PICC’s Underwriting Rebounds as Motor Strengthens

Recovery in premium rates of some insurance segments and a steady decline in the claims ratio helped PICC Property and Casualty's first-half underwriting result rebound from loss as the insurer reported net profit of 2.65 billion yuan (US$390 million).

PICC reported a "remarkable" improvement in the quality of underwriting business and realized an underwriting profit of 1.9 billion yuan by the end of June 2010, compared with an underwriting loss of 1.53 billion yuan in the first half of 2009; mainly due to a recovery in the premium rates of some insurance segments and a steady decline in the claims ratio. Its underwriting profit ratio was 3.3% during the period.

Management had expected that the company's turnover would rise about 20% in 2010. Natural catastrophes including an earthquake and landslides in northwest China's Gansu province in the first half will not have a significant impact on the insurer, said Vice Chairman Wang Yincheng at a press conference in Hong Kong.

Wang said the insurer will not need to issue subordinated debt again to increase its solvency margin in the short term.

The group listing plan of parent PICC Group will be postponed as Wu Yan, chairman and executive director of PICC Property and Casualty, confirmed that the parent company does "not have any plan and schedule for its proposed public listing at present," although an IPO is still a long-term goal.

In the first half of 2010, turnover of PICC and its subsidiaries maintained a rapid growth momentum and increased by 21.7% to 81.63 billion yuan from 67.05 billion yuan in the correspondent period of 2009.

Net profit was 2.65 billion yuan, up from 80 million yuan in 2009.

The board of directors did not declare an interim dividend for 2010.

During the first half, net premiums earned by the company and its subsidiaries was 57.68 billion yuan, up 32.8% from 43.45 billion yuan in 2009. Net claims incurred was 38.11 billion yuan, up 29.3% from 29.47 billion yuan last year.

PICC's management said its overall business growth in the first half continued at a steady pace, largely driven by motor vehicle insurance as there was a "significant" increase in the sales volume of motor vehicles compared to the same period of last year.

Growth was aided by the implementation of a series of favorable measures, such as the continuation by the Chinese government of an automobile subsidy program for rural areas and tax-related purchase subsidies, an increase in subsidies for the trade-in of vehicles and an increase in the number of pilot cities for new energy vehicles, according to PICC.

Net investment income of the company and its subsidiaries was 1.8 billion yuan in the first half of 2010, up 31.3% from 1.37 billion yuan in the correspondent period of 2009.

Total assets reached 186.29 billion yuan during the first half , as shareholders' equity totaled 22.31 billion yuan.

As at June 30, the cash and cash equivalents of the company and its subsidiaries amounted to 28.32 billion yuan.

The company recorded a solvency margin of 21.3 billion yuan and the solvency margin adequacy ratio was 117.

PICC had a 39% market share in the nonlife insurance market in China during the period, maintaining its leading position in the domestic property insurance market, said the company.

(By Rebecca Ng, Hong Kong news editor: [email protected])