China Life Insurance Co., the nation's biggest insurer, said first-half profit jumped 72 percent because of higher investment gains.
Net income rose to 8.97 billion yuan ($1.13 billion), or 0.33 yuan a share, from 5.21 billion yuan, or 0.19 yuan a share, a year earlier, the Beijing-based company said in a statement on Aug 28. That beat the median estimate of 8.5 billion yuan.
Rising Chinese stock markets allowed the company to earn more investing premiums, and Chairman Yang Chao plans to take advantage of a government relaxation of investment restrictions to seek higher returns. China Life aims to buy more corporate bonds and overseas securities and branch into infrastructure projects and property.
“The strong bottom line was supported a lot by equity returns on the investment side,” said Bill Stacey, an analyst at Credit Suisse in Hong Kong, before the announcement. “The second half is going to be much weaker. They have to continue to broaden the range of different types of investments to make returns more stable.”
Total investment income surged 170 percent to 17.6 billion yuan. Of that, net investment income gained 46 percent to 11.3 billion yuan. Realized gains rose to 497 million yuan, against a loss of 383 million yuan a year earlier. Unrealized gains reached 5.8 billion yuan from a loss of 888 million yuan a year earlier.
Investment yield was 4.24 percent in the first six months, the company said in a separate release. Of the 560 billion yuan of financial assets as of June 30, equities accounted for 9.4 percent, up from 8.4 percent. Bonds rose to 57.4 percent of the total from 54 percent a year earlier.
Riding Growth
Revenue rose 47 percent to 72.7 billion yuan. Net earned premiums and policy fees rose 29 percent to 54 billion yuan. Operating profit increased 70 percent to 11.3 billion yuan. As with last year, the company didn't offer any interim dividend.
China Life is also benefiting from economic growth, the fastest in more than a decade in the second quarter at 11.3 percent, to sell more policies. Its share of the life market rose to 49 percent as of June 30 from 45 percent a year earlier. The company doesn't have any property and casualty business.
The overall insurance market grew 14 percent to 308 billion yuan in the first six months, based on domestic accounting rules. Life premiums rose 13 percent to 229 billion yuan.
In June, China Life and its parent invested 4.65 billion yuan in Citic Securities Co. Regulators earlier this year ended a 13-year-old rule barring insurance companies from investing in banks and other financial institutions.
Bank Buyout?
The next step for the insurer may be buying a bank. The China Insurance Regulatory Commission said last month that it supports the company's bid for Guangdong Development Bank.
Rival Ping An Insurance (Group) Co. took over Shenzhen Commercial Bank for 4.9 billion yuan last month.
“Many investors prefer China Life to Ping An because it's a pure life insurance play,” said Stacey, who has an “underperform” recommendation on China Life's stock. They may worry if the company becomes involved in the operation of brokerages or banks, he said.
China Life's shares lost 1.6 percent to close at HK$13.48 today. The stock has advanced 97 percent this year, outpacing the 28 percent gain of the Hang Seng China Enterprise Index, which measures the performance of 38 state-owned companies.
Ping An, China's second-biggest insurer, reported earlier this month that its first-half profit rose 83 percent to 4.1 billion yuan on higher investment gains.
Source:佚名