China Life foresees uncertain market
By Michael Wei and Doug Young |
August 26, 2010, Thursday
|
Print Edition
Print Edition
CHINA Life, the world's top life insurer by market value, warned of more market uncertainty ahead after second-quarter profit fell 27 percent amid writedowns in a weak stock market.
The company and its top domestic rival, Ping An Insurance, which reported on Tuesday, took hits from stock market investments and have flagged a possible slowdown as China tries to cool its racing economy.
But unlike China Life, Ping An's diversification into other financial products, including banking, helped to shield it from the worst effects of the stock market downturn.
Chinese insurers' weak equity investments have offset a steady increase in premiums as the country's economy, which is now the world's second-biggest, continues to expand.
The outlook for capital markets remains unclear, putting relatively big pressure on China Life's investment return target, the Beijing-based group said in a filing to the Shanghai Stock Exchange.
"The second half looks even worse than the first half not only for China Life, but also for all Chinese financial companies as Beijing continues to fine-tune its economy," said Chen Xingyu, analyst with Phillip Securities.
China Life posted a profit of 7.82 billion yuan (US$1.15 billion) in the April-June quarter, its third-best quarter since 2008, versus 10.66 billion yuan a year earlier, according to Reuters calculations based on the stock exchange filing.
Five analysts surveyed by Reuters had on average forecast net earnings of 7.39 billion yuan for the quarter.
"The big theme in the second half will be macroeconomic adjustment," said Chen, who has a "hold" recommendation on China Life in the short run.
Shanghai's stock market, on which China Life depends for a sizeable portion of its investment income, has fallen 17.8 percent this year.
The Shanghai Composite Index has rebounded 12.3 percent since July, but any gains from that period won't be reflected until the second half.
China Life booked 382 million yuan in losses from changes in fair value following the Shanghai stock market sell-off.
The company and its top domestic rival, Ping An Insurance, which reported on Tuesday, took hits from stock market investments and have flagged a possible slowdown as China tries to cool its racing economy.
But unlike China Life, Ping An's diversification into other financial products, including banking, helped to shield it from the worst effects of the stock market downturn.
Chinese insurers' weak equity investments have offset a steady increase in premiums as the country's economy, which is now the world's second-biggest, continues to expand.
The outlook for capital markets remains unclear, putting relatively big pressure on China Life's investment return target, the Beijing-based group said in a filing to the Shanghai Stock Exchange.
"The second half looks even worse than the first half not only for China Life, but also for all Chinese financial companies as Beijing continues to fine-tune its economy," said Chen Xingyu, analyst with Phillip Securities.
China Life posted a profit of 7.82 billion yuan (US$1.15 billion) in the April-June quarter, its third-best quarter since 2008, versus 10.66 billion yuan a year earlier, according to Reuters calculations based on the stock exchange filing.
Five analysts surveyed by Reuters had on average forecast net earnings of 7.39 billion yuan for the quarter.
"The big theme in the second half will be macroeconomic adjustment," said Chen, who has a "hold" recommendation on China Life in the short run.
Shanghai's stock market, on which China Life depends for a sizeable portion of its investment income, has fallen 17.8 percent this year.
The Shanghai Composite Index has rebounded 12.3 percent since July, but any gains from that period won't be reflected until the second half.
China Life booked 382 million yuan in losses from changes in fair value following the Shanghai stock market sell-off.
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