China Pacific Insurance Group Co, the country's third largest insurer, saw first quarter profits plummet 88.8 percent to 200 million yuan ($29.28 million), affected by a premium slowdown and a write-off of stock investment.

Although investment profit reached 3.27 billion yuan in the quarter, the insurer made an asset impairment provision of 151 million yuan due to the shrinking value of previous equity investment, it said in a filing to the Shanghai Stock Exchange on Monday.

The write-off is part of the insurer's digesting process of book losses incurred in last year's bearish stock markets, analysts said.

As of March 31, total assets of the company amounted to 348.61 billion yuan, up 4 percent over the end of last year. Return on equity stood at 0.4 percent, down 2.9 percentage points on a yearly basis. Earnings per share were 0.03 yuan.

Earlier this month, China Pacific said its premium income dropped 5 percent year-on-year to 29.2 billion yuan in the first quarter. The figure lagged behind two major rivals - China Life and Ping An Insurance - which saw premiums up 2 percent and 37 percent, respectively.

China's insurance sector saw premium income totaling 327.7 billion yuan in the first quarter, an increase of 10 percent, while investment profit reaching 43.3 billion yuan, the industry regulator said last Tuesday.

Analysts attributed Pacific's premium slowdown to an adjustment of insurance product structure this year.

"To raise profit margin, China Pacific plans to strengthen the installment payment business of traditional insurance products and dividend-oriented products. During the adjustment, fluctuations of premium income are inevitable," according to Li Cong, analyst from Changjiang Securities.

China Pacific will focus on debenture credit bonds and infrastructure investment this year for stable returns, Yang Wenbin, manager from the insurer's investment division said at a results briefing earlier in Shanghai. "Our strategy this year is pursuing safe investment and avoiding rash advance," he added.

Shao Ziqing, analyst with Ping An Securities, said China Pacific has written off most equity investment losses so far. The recent rally of the domestic stock market also helped to retrieve some book losses, which will lay a solid foundation for future growth.

Shares of China Pacific closed down 7 percent on Monday to 16.73 yuan. The price is 44 percent below its initial public offering price of 30 yuan in December 2007.

(Chinadaily.com.cn April 28, 2009)