A PICC ad in the file photo taken in Shaoyang, Hunan province. [Asianewsphoto]
PICC Property & Casualty Co, China's largest non-life insurer, aims to achieve a profit from underwriting operations this year as premium rates rebound and the company improves claims management.
Investment returns will be similar to last year's level as the company's portfolio grows, President Wang Yincheng told a briefing in Hong Kong today. Possible interest rate hikes will benefit PICC because of its large cash holdings and cash inflows that remained "strong" in the first quarter, he said.
PICC's profit jumped 16-fold last year to 1.78 billion yuan ($260.8 million) as the nation's stock market surged, lifting the value of investments, and insurance premium grew, the insurer said yesterday. Underwriting losses narrowed 21 percent as claims dropped by more than 6 percentage points to 69.2 percent of premiums earned.
"This year we should be able to achieve an underwriting profit," Wang said.
Tightened regulation is helping the company cut discounts on motor insurance premiums to between 10 percent and 20 percent, from as much as 30 percent, in many regions, he said. Motor insurance accounted for 76 percent of premiums earned in 2009.
PICC is exploring "all means" to improve its solvency ratio, a measure of insurers' ability to settle claims, Wang said, after the gauge dropped by 34 percentage points last year to 111 percent as sales expanded.
The company is seeking to sell more subordinated bonds, he said without providing details. PICC sold 5 billion yuan of such debt last year.
"The management feels a lot of pressure meeting the solvency requirement," Wang said. "But confronted with the very strong business development environment in China, it's hard for us not to pursue rapid growth."
China's regulator can order insurers with a solvency ratio between 100 percent and 150 percent to come up with plans to raise capital. Those with a ratio below 100 percent are subject to business restrictions, investment curbs and suspension of dividends.
An earthquake this week in western China's Qinghai province won't affect earnings, Wang said. The company has limited earthquake coverage in the region affected, he added.
Parent PICC Group doesn't have a timetable or a firm plan for an initial public offering, the listed company's Chairman Wu Yan said at the same briefing.
PICC Property & Casualty boosted equities to 13.4 percent of its portfolio as of Dec 31, from 7.9 percent a year earlier, the company said in a document distributed at the briefing. The company hasn't and doesn't plan to substantially change its investment asset allocation this year, Wang said without being specific.