PICC first-half net profit jumps 24pc on higher income from premiums

Rival China Pacific vows to avoid taking part in price wars, after first-half net falls 54.6 per cent

PUBLISHED : Tuesday, 21 August, 2012, 12:00am
UPDATED : Tuesday, 21 August, 2012, 3:56am

PICC Property & Casualty, China's biggest non-life insurer, said first-half profit rose 24 per cent as premiums income increased and underwriting profitability improved.

Net income climbed to 6.53 billion yuan (HK$7.98 billion) from 5.3 billion yuan a year earlier, the Beijing-based insurer said. Premiums growth and controls on claims and expenses helped offset the impact of stock-market declines on PICC's equity holdings.

Investment income expanded 38 per cent from a year earlier to 4.1 billion yuan. The company booked 163 million yuan in unrealised gains on investments, reversing a 15 million yuan loss a year earlier, while impairment losses widened 16 per cent.

Separately, China Pacific Insurance promised yesterday not to participate in price wars to get business in the current half, after first-half net profit plunged from a year earlier. For the six months to June 30, net profit attributable to equity holders of the parent company fell 54.6 per cent to 2.64 billion yuan, owing to reduced investment gains and slower business.

The group's solvency margin ratio - a measure of an issuer's ability to pay claims - fell 13 percentage points to 271 per cent in the first half, while the ratio for its property and casualty business dropped 39 percentage points to 194 per cent.

Wu Zongmin, chairman and chief executive of the group's China Pacific Property Insurance unit, said yesterday the decrease in the ratio resulted from factors including fierce price competition in the industry, increasing inflation and rising labour costs and expenses related to increasing its business.

He expects the costs associated with getting more business to continue to rise for the rest of the year. But he said the group would not "blindly participate in price competition". Instead, it plans to increase investment in customer service and control costs.

"The decrease [in solvency margin ratios] is a challenge faced by the whole [insurance] industry, and our group is still in an industry-leading position," said Gao Guofu, chairman of China Pacific Insurance.