market.
Separately, New China Life, the mainland's third-biggest life insurer, which listed in Hong Kong and Shanghai in December, dropped 5.6 per cent to HK$30.3 yesterday. New business value for last year, which measures the profitability of new policies sold, fell 8 per cent, the weakest in the sector, the company said.
NCI plans to expand its branch network on the mainland, setting up 170 new branches next year.
'We must seize the significant opportunities arising from China's urbanisation and ageing,' said chairman Kang Dian.
The company reported a gross premium income of 94.8 billion yuan for last year, up 3.4 per cent compared with a year earlier. Its market share on the mainland increased to 9.9 per cent from 8.9 per cent in the previous year. NCI announced a dividend of 0.09 yuan per share.