China Life Insurance Co., (601628.SH)the nation’s biggest insurer, said first-half profit fell 28 percent as declines in the local stock market hurt investment returns.
Net income fell to 12.96 billion yuan ($2 billion), or 0.46 yuan a share, from 18 billion yuan, or 0.64 yuan a share, a year earlier, the Beijing-based insurer said in a statement to the Hong Kong stock exchange today.
The benchmark Shanghai Composite Index slid 1.6 percent in the first half, reducing the value of China Life’s equity holdings, as the government tightened monetary policy. Growth in net premiums earned slowed to 6.1 percent, from 13 percent a year earlier, as efforts to lower the share of less-profitable, shorter-duration contracts hampered policy sales.
“Investment income probably wasn’t great as the performance of the stock market was poor in the first half,” said Olive Xia, a Shanghai-based analyst at Core Pacific- Yamaichi International Ltd., before the announcement. “Premiums will likely see some mild growth for the rest of the year given the lack of policy stimulus or an easing in monetary policy.”
Net realized gains on financial assets slumped more than 90 percent to 601 million yuan, according to today’s statement. Net investment income, mainly dividends and bond yields, rose 23 percent to 30.3 billion yuan.
Further Declines
Shanghai-listed stocks fell in the first half as the government raised interest rates and ordered banks to set aside more reserves to curb accelerating inflation. The benchmark index has tumbled another 7.5 percent since June 30 amid concern U.S. economic growth will slow and the European sovereign-debt crisis in Europe will worsen.
China Life rose 4.3 percent to HK$22.95 in Hong Kong today before the earnings, paring this year’s decline to 28 percent.
The insurer’s gross premiums slipped 5.7 percent in July from a year earlier as sales through agents and banks continued to decelerate, indicating a “slower than expected” recovery in its business, Ping An Securities Co. analyst Dou Zeyun said in an Aug. 16 report. The impact from product-mix adjustments to refocus on regular-premium contracts and slower growth in individual contract renewals will “continue into the second half.”
Ping An, the nation’s second-biggest life insurer, boosted net premiums by 39 percent in the first half, as it focused on telemarketing and cross-selling through its banking and securities operations.