Mainland expansion to weigh on PCI profits

Pacific Century Insurance Holdings' (PCI) expansion plans in the mainland will affect its profitability over the next few years, according to chairman Francis Yuen Tin-fan.

The company has applied to set up a joint venture insurance company in China, in which it will invest 100 million yuan and take a 20 per cent stake.

Separately, the insurer was in talks to purchase a stake in a nationwide mainland life insurance company that would offer 'a short cut to obtain a large network in China but would also cost PCI more money', Mr Yuen said at the company's corporate results briefing yesterday.

'We do not expect to have quick profit on our China investments. Insurance companies usually look to break even after five to seven years,' Mr Yuen said.

'The China expansion plan entails some pressure on profit growth. However, I do not think it will be too serious as Hong Kong's business growth should be able to cover the losses in China.'

He said the investments would benefit the company in the long term as China was a critically important insurance market.

The company, 45.1 per cent owned by Richard Li Tzar-kai's Pacific Century Regional Developments, yesterday announced a 9.1 per cent decline in net profit to $196.3 million for the year to December, due mainly to bond investment losses in the first half of last year.