Top Insurers Saw Losses from Investment in Listed Firms

China Life Insurance Co. (China Life, 601628.SH, 2628.HK), Ping An Insurance (Group) Co. of China Ltd. (601318.SH) and China Pacific Insurance (Group) Co. (CPIC, 601601.SH) by this March totally suffered floating losses of about 1.1 billion from their investment in the country's listed companies.

By the end of last year, insurance institutions were the top 10 tradable shareholders of 90 companies traded on the Shanghai and Shenzhen stock exchanges, with the market cap of the 1.147 billion shares they held standing at CNY 21.5 billion. As of March 23, 2010, however, the market cap of these shares shrank 5.34% to CNY 20.4 billion.

As the country's biggest life insurance firm, Beijing-based China Life suffered the largest amount of such floating losses. In the first three months of this year, the life insurer suffered total floating losses of about CNY 700 million from the investment in 42 stocks.

Based in the southern boomtown Shenzhen, Ping An as China's second biggest insurer by premiums saw floating losses of CNY 209 million in the first quarter of this year, as one of the the top ten tradable shareholders of five stocks. As for CPIC, the financial center Shanghai-based insurance group as the shareholder of 17 listed companies suffered floating losses of CNY 187 million in January to March 2010.

China Life, Ping An and CPIC gained premium revenues of CNY 41.8 billion, CNY 21.8 billion and CNY 16.9 billion respectively in January 2010. The boosting news helped drive up the stock prices of these listed insurers days ago.

Still, a latest report of HSBC Insurance showed that the consumers of China's Mainland are more willing to put their savings into banks, out of their worry for the inflation, even though the Chinese economy actually has made a turnaround from the financial crisis.

In this way, it becomes tough for insurers to see the premium increase in cities like Shanghai, Beijing and Guangzhou. So more second-tier cities in central and western China are going to become the major target markets of these insurance companies this year.

Actually, the bank deposits cannot take up a large proportion in people's wealth management plan. They are suggested to raise the proportion of funds or insurance products to keep a balance of their wealth management plan, according to their own financial strengths. With the rise of domestic commodities prices and the ambiguous future of domestic stock market, commercial insurance is an indispensable part for people to prevent against future risks.