PICC Group Jumps After Profit Beats Estimates: Hong Kong Mover

People’s Insurance Company (Group) of China Ltd. (1339), parent of the nation’s biggest non-life insurer, rose to the highest in 11 weeks in Hong Kong trading after reporting a better-than-expected 53 percent jump in profit.

The stock rose as much as 3.5 percent to HK$3.87, the highest since June 3, and traded 2.1 percent higher at HK$3.82 as of 10:24 a.m. local time. First-half net income jumped to 7.54 billion yuan ($1.23 billion) as investment and premiums income expanded, Beijing-based PICC Group, as the insurer is known, said in a filing yesterday.

Chairman Wu Yan boosted premiums income in the first half amid the nation’s economic slowdown after raising HK$24 billion ($3.1 billion) in an initial public offering in Hong Kong in November to fund its business expansion. Net income at PICC Property & Casualty Co. (2328), the main revenue contributor, climbed 17 percent to 7.63 billion yuan as underwriting profit grew and investment income increased, the non-life unit said in a separate statement.

PICC Group’s numbers were “stronger than expected due to strong P&C result,” Credit Suisse Group AG analysts led by Arjan van Veen wrote in a report dated yesterday. “This result represents a ‘coming of age’ for PICC P&C, where it has caught up with peers on claims management and its scale advantage is finally shining through.”

‘Much Better’

PICC P&C’s combined ratio, used to gauge claims and expenses as a percentage of premiums earned, rose 1.2 percentage points from the record-low 92.4 percent in the first half of last year to 93.6 percent, according to the statement. Lower combined ratio means higher profitability.

The combined ratio was “much better than expectation” and compares with 97.7 percent at China Pacific Insurance (Group) Co. (2601), the nation’s third-largest non-life insurer, the Credit Suisse analysts wrote. They raised PICC Group’s target price to HK$4.25 from HK$4.10. PICC P&C’s loss ratio, which gauges claims as a percentage of premiums, was 61.5 percent, lower than Pacific Insurance’s 62.2 percent, they wrote.

Gross premiums at PICC P&C jumped 14 percent, while revenue at the group’s life insurance unit dropped 12 percent as higher-return wealth management products offered by banks dwarfed the appeal of insurance products, according to data from the China Insurance Regulatory Commission.

Investment income surged 50 percent to 15.34 billion yuan, PICC Group said. Net investment income, mainly comprised of interest and dividends, gained 21 percent to 12.61 billion yuan. The company reported 3.7 billion yuan in realized gains from investments, reversing 88 million yuan in realized losses a year earlier.

PICC P&C jumped as much as 6 percent to HK$10.38, the most since Jan. 2, in Hong Kong.

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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