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Monday, October 6, 2008

Chinese insurer to record US$2.3bil loss on Fortis

BEIJING: Ping An Insurance Co., one of China's biggest insurers, said Monday it will record a US$2.3 billion loss on its stake in troubled European bank Fortis NV.

The writedown was the biggest blow yet for a Chinese financial institution from the Western credit crisis. It was a setback to one of the most ambitious foreign acquisitions to date by China's fast-growing banks and insurers.

Ping An's earnings for the first three quarters of 2008 will be affected by the writedown, the insurer said in a statement issued through the Hong Kong stock exchange. But Ping An said it was still financially sound.

Ping An was the biggest shareholder in Fortis, with a 5% stake, before the bank ran into a financial crisis triggered by losses on credit derivatives and problems stemming from a corporate acquisition. The Dutch, Belgian and Luxembourg governments and French bank BNP Paribas took over portions of Fortis.

Ping An said the total cost of its Fortis shares was 23.9 billion yuan (US$3.5bil).

"Even after taking impairment accounting treatment on the investments in Fortis Shares in the 2008 third quarterly report of the Group, the capital position and solvency margin of the Group remain solid and sufficient, the Group has a strong foundation and the financial condition is stable,'' the company statement said.

Ping An backed out of a deal last week to buy 50 percent of Fortis's asset management arm for 2.15 billion euros (US$3.39bil). Fortis said the Chinese company blamed turmoil in financial markets.

Ping An had total assets of 689 billion yuan (US$100bil) as of June 30, according to the company's last financial report.

"Core business lines such as insurance, banking, trust and securities are experiencing healthy and decent growth,'' the Ping An statement said. "The interests of our customers are adequately protected. The Group will continue to deliver long-term sustainable returns to investors.''

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