Claims drag down profit growth at PICC P&C

Gains in investment income at mainland's biggest non-life insurer fail to offset costs

PUBLISHED : Saturday, 29 March, 2014, 1:13am
UPDATED : Saturday, 29 March, 2014, 2:08am

PICC Property & Casualty (PICC P&C), the mainland's biggest non-life insurer, saw its profit growth slow to 1.5 per cent last year as increased claim costs offset an improvement in investment income.

Net profit rose to 10.6 billion yuan (HK$13.2 billion) from 10.4 billion yuan in 2012, the company said in a statement to the Hong Kong stock exchange yesterday. Its first-half profit had grown by 16.8 per cent.

Although the insurer's net premium earned doubled to 182.5 billion yuan, underwriting profit grew by a mere 3.3 per cent to 5.96 billion yuan as net claims incurred increased by 66.2 per cent to 120.9 billion yuan.

The loss ratio increased by 2.6 percentage points to 66.2 per cent, driven partly by higher claim costs from motor insurance as the cost of automotive components increased, while more claims resulted from frequent disasters.

PICC P&C posted an 18.5 per cent increase in investment income to 9.9 billion yuan last year. As the recovery in capital market resulted in lower impairment losses, net realised and unrealised losses also decreased to 342 million yuan from 913 million yuan in 2012.

The profitability of the mainland's non-life insurers has been under pressure because of increasing claim costs. The underwriting outlook for PICC P&C this year remained challenging because of competition in the motor insurance sector, Morgan Stanley analysts said earlier in a research note.

Meanwhile, China Taiping Insurance said its profit rose 16.3 per cent to 15.3 billion yuan, fostered by growth in insurance business and investment income. Gross premium income increased by 41.7 per cent to 85.5 billion yuan, with life insurance premiums rising 44.9 per cent and 41.6 per cent growth in property and casualty premiums, it said in a statement to the Hong Kong stock exchange yesterday.

The capital market recovery saw China Taiping's investment income grow 68.3 per cent last year to 11.2 billion yuan, with total investment yield lifting by 1.5 percentage points to 5.1 per cent.

Chief financial officer Li Tao said yesterday that the insurance business was expected to grow strongly this year due to stronger economic momentum.