China's Ping An Insurance 2Q profit falls 39.5 pct

By Kennix Chim

HONG KONG (Reuters) - Ping An Insurance (Group) Co (2318.HK), China's second-largest life insurer, posted a 39.5 percent decline in second-quarter profit on Friday as a drop in investment income, due to a sharp fall in the stock market, offset growth in premiums.

A near-50 percent tumble in China's domestic stock market and rising claims related to an earthquake and snowstorms earlier in the year have squeezed first-half profits at Chinese insurers, and a continued decline in share prices threatens to crimp second-half earnings.

Ping An (601318.SS), which owns 5 percent of Belgian-Dutch financial group Fortis, reported net profit attributable to shareholders of 2.39 billion yuan (US$347 million) in the three months ending June 30, based on Reuters calculations, compared with 3.95 billion yuan in the same period last year.

The insurer reported net profit attributable to shareholders of 9.49 billion yuan in the first half of 2008, compared with 9.69 billion yuan in the year-earlier period.

On average, four analysts polled by Reuters expected the Shenzhen-based company, which trails market leader China Life Insurance Co (2628.HK)(LFC.N), to earn 7.72 billion yuan in the first half, with estimates ranging widely from 5.6 billion yuan to 9.3 billion.

In March Ping An, which is 17 percent-owned by global bank HSBC Holdings (HSBA.L)(0005.HK), agreed to pay 2.15 billion euros ($3.37 billion) for 50 percent of Fortis' asset management business, building on an initial investment in the company last year as it looks to diversify overseas, beyond its core insurance business.

Fortis has since said approval from Chinese authorities has been delayed and is expected later in the year.

REDUCE EQUITY PORTFOLIO

Due to China's tumbling local A-share market this year, Ping An reported 9.3 billion yuan in total investment income in the first half of 2008, down 64 percent from the same period last year, due to an impairment loss of 1.6 billion yuan.

Its net investment yield inched down to 3.8 percent from 4.3 percent a year ago.

Due to the fluctuations in the capital markets, Ping An increased its fixed maturity investments to 64.2 percent of its total investment assets as at end of June, from 47.7 percent as at end of December, while equity investments decreased to 15.6 percent from 24.7 percent.

The Shanghai benchmark index .SSEC has shed half its value this year on the global sell-off and China's measures to curb inflation.

Ping An reported gross written premiums were up 23.6 percent to 54.2 billion yuan in the first half, but its property and casualty (P&C) business posted a 55 percent drop to 339 million yuan, due to payouts for natural disasters.

The company obtained shareholder approval earlier this year to raise about $16 billion in one of the world's biggest corporate fund raisings, and plans to use part of the money for acquisitions.

The capital-raising plan battered Ping An's share price and roiled the Shanghai stock market, and the firm said in May that it would not issue new domestic shares for at least six months.