China Life’s First-Quarter Profit Rises on Investment Returns

China Life Insurance Co. (2628), the nation’s biggest insurer, reported a 79 percent jump in profit in the first quarter as investment returns increased and impairment losses fell.

Net income rose to 10.1 billion yuan ($1.6 billion) from 5.63 billion yuan a year earlier, the Beijing-based company said in a statement to the Hong Kong stock exchange. Investment income, which is mainly interest income and dividends, climbed 37 percent to 26.1 billion yuan, while impairment losses declined 89 percent, according to the statement.

China Life wrote off investment losses last year and positioned itself to book profits from any rebounds in the Shanghai Composite Index (SHCOMP), according to Guotai Junan Securities Co. The index entered a bull market on January 29 after surging 20 percent from a December low. The Shanghai gauge has slumped 9.7 percent since reaching this year’s high on Feb. 6 high.

“They should have absorbed almost all their unrealized losses by last year,” said Olive Xia, a Shanghai-based analyst at Core Pacific-Yamaichi International Ltd. “Investment returns should be a bit better this year if they can lock in some profit at high points” of the market.

Net premiums earned fell 2.4 percent to 110.1 billion yuan as Chairman Yang Mingsheng curbed sales of low-margin policies to focus more on long-term contracts.

China Life added 0.7 percent to close at HK$20.6 in Hong Kong trading, before the publication of earnings, trimming this year’s decline to 19 percent. Smaller China Pacific Insurance Group Co. (2601), which yesterday reported a 241 percent jump in first- quarter profit, gained 1.3 percent today.

The China Insurance Regulatory Commission may scrap the 2.5 percent maximum rate on fixed-return policies in a trial starting as early as next month to help insurers make their products more attractive, a person with knowledge of the matter said this week.

The changes may prompt redemptions to increase by less than 50 percent by value from the current level, as existing policyholders end their contracts to seek higher returns from new policies, the person said.

To contact Bloomberg News staff for this story: Zhang Dingmin in Beijing at dzhang14@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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