PING An Insurance (Group) Co, China's second-largest insurer, had a third-quarter loss after an impairment charge from its investment in Fortis and slumping stocks at home hurt returns.
The insurer made a 7.8-billion-yuan (US$1.1 billion) loss under Chinese accounting standards, the Shenzhen-based company said in a statement to the Shanghai Stock Exchange yesterday after the market closed. Full-year profit will drop "significantly," it said.
Third-quarter profit last year more than quadrupled to 3.6 billion yuan, powered by investment returns as China's stocks surged 179 percent in dollar terms, the world's best performing major stock market in 2007.
Ping An on October 5 said it would post a 15.7-billion-yuan charge in the third quarter on its investment in Fortis, formerly Belgium's biggest financial-services company, after the value plunged, wiping out the company's 7.1-billion-yuan first-half profit.
China's benchmark CSI 300 Index slumped more than 60 percent this year, eroding the value of other equity holdings.
"Ping An may well post a full-year loss bigger than this should all additional losses from the Fortis investment be reflected in the financial results," Peng Yulong, a Shanghai-based analyst at Guotai Jun'an Securities Co, told Bloomberg News. "The losses will restrict the company's expansion by denting the capital base, but won't hurt its overall financial health."
Premiums earned rose 37 percent to 29.1 billion yuan in the third quarter while investment income fell 81 percent to 3.1 billion yuan.
Ping An paid 1.81 billion euros (US$2.28 billion) for a 4.9-percent stake in Fortis last November, which became a casualty of the global credit crunch after pouring 24.2 billion euros into the acquisition of ABN Amro Holding NV assets last year just as the US subprime-mortgage market collapsed. Fortis dropped 95 percent this year. Ping An on October 2 said it scrapped a planned purchase of half of Fortis's asset management unit. The Chinese insurer has fallen 80 percent in Shanghai trading this year.
Citigroup Inc analyst Cindy Chu on October 7 cut Ping An's earnings-per-share estimate for this year by 94.5 percent to 0.109 yuan. Chu also made a 4-billion-yuan "prudential charge" against Ping An's profit next year to reflect more potential markdowns on the investment.
French bank BNP Paribas SA agreed on October 6 to take control of Fortis for 14.5 billion euros, completing a breakup of the company after a government rescue failed.