Doubt cast on PICC health unit's huge loss

Clerical error is suspected in reporting of 7.4 trillion yuan blowout for last year

PUBLISHED : Thursday, 02 May, 2013, 12:00am
UPDATED : Thursday, 02 May, 2013, 3:47am

PICC Health Insurance has posted a massive loss in its latest financial results, prompting speculation of a clerical error.

The struggling non-listed mainland life insurer, controlled by Hong Kong-listed PICC Group and DKV, the largest private health insurance company in Europe, said last year's net losses amounted to 7.43 trillion yuan (HK$9.35 trillion), more than 200 times its 28.93 billion yuan in assets.

The massive loss has raised eyebrows, with industry experts saying it must be a clerical error because China Cosco, the country's biggest operator of dry bulk ships, had posted the biggest losses among all listed mainland companies last year, at 9.6 billion yuan.

That was the state-owned shipping and logistics giant's second consecutive annual loss.

PICC Health's loss figure is nearly five times the total premium income of all mainland insurers last year.

The premium collected by life insurers on the mainland rose 4.5 per cent year on year to more than 1 trillion yuan last year, with health insurance premiums leading the growth, according to official figures.

PICC Health could not be reached for comment yesterday as it was a public holiday.

Established as a health insurance firm in 2005, PICC Health, it is thought, may have erroneously used the unit of "10,000" in its income statement, expanding the original number by a factor of 10,000. By industry estimates, its net loss should be 743 million yuan, following a loss of 482 million yuan for 2011.

In the mainland's highly fragmented operating environment, more than half of the non-listed life insurers posted losses last year, while the aggregate profits of the top 20 non-listed life insurers were lower than that of Ping An Insurance's life unit.

Apart from slowing economic growth and the persistent weakness in investment returns, mainland life insurers may be exposed to risks from new investments as a result of the recent liberalisation moves by the China Insurance Regulatory Commission, Fitch Ratings said last year.

Under the initiative, mainland insurers now have more flexibility to diversify their investments into credit-related financial products, such as wealth management and asset-backed securities offered by banks.

In addition, insurers can invest up to 20 per cent of their total assets in infrastructure debts and property-related assets, from the present 10 per cent.