China Life Profit May Drop Up to 70% on Investment Returns

  • Chinese insurers’ total profits fell 54.1% in the first half
  • Shanghai stock benchmark declined 17% amid economic slowdown

China Life Insurance Co., the nation’s largest insurer, said net income in the first half of the year may fall as much as 70 percent from a year earlier as stock-market declines dragged down investment returns.

The Beijing-based company attributed the forecast, which is based on unaudited numbers, to lower investment income and changes in discount-rate assumptions in reserves for traditional insurance contracts, according to a filing with the Hong Kong stock exchange on Friday. The insurer is scheduled to report first-half results Aug. 25.

The benchmark Shanghai Composite Index slumped 17 percent in the first half as the nation’s economic growth slowed, hurting the value of insurance companies’ stock investments. China Life’s smaller rival New China Life Insurance Co. said July 22 its first-half profit may fall about 50 percent, citing declining investment returns. Another firm, China Taiping Insurance Holdings Co., forecast a similar decline on Friday.

Insurers’ combined profits slumped 54.1 percent in the period from a year earlier, largely due to share-market declines and higher expenses, the China Insurance Regulatory Commission said Thursday. 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 showed.

China Life shares fell 1.7 percent to HK$17.68 in Hong Kong trading, extending this year’s loss to 29 percent. Its forecast came after markets shut Friday.

China Taiping separately projected a first-half profit drop of 45 percent to 50 percent, also in a statement after the market closed. Profit is expected to be lower as the company had bigger gains from equity investments in the first half of 2015, it said.

— With assistance by Dingmin Zhang

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