second-largest life insurer, trumpeted its 5 percent equity stake
in Belgo-Netherlands bancassurer Fortis acquired for $3.5 billion
as a major step in its goal of becoming a major player in global
financial markets.
It’s an investment Ping An has come to
regret in the wake of Fortis’ near-demise and lead it to seriously
question its future strategy.
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Damage caused by the precipitous slump in
Fortis’ share price since Ping An acquired its equity stake was
reflected in a marked-to-market loss of CNY18.611 billion ($2.73
billion) on the investment, CNY15.7 billion of which was written
off against equity in the third quarter of 2008.
The write-off plummeted Ping An into a net
third-quarter loss of CNY7.92 billion, down from a CNY5.42 billion
net profit in the third quarter of 2007, and left its shareholder
equity 26 percent down at CNY84.1 billion.
“The company has learned a lesson from the
investment in Fortis shares,” Ping An conceded in its third-quarter
statement. “The company will deepen its understanding concerning
the risks in the international financial market, re-examine its
asset allocation and investment strategies,” the insurer added.
To an extent, however, Ping An has come off
lightly from its flirtation with Fortis. Had Fortis’ problems
emerged later than they did Ping An could well have found itself
closing a deal in which it would have bought a 50 percent stake in
Fortis’ global asset management unit Fortis Investments for €2.15
billion ($2.7 billion).
The acquisition agreement announced in April
2008 was terminated in October.
A troubled period for Ping An is reflected in
its share price which by late-October had fallen 80 percent from
its 12-month high on the Hong Stock Exchange.
China’s largest life insurer China Life, which
reported a 70 percent year-on-year fall in net third-quarter profit
to CNY2.34 billion, has seen its share price fall by 70 percent
from its 12-month high.
