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China's top insurers reported a slump in performance last quarter as their investment books suffered from stock losses triggered by strict Covid-19 lockdowns to combat the Omicron wave. Measures to restructure their agency force will weigh on the outlook.
Ping An Insurance, the nation's biggest, suffered a 24 per cent drop in earnings to 20.7 billion yuan (US$3.1 billion) from a year earlier, mainly due to volatile capital markets as yields from its 4.1 trillion yuan (US$620 billion) investment portfolio shrank.
Earnings at China Life Insurance, the second largest, slid almost 47 per cent to 15.2 billion yuan. Income from its pool of 4.72 trillion yuan of investment assets fell 27 per cent during the quarter.
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"The big drop is pressuring their whole-year performance," said Gigi Chen, insurance analyst at CMB International. "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."
A pedestrian walks past a signboard of China Life Insurance in Huai'an in eastern Jiangsu province. Photo: Handout alt=A pedestrian walks past a signboard of China Life Insurance in Huai'an in eastern Jiangsu province. Photo: Handout>
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.
The CSI 300 Index, which tracks the 300 largest listed companies in mainland China, had its worst three months since the third quarter of 2015. The Shanghai Composite Index fell 10.7 per cent, the most since the fourth quarter of 2018.
Ongoing measures to control the pandemic have provoked partial and citywide lockdowns in more than 50 municipalities and provinces across the country, putting a large chunk of national output at risk. The economic slowdown will continue to challenge the insurers' performance, according to Industrial Securities.
"Their profit and revenue may continue to face pressure in the first half of this year," analyst Zhang Bo said. "It will mainly depend on agents [restructuring], in addition to consumer sentiment because many citizens' income has been affected during the pandemic."