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China Re estimates up to 45% uplift in first-half profits

6th August 2019 - Author: Steve Evans

China Reinsurance Corporation (China Re) has put a preliminary estimate for its first-half 2019 results, suggesting as much as a 45% uplift in profits is to be expected.

China ReFor the first six months of 2019, China Re’s estimates suggest that net profit attributable to equity shareholders in the reinsurer may be up by from 35% to as much as 45%, compared to the first-half of 2018.

For H1 2018, China Re reported a net profit of RMB 2.331 billion (around US $331 million).

So, at the lower end of its estimates, China Re should report net profit of around RMB 3.303 billion, to as much as RMB 3.38 billion (almost US $480 million) of net profit at the top end of its estimated range.

It’s a significant increase, year-on-year, which the company said can be explained by two factors.

Firstly, China Re expects to report improved investment results for the first-half of 2019, compared to the prior year.

Secondly, the reinsurer has also experienced fewer losses in the last six months, leading it to expect to report an improved underwriting result and higher profits for H1 2019, compared to last year.

In addition, this is the first period where the results of recently acquired Chaucer are going to be included in China Re’s reporting, which has provided a further boost.

The acquisition of international specialty insurance and reinsurance group Chaucer by China Re only completed in April, so the contribution from its results will likely not be as significant as we should expect to see in further quarters down the line.

In addition, it will be interesting to see how the added diversification benefit of Chaucer’s international business plays into China Re’s results going forwards.

China Re, like other Chinese insurance and reinsurance players, is expansively looking to diversify globally, with recent tie-ups around the Belt & Road projects and infrastructure developments one angle to this.

The Chaucer acquisition is another angle that will provide diversification benefits to China Re going forwards.

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