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PICC Group 2013 Profit Rises 19% on Premiums, Investments

People’s Insurance Company (Group) of China Ltd. (1339), parent of the nation’s biggest non-life insurer, said profit rose 19 percent last year as premiums and investment income increased.

Net income climbed to 8.12 billion yuan ($1.3 billion), or 0.19 yuan a share, from 6.83 billion yuan, or 0.2 yuan, a year earlier, Beijing-based PICC Group said in a statement to the Hong Kong stock exchange yesterday. That compares with the 9.73 billion yuan median estimate of three analysts surveyed by Bloomberg.

Chairman Wu Yan boosted net premiums while intense competition and higher expenses eroded margins of non-life insurers. Investment returns expanded and premium income at PICC Property & Casualty Co. (2328), the main revenue contributor, climbed 17.5 percent, according to filings.

“Underwriting margins probably dropped because competition is fierce and marketing and repair costs also rose,” Olive Xia, a Shanghai-based analyst at Core Pacific-Yamaichi International Ltd., said before the announcement. “Profitability should remain stable this year as we’re not seeing substantial increase in the competitive pressure.”

The combined ratio, used to gauge claims and expenses as a percentage of premiums earned, rose to 96.7 percent last year from 95.1 percent in 2012, according to the statement. Underwriting profit at the non-life unit fell 21.4 percent to 5.96 billion yuan as expenses climbed and claims jumped 22.5 percent, PICC P&C said, citing the effects of hurricanes and rainstorms.

Ping An

Ping An Insurance (Group) Co. (2318), the second-largest non-life insurer, earlier this month reported a 2 percentage point jump in the combined ratio to 97.3 percent for the same period. The ratio of commissions paid to agents, calculated as part of expenses, rose 1.1 percentage points to 9.9 percent, “confirming that effective price competition has intensified significantly in 2013,” Sanford C. Bernstein Co. analysts led by Hong Kong-based Linda Sun-Mattison wrote in a March 14 report.

Investment income at PICC Group from diviends, interest and rentals increased 24 percent to 27.2 billion yuan in 2013, the company said. Net realized gains from investments jumped more than fivefold to 3.57 billion yuan while impairment losses narrowed to 3.32 billion yuan from 4.15 billion.

The stock rose 1.8 percent to close at HK$3.32 in Hong Kong yesterday, before the company reported earnings, trimming this year’s decline to 11.5 percent.

Net income at PICC P&C was 10.6 billion yuan in 2013 compared with 10.4 billion yuan a year ago, the unit said in a separate statement.

Premiums income at the life-insurance unit, the nation’s fifth-biggest by premiums, was 75.3 billion yuan, the company said.

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

To contact the editors responsible for this story: Andreea Papuc at apapuc1@bloomberg.net Tomoko Yamazaki, Joshua Fellman

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