New China Life Insurance Co. (1336) shares are on track for their biggest fall in four months in Hong Kong after Zurich Insurance Co. sold 97.5 million shares in the third-biggest Chinese life insurer by premium income last year.
The stock dropped as much as 5 percent, the most since March 13, and was down 4.8 percent at HK$22.90 at the midday break. Zurich Insurance sold the shares at HK$22.50 each, according to a term sheet obtained by Bloomberg News.
“Investors aren’t very optimistic on New China Life improving profitability,” said Xie Jiyong, a Shanghai-based analyst at Capital Securities Corp. (6005), citing the company’s reliance on bank-counter sales and unstable investment performance. “But we guess it’s more likely its own reasons that Zurich Insurance is selling because the share price is near its lowest” since the initial public offering in 2011.
New China Life’s premium income fell 8.5 percent in the first five months from a year earlier as higher-yielding assets such as banks’ wealth management products attracted clients away, causing the insurer to temporarily lose its title as the third-biggest life insurer it held since 2010.
Zurich Insurance Group AG (ZURN), Switzerland’s biggest insurer, in May reported a 7 percent drop in first-quarter profit after investment returns declined amid low interest rates.
The Swiss insurer held 390 million Hong Kong-traded New China Life shares, or 12.5 percent, as of Dec. 31, according to the Chinese insurer’s 2012 annual report.
Cash flows at China’s life insurers will be squeezed this year by customers canceling contracts out of frustration with low returns and an increase in maturing policies, according to BoCom International Holdings Co. and Capital Securities. Redemptions jumped 62 percent at China Pacific Insurance and 55 percent at New China Life in the first quarter, the insurers said.
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