Ping An Insurance (Group) Company's plan to make provisions for impairment in its investment in beleaguered Belgian financial services company Fortis will probably result in a 2 billion yuan ($292 million) loss on the company's third quarter report, industry analysts have said.
"The insurer's whole year performance is likely to hover around the break-even point," said Wang Xiaogang, a senior analyst with Shanghai-based Orient Securities.
Fortis-related investment losses hit 15.7 billion yuan in book value as of the end of September, and the loss will be reflected in its third quarter report, Ping An said in a statement on Sunday.
The country's second largest insurance giant has invested 23.87 billion yuan in Fortis shares since November last year. After allowing for impairment provisions, the company still maintains sufficient capital adequacy and a solid financial position, with payment capability of more than 300 percent, said Ping An spokesman Sheng Ruisheng.
"The accounting treatment will impact on this year's profit only, and it is predicted to recover to normal profit levels next year," Sheng said.
The accounting treatment will not have any impact on Ping An's net asset, price/book value and cash flow per share, Wang said.
The group will provide sufficient capital support to all of its controlled subsidiary companies. It is also planning to launch procedures on an increased investment of 20 billion yuan in Ping An Life, Sheng added.
Meanwhile, Ping An of China had earlier announced terminating plans to purchase 50 percent of the shares of Fortis' asset management company. In April this year, Ping An and Fortis signed an agreement to buy the Fortis asset management company for 2.15 billion euros.
"The halting of further investment in Fortis largely eases investors' worries, given the increased turbulence in the global financial market," Wang said.
Ping An's A shares jumped by 1 percent to 33.4 yuan yesterday, and its H shares closed at HK$46 ($5.92), a plunged of 8 percent.