China Life Insurance annual profit jumps 124 percent but misses forecasts

HONG KONG, March 25 Tue Mar 25, 2014 8:57am EDT

Related Topics

HONG KONG, March 25 (Reuters) - Insurer China Life's annual profit more than doubled in 2013 as investment income surged on the back of a recovery in the Chinese stock market, but it still missed analysts' forecasts.

China Life Insurance Co Ltd - the country's largest insurer by market value - said net profit rose 124 percent to 24.77 billion yuan ($4.00 billion) in the year ended Dec. 31.

That was less than the average forecast of 28.5 billion yuan from analysts, according to Thomson Reuters data.

With large investment portfolios, China's insurers are prone to big swings in reported profits. In 2011 and 2012, annual earnings were dented by losses on their equity investments.

China Life and its peers New China Life Insurance Co Ltd and China Pacific Insurance Group Co have all told investors that they expected higher profits for 2013 as those investments recovered.

Portfolio returns in 2013 were also bolstered by a rule change in October 2012, which allowed insurers to invest in riskier but higher-yielding products.

While China's insurers have improved returns on their investments, they have found it tough to increase sales amid tighter regulation and intensifying competition.

Wealth management products (WMPs) sold by banks offer investors returns of 5 to 6 percent, compared with just 2.5 percent for life insurance products.

Investors had until this year perceived those WMPs to be almost risk-free, because they assumed the government would bail out any product that looked like failing.

However, a landmark bond default by Shanghai Chaori Solar Energy Science & Technology Co. Ltd in early March could trigger the start of a flight to quality back to insurance products as investors reassess those risks, according to Bernstein Research.

($1 = 6.1888 Chinese yuan) (Reporting by Lawrence White; Editing by Ryan Woo and Pravin Char)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.