China: Investment losses hit largest insurers

| 10 May 2022

Five of the country's largest listed insurers saw their investment books impacted by stock losses in the first quarter this year due to strict Covid-19 lockdowns to curb the Omicron wave.

New China Life’s net profit fell by a whopping 78.7% to CNY1.34 billion year-on-year. Its investment income fell 39.3% to CNY11.9 billion in Q1 this year from the CYN19.6 billion in the same quarter last year. It cited a steep pullback in equity markets for the weaker results.

China Life Insurance suffered a 46.9% drop year-on-year in net profit to CNY15.2 billion (US$2.28 billion). Income from its pool of CNY4.72 trillion of investment assets fell to CNY54.0 billion during the quarter, down 26.5% from the CNY73.5 billion in the same quarter last year.

The China Pacific Insurance group, which underwrites both life and non-life businesses, also experienced a setback as its earnings declined 36.4% to CNY5.44 billion yuan.

The Ping An Insurance group, which has both life and non-life insurance arms, suffered a 24.1% drop in earnings to CNY20.7 billion from a year earlier, mainly due to volatile capital markets as yields from its CNY4.1 trillion investment portfolio shrank.

Meanwhile, the People’s Insurance of China group recorded a 12.9% fall in net profit to CNY8.74 billion.

“The big drop is pressuring their whole-year performance. In the short term, the impact of the pandemic will still hurt. It will be difficult for life insurance businesses to develop as it relies on face-to-face sales by agents,” said Gigi Chen, insurance analyst at CMB International.

Stock losses have deepened this year amid recession fears as Covid-19 lockdowns upended supply chains and forced factory closures. They added to a broad sell-off in 2021 caused by China’s crackdown on the tech sector. At the same time, bond prices also suffered amid a surge in debt defaults and risk premium, according to South China Morning Post.