ChinaÆs insurers return poor report card

Write-downs have cost China Life, Ping An and China Pacific Rmb30 billion ($4.4 billion) this year, not withstanding mark-to-market and foreign exchange losses.
The average investment return for ChinaÆs top three insurers is down by 68.9% in the third quarter of 2008 compared to Q3 last year.

The most shocking results were reported by China Pacific with investment returns down by 118.4% compared to the same quarter last year. This represents a net loss of Rmb1.51 billion ($222 million) between July and September. In the first nine months of 2008, China Pacific recorded investment gains of Rmb21.61 billion ($3.2 billion), down by 31.4% year-on-year.

The results do not yet reflect the losses China Pacific has incurred in mark-to-market costs and foreign exchange losses. Fair valuation rules have cost China Pacific Rmb120 million ($17.6 million) just in the third quarter and mark-to-market losses for the year to date total Rmb695 million ($102 million). It has lost another Rmb122 million in the first nine months of 2008 from the renminbiÆs strong gains against the dollar.

China Pacific has had to write down Rmb3.61 billion ($530 million) from its portfolio this year û Rmb2.16 billion of which it incurred in the latest quarter. Net losses for the quarter totalled Rmb1.64 billion. However, for the first nine months of 2008, China PacificÆs net profit was still up at Rmb3.97 billion ($583 million), 33% down compared to results in 2007.

Ping An, the nationÆs number two insurer, also reported a significant drop in investment returns. For the third quarter of 2008, investment income was down by 81.5% compared to last year, although it made a modest return of Rmb3.12 billion ($459 million) on its investment portfolios. In the first nine months of 2008, investment returns totalled Rmb26.57 billion, down 42.2% year-on-year, compared to the Rmb45.98 billion reported for the first nine months of 2007.

Ping An further suffered a Rmb1.17 billion ($172 million) mark-to-market loss for the quarter; Rmb19.93 billion ($2.9 billion) in the first nine months of 2008, and these would wipe out almost half of its gains for the year. Most of these losses were related to the continued slump in the China A-share market, which had only experienced moderate rebounds since it peaked in November last year.

Foreign exchange related losses for Ping An slowed to just Rmb9 million ($1.3 million) for the quarter. For the first nine months of 2008, currency related losses stand at Rmb534 million. Ping An already wrote down a total of Rmb17.27 billion in the first nine months of 2008, with a whopping Rmb15.73 billion incurred in the latest quarter. Ping An linked the downturn in its investments to the Fortis Group, which has since been nationalised by the Benelux governments.

China Life, meanwhile, as the mainlandÆs largest market player, has proven to be the most resilient in the current crisis. According to its third-quarter results, China Life made an investment income of Rmb11.12 billion ($1.6 billion) between July and September, just 43.5% lower than the feverish third quarter of 2007, when the mainland A-share market hit its all-time peak. Year-to-date, China LifeÆs portfolio generated an income of Rmb45.32 billion ($6.7 billion), up just 16.2% year-on-year.

In the first nine months of 2008, China Life made an Rmb8.73 billion write-down. Of that, Rmb3.10 billion ($456 million) was in the third quarter alone. Separately, it incurred a Rmb8.1 billion mark-to-market loss and a Rmb1.01 billion foreign exchange loss in the first nine months of 2008.

The top 10 holdings in China LifeÆs portfolio includes: Citic Securities (worth Rmb15.43 billion), Minsheng Bank (Rmb5.99 billion), Harvest 300 Fund (Rmb2.92 billion), ICBC (Rmb2.5 billion), China Construction Bank (Rmb2.20 billion), Shenhua Energy (Rmb1.55 billion), Daqin Railway (Rmb1.46 billion), Bosera Yufu Fund (Rmb1.29 billion), E-fund Shanghai 50 Index Fund (Rmb1.23 billion) and Dacheng Shanghai-Shenzhen 300 ETF (Rmb972 million).

At Ping An, the group still has its largest holding in Fortis stock (Rmb5.26 billion). Its top 10 holdings also include: Rmb4.85 billion in Minsheng Bank, Rmb1.93 billion in Shanghai Pudong Development Bank, Rmb1.77 billion in Shenzhen Development A, Rmb1.34 billion in Fortune SGAM Boakang Bond Fund, Rmb1.29 billion in Fortis Haitong Money Market Fund B, Rmb1.15 billion in Huaan Hongli Stock Fund, Rmb1.12 billion in CIFM China Alpha Fund, Rmb1.12 billion in the Tracker Fund of Hong Kong, and Rmb1.01 billion in Galaxy Money Market Fund B.

China PacificÆs top 10 holdings include: a Rmb3.44 billion investment in Haitong Securities, Rmb1.10 billion in Shenzhen Development A, Rmb901 million in ChinaAMC Shangai 50 ETF, Rmb565 million in CIFM China Alpha Fund, Rmb449 million in Fortune SGAM Advanced Growth Fund, Rmb383 million in ICBC, Rmb350 million in ChinaAMC Advantage Growth Fund, Rmb333 million in Fullgoal Tianyi Value Fund, Rmb311 million China Unicom, and Rmb304 million in Anshun Fund.
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