China Life Insurance

China Life posts 94.8pc profit growth

PUBLISHED : Wednesday, 26 March, 2008, 12:00am
UPDATED : Wednesday, 26 March, 2008, 12:00am

China Life Insurance, the mainland's largest insurer, said net earnings jumped 94.8 per cent last year, lower than analysts had expected as a weaker share market weighed on an otherwise stellar performance.

The Beijing-based insurer, which controls almost 44 per cent of the nation's life insurance market, made 38.88 billion yuan (HK$42.95 billion) in profits, compared with 19.96 billion yuan a year earlier, on revenue that rose 29.9 per cent to 191.37 billion yuan.

Net profit for the first half hit 23.3 billion yuan, up 160 per cent.

Full-year earnings were 65 per cent lower than the first half due significantly to a weaker A-share market performance in the fourth quarter.

Net investment income surged 76.49 per cent to 44.02 billion yuan, mainly as a result of a stock market that almost doubled last year. Total investment yield increased 2.27 percentage points to 10.24 per cent. Its overall investment yield lagged behind that of rival Ping An Insurance (Group), which recorded 14.1 per cent during the period.

Share investments made up about 20 per cent of China Life's total investment portfolio, with investments in government bonds and other debt securities accounting for the remainder. 'Compared to Ping An, China Life has a more conservative investment strategy with longer-term equity investments instead of short-term gains,' said Olive Xia, an analyst at Core Pacific-Yamaichi International. 'Its investment returns should fall greatly this year.'

Mainland insurers relied on domestic equity investments to lift their earnings last year.

Total investment income of China Life accounted for about 40.89 per cent of its total revenue, compared with 37.76 per cent for Ping An.

China Life made 19.4 billion yuan on equity securities last year compared with less than five billion yuan a year earlier.

The company's gross written premium and policy fees rose 12.54 per cent to 111.89 billion yuan.

Under mainland accounting standards, the insurer only recorded 6.9 per cent growth in life premiums, compared with 14.4 per cent in the previous year.

'China Life is still very much a 'life-only' insurance company. We don't expect its non-life units such as annuity and property and casualty businesses to contribute more than 5per cent of its revenue over the next three years,' said Francis Chan, an analyst at Bear Stearns.

China Life's assets reached 933.7 billion yuan by the end of last year, up more than 22 per cent from a year earlier.

In 2006, insurers were allowed to invest in the domestic stock market.

In recent months a rule limiting them to investing a maximum of 5 per cent of total assets in local stocks was lifted to 10 per cent.

Insurers are now also allowed to invest up to 15 per cent of their assets in overseas securities.

The company declared a final dividend of 42 fen per share to shareholders.

Shares of China Life rose 9.15 per cent yesterday to HK$27.45.