<News Alert> 1H22 profit warning: expect to record net loss in 1H22 due to market volatility, FX losses and impact from IFRS 9 adoption
- Zhong An issued a profit warning and expect 1H22 earnings to incur net loss of Rmb 650-750m, compared to net profit of Rmb 604mn for 1H21
- The expected net loss is primarily due a) poor investment income performance as impact by capital market volatility, b) impact from IFRS 9 adoption which result in mark-to-market losses in its investment, and c) incur exchange losses of Rmb300-400m on its USD-denominated bonds given USD appreciation
- Underwriting business remains on an improving track, with combined ratio expect to continue to see y-o-y improvement
- Market consensus expects Zhong An’s net profit to reach Rmb 1bn in FY22, we see downside risk in ours and consensus forecast.
- We expect share price to be weak in the near term.