PICC Group Posts 2012 Profit Gain as Underwriting Income Expands

People’s Insurance Company (Group) of China Ltd. (1339), parent of the nation’s biggest non-life insurer, said profit rose 32 percent last year as underwriting revenue and investment income expanded.

Net income climbed to 6.83 billion yuan ($1.1 billion), or 0.2 yuan a share, in 2012 from 5.19 billion yuan, or 0.16 yuan a share, a year earlier, Beijing-based PICC Group said in a statement to the Hong Kong stock exchange yesterday. The profit compares with the 7.7 billion yuan mean estimate of 14 analysts surveyed by Bloomberg News.

PICC Group raised HK$24 billion ($3.1 billion) in Hong Kong in November in the city’s largest initial public offering in two years, paving the way for Chairman Wu Yan to expand premiums as the world’s second-biggest economy rebounds. Net income at PICC Property & Casualty Co. (2328), the main profit contributor, climbed 30 percent after the unit’s underwriting profit margin rose to the highest since its shares first traded in 2003 in the first half of last year as the company tightened controls on claims and expenses.

“The level of underwriting profitability can’t be maintained this year as there’s considerable pressure from rising costs on the property-insurance side,” said Li Wenbing, a Beijing-based analyst at Bocom International Holdings. “Competition in the industry is getting more and more intense,” he added, citing looser risk selection and pressures to cut prices to attract clients among insurers.

Underwriting Profit

The combined ratio, used to gauge claims and expenses as a percentage of premiums earned, rose to 95.1 percent last year, compared to 94 percent in 2011, according to the statement.

Investment income increased 34 percent to 22 billion yuan, the company said. The company booked 1.53 billion yuan in fair value gains on investments, while impairment losses rose to 4.15 billion yuan from 2.59 billion last year.

The stock rose 0.2 percent to HK$4.3 yesterday, extending the rally since its Nov. 30 IPO to 23.6 percent. Ping An Insurance (Group) Co. (2318), China’s second-biggest insurer which reported a 3 percent profit increase March 14, fell 0.3 percent to HK$60.25.

To contact Bloomberg News staff for this story: Zhang Dingmin in Beijing at dzhang14@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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