China Life First-Quarter Profit Rises on Investment Returns

China Life Insurance Co., the nation’s biggest insurance company, 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 yesterday. Net investment income, mainly interest income and dividends, climbed 37 percent to 26.1 billion yuan, while impairment losses declined 89 percent, according to the filing.

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

The results were “mainly driven by improving investment return,” Olive Xia, a Shanghai-based analyst at Core Pacific-Yamaichi International Ltd., wrote in a report today. “However, we expect weak premium income growth and upcoming maturity payment to remain the major overhang.”

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.

More Redemptions

China Life rose 1.5 percent to HK$20.90 at the close of trading in Hong Kong, trimming this year’s decline to 17 percent. Smaller China Pacific Insurance Group Co., which on April 24 reported a 241 percent jump in first-quarter profit, gained 1.1 percent to HK$27.90.

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.

The reforms may put the biggest short-term liquidity pressure on China Life, which has about 132 billion yuan of maturing policies it needs to pay this year, an increase of 93 percent on year, according to Bocom International Holdings Co.’s Beijing-based analyst Li Wenbing.

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