PICC Property and Casualty Company Limited, China's largest non-life insurer, has revealed it has huge assets in an account with the troubled Hantang Securities. China Daily reported Tuesday.

The company has government bonds of an aggregate face value of 356.5 million yuan (US$42.9 million) and cash of 56.85 million yuan (US$6.8 million) in its account with Hantang, the assets of which have been put into the custody of and are being operated by China Cinda Asset Management Corporation earlier this month, it said in a statement last Friday.

"In the meantime, shareholders of the company and investors are advised to exercise caution in dealing the securities of the company," it said.

Its Hong Kong-listed shares fell by 2.86 per cent to close at HK$2.55 (32 US cents) yesterday.

Chinese authorities are trying to overhaul a loss-making securities industry. About half of the brokerages posted losses in the first six months of this year.

On the same day that Hantang was put into the custody of China Cinda on September 3, the China Securities Regulatory Commission also took over another three troubled brokerages.

Analysts say Hantang suffered huge losses in its proprietary trading and bond repurchase operations earlier this year as the bond market fell abruptly.

"From September 3, 2004, the company has taken active measures to recover the government bonds and cash standing in its account with Hantang Securities," the PICC Property and Casualty statement said.

"However, currently Hantang Securities has temporarily suspended payments of proceeds from securities trading to its institutional customers. Accordingly, the company has not been able to recover such assets," it said.

"The company will continue to take necessary actions, including legal action, to recover its assets," the company said.

PICC Property and Casualty reported a 27.1 per cent drop in net profit for the first half of this year - to 963 million yuan (US$116 million) - largely due to losses in the capital market.

The company's net losses on trading and non-trading securities amounted to 514 million yuan (US$61.9 million) in the first half of this year, compared to a net gain of 230 million yuan (US$27.7 million) a year earlier, according to its first-half report.

But the company remains a leading non-life insurance provider on the Chinese mainland, boasting a 63.3 per cent market share in the first half of this year.

And its underwriting operations have witnessed strong growth this year, with turnover from the motor vehicle sector, the main pillar in the mainland non-life insurance sector, increasing by a robust 4.8 billion yuan (US$578 million) in the first six months of this year.

(China Daily)