China Life Insurance

Earnings at China Life soar 114.4pc

PUBLISHED : Wednesday, 18 April, 2007, 12:00am
UPDATED : Wednesday, 18 April, 2007, 12:00am

China Life Insurance, the mainland's largest life insurer, said profit surged 114.44 per cent last year to a record, as it sold more policies and reaped higher returns from investments.

Net profit rose to 19.96 billion yuan from 9.31 billion yuan in 2005, beating the mean estimate of 16.2 billion yuan by 11 analysts in a Bloomberg survey.

Revenue climbed 49.99 per cent to 147.31 billion yuan, while net premium income and policy fees grew 23.5 per cent to 98.85 billion.

Investment income jumped 49.49 per cent to 24.94 billion yuan with a yield of 4.27 per cent, up 41 basis points, partly fuelled by an 843.72 per cent growth in stock investments to 4.66 billion yuan.

The mainland's insurance sector is benefiting from rising household income and Beijing's policy to shift the pension burden to the private sector.

The surging stock market, whose gains more than doubled in Shanghai last year, also helped insurers make higher investment returns.

The company's embedded value, a gauge of future profit based on current policies, rose 59.7 per cent to 181.98 billion yuan. The value of new business increased 40 per cent to 10.48 million yuan.

'We are taking steps to pour our resources into three major sales channels for cross-referral sales and to share customer resources,' chairman Yang Chao said.

Mr Yang said the industry was facing challenges including keen competition and the uncertainty of the capital markets.

The company had optimised its investment structure to improve investment returns, he said.

To broaden its income base, China Life is seeking to tap into other financial business such as banking. It bought a 20 per cent stake in Guangdong Development Bank last year.

'I expect premium income to maintain 20 per cent growth this year, but [the company] may not have gains on investment income that are as big as last year,' said Bill Stacey, an analyst at Credit Suisse.

China Life declared a final dividend of 14 fen per share. Its stock closed 2.14 per cent lower at HK$25.15 yesterday.

Reaping the fruit

China Life Insurance's forecast-beating net profit, in billion yuan: 19.96