China Life, Ping An earnings jump in first nine months on stock rally

Stock rally boosts profit of mainland's two largest insurers in first nine months of year with yields on investments about 5 per cent

PUBLISHED : Saturday, 26 October, 2013, 2:55am
UPDATED : Saturday, 26 October, 2013, 2:55am

A recovery in the stock markets boosted the earnings of mainland insurers, with China Life Insurance more than tripling its profit in the first nine months of the year and Ping An Insurance increasing its 45.1 per cent.

China Life, the mainland's largest insurer by market value, said its net profit for the first three quarters of this year reached 23.7 billion yuan (HK$30.2 billion), more than double what it was in the same period last year.

Third-quarter net profit totalled 7.5 billion yuan, compared with a net loss of 2.2 billion yuan in same three-month period last year when equity market weakness resulted in significant impairment losses.

Investment income in the first nine months increased 23.8 per cent to 72.4 billion yuan, with gross investment yield rising 2.8 percentage points to 4.97 per cent.

China Life posted an impairment gain of 903 million yuan, against a 1.34 billion yuan loss a year ago.

Premium income in the first nine months rose 5.4 per cent to 277.2 billion yuan. Premium income in the three months to September dropped 4.7 per cent to 73.9 billion yuan, after growing 8.7 per cent in the first half of the year.

Competition from wealth management products that offer high returns to investors dented growth in China Life's premium income, Ping An Securities said in a report. The deregulation of predetermined rates for life insurance policies also put pressure on insurers' premium income growth.

The China Insurance Regulatory Commission in August scrapped the 2.5 per cent cap on returns to life insurance policies. Analysts said the deregulation would trigger a price war and withdrawals from insurance.

Hong Kong and Shanghai-listed Ping An Insurance, the mainland's second-largest insurer by market value, said its net profit for the first nine months rose to 23.3 billion yuan from 16.1 billion yuan in the same period last year.

Investment income more than doubled to 41.8 billion yuan from 19.2 billion yuan, with total investment yield at 5 per cent.

The profit contribution of its banking unit, Ping An Bank, increased 14.8 per cent to 6 billion yuan, while gross premium income grew 13.7 per cent to 204.5 billion yuan.

The insurer's third-quarter net profit rose to 5.4 billion yuan from 2.1 billion yuan on the back of 140 per cent growth in investment income, which totalled 14.4 billion yuan. Premium income grew 15.3 per cent to 60.1 billion yuan.

"The global economy turned around in the third quarter but the outlook remains uncertain," Ping An chairman Ma Mingzhe said in a statement yesterday.

The company would actively monitor changes in the external environment and economic climate, according to the statement.