China Life expects a double-digit increase in premiums this year

China Life Insurance expects a double-digit increase in its premium income this year, President Lin Dairen said on Thursday. China’s largest insurer earlier reported a weaker-than-expected rise in net profit for 2015.

PUBLISHED : Thursday, 24 March, 2016, 7:40pm
UPDATED : Thursday, 24 March, 2016, 7:40pm

China Life Insurance expects a double-digit increase in its premium income this year, President Lin Dairen told a media conference on Thursday. China’s largest insurer earlier reported a weaker-than-expected rise in net profit for 2015.

The Beijing-based company said net income climbed 7.7 per cent to 34.7 billion yuan in 2015 from 32.2 billion yuan a year earlier. The rise was due mainly to higher investment returns from a rally in Chinese stocks in the first half of last year. The median estimate was for 35.4 billion yuan, according to 19 analysts surveyed by Bloomberg.

Premium income in 2015 jumped 10.0 per cent to 363.97 billion yuan. Lin said he is confident with his forecast for premium income growth this year due to the company’s improving business structure.

“We will strengthen the company’s sales force and improve long-term assets allocation to achieve stable growth,” Lin said. “At the same time, the products will be more diversified.”

China Life agreed last month to buy Citigroup’s stake in China Guangfa Bank for 19.7 billion yuan, a price Chairman Yang Mingsheng said was not expensive. The deal boosted the company’s ownership of the lender to 43.7 per cent from 20 per cent and made it the single largest investor.

Yang said China Life can deliver insurance products when it has closer ties to banks and could acquire more customer resources from Guangfa.

Victor Au, chief operating officer at Delta Asia Financial Group, said China Life’s short-term business development will be hindered by the purchase, though the longer-term impact may be positive due to

an abundance of Guangfa clients.

China’s banks face fundamental challenges, including deteriorating asset quality and pressure on net interest margins and that may drag down China Life’s valuation, Au said.

China Life shares fell for three consecutive days from a month-high HK$ 19.5. They closed at HK$ 18.5, down 3.9 per cent, on Thursday. Hong Kong’s stock market will be closed until Tuesday for the Easter break.

Au said China Life stock is worth buying at the current level.

Dominic Chan, head of Asia-Pacific insurance research at BNP Paribas increased his target price for China Life to HK$ 39.63 and gave a “buy” rating.