Earnings reports

China Life reports 2016 net profit tumbles 44.9pc, weighed by drop in investment income

PUBLISHED : Friday, 24 March, 2017, 5:04pm
UPDATED : Friday, 24 March, 2017, 10:46pm

China Life Insurance Co, the country’s biggest life insurer, said it will continue to diversify its overseas investments despite tightened controls on capital outflows.

Speaking during its annual results press briefing on Friday, vice president Zhao Lijun said China Life’s overseas investments amounted to US$8.6 billion, adding that the company will continue to enhance, as well as diversify its outbound investment this year.

“We have indeed been affected by China’s tightening capital controls in the short term,” Zhao said. “But we also believe that opening up is still the country’s national policy and we will continue to invest overseas in the long run.”

Zhao said the insurer would increase its alternative investments this year, such as commercial properties and financials.

The Beijing-based insurer reported 2016 net profit fell 44.9 per cent on year to 19.13 billion yuan (US$2.78 billion), mainly due to a drop in investment income related to downtrending interest rates and volatile capital markets, as well as “the update on the discount rate assumption for reserves of traditional insurance contracts”, according to a filing to the Hong Kong stock exchange.

The insurer was also upbeat about its market share as the China Insurance Regulatory Commission (CIRC) tightens restrictions over short and mid-term life insurance products, which could potentially eat into smaller insurers’ benefits, according to Lin Dairen, president of China Life.

China Life together with the other six big mainland insurers have seen their market share fall to 60 per cent from 80 per cent during the last three years, amid aggressive competition from smaller firms, according to Lin.

However, with the launch of the CIRC’s new policies this month, small and medium size insurers will come under pressure, as they mainly sell short and mid-term insurance polices, while large insurers, whose main products are long-term policies, would be little affected, Lin said.

China Life’s shares eased 1.2 per cent to close at HK$24.00 on Friday in Hong Kong.

The People’s Bank of China issued new rules on overseas currency transfers in January requiring all Chinese banks and financial institutions to report all domestic and overseas cash transactions of more than 50,000 yuan ($7,201), compared with 200,000 yuan previously. The new rules are due to take effect in July.

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