(Yicai Global) Aug. 31 -- The value of new business at five big Shanghai-listed insurance companies fell an average of 15.4 percent in the first half from a year ago, indicating that China’s insurers are facing considerable operational pressure.

New business at Ping An Insurance Company of China, China Pacific Insurance, China Life Insurance, New China Life Insurance and The People's Insurance Company of China totaled CNY74.7 billion (USD11.6 billion) in the six months ended June 30.

Their net profits rose an average of 7 percent to a combined CNY143.7 billion (USD22.2 billion). Of the five companies, Ping An was the only one to see a decline in net profit, with a drop of 15.5 percent. That was partly due to impairment provision for investments in indebted real estate developer China Fortune Land Development.

Profit at the other four was boosted by higher investment income and lower services charges and commissions, their first-half earnings reports showed. Income from investments at the five totaled CNY299.5 billion (USD46.4 billion), up 11.9 percent. 

But the value of new business was down across the board. New China Life saw a 21.7 percent drop, the steepest of the five. PICC suffered the smallest drop at 8.9 percent, while the other three posted double-digit decreases. 

Various factors are likely to blame, including reduced premium income and changes in premium structure as a result of a weak recovery in demand following the pandemic, China Merchants Securities said in a research note. 

The capital market also reflected the pressure on the sector, with insurance stocks seeing the biggest year-to-date decline of 37.9 percent. And there has been no sign of recovery following the release of the listed insurers’ semi-annual reports.

“The market still has a lot of concerns about the insurance industry,” a veteran of the sector told Yicai Global. “The demographic dividend is disappearing and insurance firms are restructuring teams and products. The rate of return from incremental asset reinvestment will also be impacted when interest rates fall.”

Rebuilding investors' confidence in the insurance sector’s fundamentals will be impossible in the near future, with their shares already significantly oversold and their market values down, according to research notes from Huachuang Securities and China Merchants Securities. 

Some analysts remain bullish about the long-term prospects. There may be improvements in terms of industrial assets and debts, Soochow Securities said in a note, adding that the sector's market valuation is at a record low, which fully reflects the short-term negative factors. 

Editors: Tang Shihua, Tom Litting