China Life Profit Tumbles 67% as Stock Declines Hurt Yield

Updated on
  • Insurer said last month first-half profit may fall up to 70%
  • Shanghai stock benchmark declined 17% amid economic slowdown

China Life Insurance Co.’s first-half profit slumped 67 percent as stock-market declines dragged down investment returns and reserves rose.

Net income dropped to 10.4 billion yuan ($1.6 billion) from 31.5 billion yuan a year earlier, the nation’s largest insurer said in a statement to the Shanghai stock exchange on Thursday. China Life said last month that first-half profit may fall as much as 70 percent.

The benchmark Shanghai Composite Index tumbled 17 percent in the first half amid an economic slowdown, hurting the value of Chinese insurers’ stock holdings and causing a slump in their combined profits. Smaller rivals New China Life Insurance Co. and China Pacific Insurance (Group) Co., due to report interim results later this month, have forecast profit declines larger than 40 percent. The more diversified Ping An Insurance (Group) Co. last week reported an 18 percent increase in net income for the period partly due to rising earnings from its banking arm.

China Life’s investment income fell 46 percent to 55.7 billion yuan, the company said. Fair-value losses from investments jumped 51 percent to 2.3 billion yuan, according to the statement.

Net earned premiums rose 24 percent, the company said. New business value, which gauges the profitability of new life policies sold, jumped 50 percent. Insurance reserves, or the pool of money set aside to settle policyholder claims, rose 31 percent, according to the statement.

Insurers’ combined profits slumped 54.1 percent in the period from a year earlier, largely due to stock market declines and higher expenses, the China Insurance Regulatory Commission said last month. Returns from equities totaled 24.1 billion yuan during the period, down by 261.2 billion yuan from a year earlier, data from the regulator show.

China Life shares rose 1 percent to HK$18.46 in Hong Kong trading on Thursday, trimming this year’s loss to 26 percent. The benchmark Hang Seng Index gained 4.2 percent.

— With assistance by Dingmin Zhang

Before it's here, it's on the Bloomberg Terminal. LEARN MORE