China Life Insurance First Quarter Profit Rises 67% on Investment Returns

China Life Insurance Co., the nation’s biggest insurer, said first-quarter profit jumped 67 percent as higher bond yields bolstered investment returns and premiums expanded.

Net income climbed to 10.2 billion yuan ($1.5 billion), or 0.36 yuan a share, from a restated 6.13 billion yuan, or 0.22 yuan, a year earlier, the Beijing-based company said in a statement to the Hong Kong Stock Exchange today.

China Life continued to boost profit after reporting a 72 percent jump in earnings last year as the benchmark Shanghai Composite Index surged almost 80 percent. The insurer said this month it would increase bond holdings as inflation and possible interest rate increases push up yields.

“Returns from bond investments should have increased noticeably as yields have climbed,” said Deng Ting, a Beijing- based analyst at Guodu Securities Co. before the announcement. “Premiums also grew quite fast.”

Investment income, which mainly includes bond yields and dividends, rose 57 percent to 18.34 billion yuan, China Life said.

The shares, which fell 0.6 percent to HK$35.85 in Hong Kong trading today, have dropped 6.5 percent this year compared with a decline of 4.2 percent in the benchmark Hang Seng Index.

The Shanghai Composite fell 5 percent in the first quarter on concern a possible tightening in bank credit may cool economic growth and curb liquidity. The gauge climbed 38 percent from March 31 to Dec. 31, 2009, leaving room for insurers to boost returns should they sell some stock holdings to pocket the profit.

Premiums earned amounted to 109.99 billion yuan as of March 31, today’s statement said. Government-mandated changes to accounting rules, adopted from 2009 annual reports, are allowing premium growth to translate into profits sooner than before as reserves drop, according to Luo Yi, a Shenzhen-based analyst at China Merchants Securities Co.

China Life lifted stocks to 15.3 percent of its portfolio as of Dec. 31, up from 8 percent a year earlier, while debt holdings dropped by 12 percentage points to 49.7 percent, the company said this month.

The combined first-quarter profit of China’s insurers may have risen 110 percent from a year earlier to 18 billion yuan, Wu Dingfu, chairman of the China Insurance Regulatory Commission, said in an April 20 statement posted to the regulator’s Web site.

To contact the Bloomberg News staff for this story: Zhang Dingmin in Beijing at Dzhang14@bloomberg.net

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