China Life profit falls as market rout hurts investments

CHINA Life Insurance, the nation’s largest life insurer, said profit fell 31 per cent last year as a stock market rout and lower bond yields hurt investment returns.

Net income dropped to 46.2 billion yuan (S$8.8 billion), from 66.7 billion yuan a year earlier, the Beijing-based company said in a filing to the Shanghai Stock Exchange Won on Wednesday (Mar 27). The numbers were based on international reporting standards after incorporating accounting rule changes.

An 11 per cent slump in the CSI 300 Index and falling bond yields crimped Chinese insurers’ earnings last year, just as changes in the nation’s accounting policies amplified the impact of market volatility on profits. Rival Ping An Insurance (Group) last week reported a 23 per cent profit drop for what management said was a “very challenging” year in which its asset management business swung to a loss.

Investment income slumped 85 per cent to 31.5 billion yuan, while fair value losses on investments more than tripled to 32.8 billion yuan, according to the statement.

New business value, which gauges the profitability of new life policies sold, rose 12 per cent. That was partly driven by a 17 per cent increase in first-year sales of regular-premium products as the business “improved notably”, the company said.

Listed Chinese insurers, which started to adopt new accounting rules including IFRS 17 last year, likely all saw their profits decline by at least 8.9 per cent due to the changes as well as investment losses, China International Capital analysts led by Mao Qingqing wrote in a note. The IFRS methods bring broad changes including bigger impact on net income from stock-market volatility.

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China Life fell 2.4 per cent to HK$8.93 in Hong Kong trading before the filing. The shares have tumbled 12 per cent this year, compared with a 3.8 per cent drop for the Hang Seng Index. BLOOMBERG