Shares have slipped 8% in PICC Property and Casualty, China's largest non-life insurance company, as a result of the insurer's revelation that its profits fell by 86% in 2004.
In Honk Kong, PICC stock has fallen by 7.9% to its lowest level since the company floated in November 2003, as a result of a decline in profits from 1.45 billion yuan to just 208 million yuan in the space of a year.
The results not only embarrassed the Chinese insurer but also industry forecasters, who had predicted only a small decline in profits. The dramatic reduction in income has been attributed to poor product pricing, exposing the company’s inexperience in an open market, a significant rise in claims and disappointing investment results.
Net claims increased to 38.91 billion yuan last year, a 34% rise from 29.06 billion yuan in 2003.
The poor results seemed to have given impetus to company plans to step up its life insurance business in China, where under 3% of the population current have policies, and to expand overseas.
PICC’s parent company is scheduled to start operating in the life assurance market this year through a joint venture with Japan’s Sumitomo Life Insurance, Hong Kong’s Asia Financial Holdings and Bangkok Bank. Meanwhile, PICC will intensify its efforts to seek out international opportunities.