China Life Profit Falls 28% as Investment Returns Decline

China Life Insurance Co. (2628), the nation’s biggest insurance company, said profit fell 28 percent in the first quarter from a year earlier as investment returns dropped.

Net income fell to 7.23 billion yuan ($1.2 billion), or 0.26 yuan a share, from 10.1 billion yuan, or 0.36 yuan, a year earlier, the Beijing-based company said in a statement to the Shanghai stock exchange.

The benchmark Shanghai Composite Index (SHCOMP) slumped 9.1 percent in the year ended March 31 as the nation’s economic expansion cooled, reducing the value of insurers’ equity holdings. China Life’s gross premiums rose 18 percent in the first quarter from a year earlier, as the company boosted sales of regular-premium products to improve margins, according to China Insurance Regulatory Commission.

Investment income fell to 24.2 billion yuan in the first quarter from 26.1 billion yuan a year ago. Operating income fell to 154.2 billion yuan from 138.3 billion yuan a year earlier.

China Life fell 1.5 percent to close at HK$20.45 in Hong Kong trading yesterday, before the earnings statement, extending this year’s decline to 16 percent.

Profit more than doubled last year, reversing two years of earnings declines as investment returns improved and impairment losses dropped, China Life said in March.

The insurer boosted debt holdings by 1 percentage point to 47.3 percent of its portfolio as of Dec. 31, while cutting equities by 1.5 percentage points to 7.5 percent in 2013, indicating a more conservative investment strategy, Jiao Wenchao, an analyst at Ping An Securities Co., wrote in a report on March 26.

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

To contact the editors responsible for this story: Andreea Papuc at apapuc1@bloomberg.net Tomoko Yamazaki, Joshua Fellman

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