China Life Insurance, the mainland's largest insurer, said its first-half net profit grew 68.1 per cent on the back of strong investment income and fewer impairments. It warned rising competition will continue to put pressure on the company's profitability.
Net profit for the six months to June rose to 16.2 billion yuan (HK$20.4 billion) from 9.64 billion yuan a year ago, the company said in a filing to the Hong Kong Stock Exchange yesterday. The earnings beat an estimate of 14.8 billion yuan by four analysts polled by Thomson Reuters.
Investment income increased by 13.6 per cent to 40.1 billion yuan, while gross investment yield was 2.17 percentage points higher at 4.96 per cent compared with 2.79 per cent from the same period last year. Impairment losses from equity investments dropped to 3.7 billion yuan from 15.17 billion yuan as the capital market improved.
Net premium earned for the first six months rose 8.7 per cent to 200.8 billion yuan from a year ago. The value of new business, which is a measure of the profitability of new policies sold, expanded 0.8 per cent to 12.59 billion yuan.
However, analysts said the growth in premium income was boosted by the launch of a new single-premium bancassurance product in June that offers a relatively low margin. Mainland life insurers have been seeking to boost bancassurance, the sale of insurance products through banking networks, in an effort to diversify distribution channels amid rising competition.
Liu Jun, an analyst with Changjiang Securities said in a research note that expanding bancassurance would limit China Life in improving its embedded value and new business value.
The company's embedded value, a measure of insurance policy and asset values, rose 7.6 per cent to 363.4 billion yuan in the first six months this year from the previous year.
China Life chairman Yang Mingsheng said in the statement that the insurance industry was "facing various difficulties" amid a slowdown in growth and adjustment in structure.
"The development environment both within and outside China remains complicated," he said.
An interim dividend of 14 fen per share was declared. Shares in China Life fell 1.94 per cent to close at HK$19.16.