Pacific Century considers mainland market

Firm books a loss despite an increase in premiums and successful cost reduction

Pacific Century Insurance Holdings (PCI) yesterday reiterated its desire to enter the mainland market but executives gave no definitive time frame.

The company is also working to diversify its product portfolio.

The strategic outlook came as PCI announced a loss of $118.3 million for the first half of this year despite marked rises in first-year premiums and total premiums.

The loss was equal to 14.41 cents per share compared with a profit of 13.03 cents per share in the first half last year.

'During the period under review, both the equity and bond markets were rangebound,' chairman Francis Yuen Tin-fan said. 'Significant short-term movements were caused by highly volatile energy prices and speculation on interest-rate rises and terrorist attacks.'

Group chief financial officer Sam Cheung said talks on expanding into the mainland were still preliminary but the move was in the company's plans.

'Though we will focus on life insurance in Hong Kong, we are hoping to offer a wider range of insurance products in different cities.'

Mr Cheung pointed to an increase in first-year premiums of 17.8 per cent to $120.6 million and a rise in the premium from life insurance of 5.8 per cent to $804.1 million as reasons for optimism.

PCI, the only Hong Kong-based insurance company listed in Hong Kong, also announced a 10.5 per cent drop in its agent head-count, along with a 10.7 per cent fall in operating expenses.

'Though our agent numbers dropped year on year, if you compare the current number to that at the end of the first quarter they are more or less similar. Our agent numbers have stabilised,' Mr Cheung said.

CLSA analyst Dominic Chan sees the growth in first-year premiums and drop in agent numbers as positive signs.

Had the company reported under the new international accounting standards, due to be in place next year, it would have recorded a profit, he said.

'The underlying fundamentals of the company are strong,' Mr Chan said. 'The results show a commitment to controlling costs. By letting unproductive agents go, they have seen more high-quality recruits take over.'

PCI's stock fell 1.61 per cent yesterday to $3.05, its lowest price in more than a month.

Mr Chan was unfazed by the market reaction, however, and maintained his 'buy' recommendation, saying the stock presented an excellent opportunity for investors.