Result momentum propels China Life in Shanghai and HK
Shares of China Life Insurance, the mainland's largest insurer, soared in Hong Kong and Shanghai yesterday, propelled by its recent earnings, especially from its investment portfolio.
The stock rose to its 10 per cent daily limit on the Shanghai bourse, closing at 56.09 yuan.
In Hong Kong, its shares rose for the seventh consecutive trading day, ending at a record-high HK$37.15, up 5.69 per cent for the day and 34.6 per cent for the recent run-up.
Net investments income rose by 112.25 per cent and accounted for 23.73 per cent of its 101.43 billion yuan in revenue. However, the insurer warned that its investment yield in the second half may not as high as in the first due to market volatility.
Liu Lefei, the company's chief investment officer, said there would be 'some pressure' to maintain its investment yield.
Net investment yield rose to 3.36 per cent in the first half from 2.12 per cent a year ago.
'If the mainland capital markets, particularly the stock market, have big fluctuations, this could affect the investment income,' he added.
Citigroup in a report said that China Life's annualised net investment yield was 6.7 per cent but could moderate in the second half.
The insurer, however, was still optimistic about investment returns in the second half.
'Our prudent investment strategy is focused on fixed income investments,' Mr Liu said, adding that they would benefit from the continued rate increases on the mainland. 'Even if investment income in the second half is not higher than the first half, it could provide steady income for us in the long term.'
The China Insurance Regulatory Commission last month allowed mainland insurers to invest 15 per cent of their total asset in overseas equities under the qualified domestic institutional investor scheme.
Mr Liu reiterated that the company would take a gradual approach to overseas investments.
'China Life's business is doing well but that's no surprise to the market,' said an analyst with another US brokerage firm. Ping An Insurance also did well and got a contribution from its banking business, he said.
China Life said its long-term goal would be to develop into a multi-financial services provider.
Company chairman Yang Chao, said insurance, particularly life insurance, would continue to be the core business of the company but it would also expand into general insurance as well as the pension business.
'Banking, fund management and securities are also a key focus of our strategy,' said Mr Yang, adding that such businesses would become increasingly important.
China Life already has investments in Guangdong Development and China Minsheng Bank.