Posted on May 06, 2010 by Sergio Ulloa
PICC Property & Casualty Co., the largest non-life insurer in China, is aiming to make a profit from their underwriting operations this year, after premium rates rebounded and improvements to the claims management of the company have been completed.
Supporting the above initiative, PICC expects to benefit from an impending interest rate hike, since the company currently has large cash holdings and their cash inflows continue strong during the first quarter of this year.
Aided by surges in the Chinese stock market last year, the profits of PICC jumped 16-fold to US$260.8 million (EUR 200.6 million), lifting the value of investments and increasing the insurance premiums. Furthermore, the volume of claims dropped more than 6 percent to a claims to premiums earned ratio of 69.2 percent, which overall translates into a narrowing of 21 percent for the underwriting losses compared to last year.
Of all the premiums earned during 2009, 76 percent are attributed to motor insurance and given the tightening in regulations for this sector, PICC has been able to cut discounts in many areas from 30 percent to between 10 and 20 percent, helping the bottom line.
As a consequence of the aggressive sales expansion and rapid growth during the past year, the solvency ratio of PICC fell 34 percentage points to 111 percent.
The solvency ratio represents the ability of an insurance company to settle claims. The regulator in China can order a company with a solvency ratio falling between the range of 100 to 150 percent to formulate plans to raise capital. Companies with a solvency ration below 100 percent are subjected to business restrictions, curbs in investment and the suspension of dividends payable to shareholders.
Last year PICC sold debt amounting to US$733 million (EUR 563.9 million) in the form of subordinated bonds and would seek to repeat selling such instruments, should the regulator in China formally requests the company to raise capital.
Insurance Company mentioned:
PICC Health Insurance Company Limited (PICC) was officially launched on Apr 8, 2005 as the first professional health insurance company. PICC Health is a modern shareholding insurance enterprise sponsored jointly by PICC Group, DKV, the largest private health insurance company in Europe and other famous enterprises. PICC Health has actively introduced international advanced technology extensively consolidating external social resources and strives to provide the broad masses of people with health security, implementation of health management, which has been leading the professional health insurance market in order to realise the health of public and the harmony of society.