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Ping An Insurance (Group), the mainland's
second-largest life insurer, said it will diversify its foreign assets to
minimize currency risk after China dropped its peg against the US dollar.
``We'll invest in other major currencies, although we can't say the proportion
as Beijing hasn't revealed its portfolio,'' said chief investment officer
Philip Young Monday. ``But some [diversification] is better than none.''
All of Ping An's net 16 billion yuan (HK$15.35 billion) in foreign
currency-denominated assets are in US dollars, and the value of the assets in
mainland-currency terms fell about 300 million yuan because of the recent
severance of the peg and revaluation, he said.
Hong Kong-listed Ping An's first-half net profit gained 47.3 percent to 2.25
billion yuan as investment returns and the performance of its non-life business
beat analysts' expectations.
Nomura analyst Karen Chan maintained a ``reduce'' rating and a HK$11.67 fair
value estimate on the stock. ``Looking ahead to the second-half, we expect the
life insurance industry to continue posting slow premium growth,'' Chan said.
``The only positive surprise may come from the recovering A-share market.''
The life insurance business contributed 1.87 billion yuan, or 83 percent, of net
profit. Gross written premiums, policy fees and premium deposits of its life
insurance business increased 2.3 percent to 29.75 billion yuan, or 14.8 percent
of the mainland market.
The non-life business posted a net profit of 142 million yuan, up 216 percent,
thanks to an improvement in the combined ratio, which measures the
effectiveness of cost and risk control.
The ratio fell to 96.1 percent in the first half from 97.2 percent in the 2004
full year. The effective tax rate for the company's non-life business declined
from 75.4 percent to 55.3 percent after a tax adjustment.
Total investment income surged 69 percent to 4.5 billion yuan in the first-half
from 2.66 billion yuan a year earlier, while the total investment yield rose to
4.1 percent from 3.6 percent. Young said the improved yield was due to a larger
investment portfolio, which stood at 219.67 billion yuan at the end of June.
The insurer also booked an unrealized gain on bonds and reported a
smaller-than-expected unrealized loss on equity funds.
``We have achieved an average yield of 4.5 percent for new money investment in
bonds,'' Young said.
Ping An shares rose 1.87 percent Monday to HK$13.65.
carol.chan1@singtaonewscorp.com
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