China Life First-Half Profit Rises on Smaller Impairment Losses

China Life Insurance Co. (2628), the nation’s largest insurer, said profit rose 14 percent in the first half as impairment losses from investments fell.

Net income climbed to 18.4 billion yuan ($3 billion), or 0.65 yuan a share, from 16.2 billion yuan, or 0.57 yuan a share, a year earlier, the Beijing-based company said in a statement to the Shanghai stock exchange today.

Better investment results helped China Life counter a 3 percent drop in gross premiums as the insurer focused on higher-margin products to improve business quality. Chinese life insurers are expected to report “strong” first-half earning growth, benefiting from a less volatile equity market and fair-value gains in their debt holdings amid lower bond yields, Sanford C. Bernstein Co. analysts led by Hong Kong-based Linda Sun-Mattison wrote in an Aug. 5 report.

Equity holdings fell to 5.26 percent of China Life’s portfolio as of June 30 from 7.5 percent at the end of last year, the company said.

Impairment losses from investments fell 82 percent to 656 million yuan due to smaller stock holdings, the company said. Investment income fell 4 percent, it said. Unrealized gains from mark-to-market changes fell 25 percent, according to the statement.

The benchmark Shanghai Composite Index (SHCOMP) rallied 3.5 percent in the year ended June 30. The gauge fell 3.2 percent in the first half of this year.

Ping An Insurance (Group) Co. (2318), China’s second-largest insurer, said Aug. 19 that first-half profit rose 19 percent as premium income climbed and banking revenue jumped.

Net Premium

Net premiums earned fell 3.5 percent, China Life said. New business value, a measure of profitability of new life policies sold, rose 6.9 percent, according to the statement.

China Life led an 18 percent slump in gross premiums at the six listed Chinese life insurers in the second quarter, compared to a 36 percent jump in the preceding three months, according to Hong Kong-based Bloomberg Intelligence analyst Steven Lam. The decline was probably because of a regulatory rule change in April that curbed bank-counter sales of mainstream savings-type products, Lam said.

Fewer bancassurance sales are “not necessarily a bad thing” as margins are very low or even negative in this channel, Hong Kong-based analysts led by Arjan Van Veen at Credit Suisse Group AG wrote in a June 18 report.

China Life’s shares fell 1.1 percent to HK$22.65 at the close of Hong Kong trading, extending this year’s decline to 6.6 percent.

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

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