Insurers teeter on abyss amid antipathy for deeper reform

Chinese insurance companies may be facing a bleaker than usual winter.

Despite steps by the China Insurance Regulatory Commission to expand investment options for insurers, lasting weakness in the stock market and shrinking demand for life insurance products continued to weigh on the companies' performance in the first three quarters this year.

Earnings report for China's four listed insurers painted a grim picture.

China Life Insurance Co's profit dropped 55.6 percent from a year earlier, while China Pacific Insurance Group Co reported a 55.3 percent decline.

On the brighter side, at least on paper, New China Life Insurance Co said profits edged up 2.4 percent. Ping An Insurance Group Co reported 10.8 percent growth in net, but those gains mostly came from banking businesses, which were included in their financial reports for the first time this year.

The four listed insurers reported an aggregate 45 billion yuan (US$7.2 billion) in losses related to declines in the securities market in the first nine months.

For the industry as a whole, withdrawals by policyholders eased a bit in the third quarter but still loomed. China Life spent nearly 10 percent of its revenue covering withdrawals, while New China Life spent 15 percent, according to the performance reports.

On a quarter-to-quarter basis, profit declines were magnified. China Life net plunged 155 percent in the third quarter from the second, while profit at New China Life was down 63 percent, according to data compiled by Dongguan Securities.

"Given their shrinking assets, the investment yields for all listed insurers were lower than last year," said Deng Mao, an analyst with Dongguan Securities. "The stock market has shown no sign of improvement, and insurers will still face high costs from compensation claims and withdrawals."

Share prices of insurance companies got a boost in the first half of the year, amid expectations that regulatory efforts to expand investment options and products would help an industry on the abyss.

But disappointing investment returns and delays in kicking off a pilot project on tax-deferred pensions dimmed investor optimism. Insurance stocks, all Shanghai-listed, dropped more than the Shanghai Composite Index.

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