China's two dominant life insurers reported solid 2004 earnings on Monday despite a difficult domestic market for their investment portfolios. China Life Insurance Co, the mainland's largest life underwriter, reported better-than-forecast earnings as its premiums grew faster than the industry average.
Ping An Insurance Co, China's second-largest life insurer, said its profit rose 34 percent, in line with estimates, despite a fall in premium income which it attributed to its focus on winning more profitable business instead of market share.
The two, which together hold about 64 percent of China's life insurance market, are both poised to generate strong growth this year as more people in booming China buy insurance.
Competition is set to intensify as foreign rivals, which target the most lucrative customers, gain broader access to the market. Foreign insurers accounted for 2.6 percent of China's life insurance market in 2004, up from 2 percent in 2003.
Mainland underwriters including China Life and Ping An are expected to take advantage of Beijing's recent moves to allow insurers to better diversify their investment portfolios.
State-run China Life raised its share of the mainland life insurance market to 47 percent from 45 percent and reported 2004 net profit of 7.17 billion yuan (US $866 million).
That was a rise of 22.4 percent from year-earlier pro-forma earnings of 5.86 billion yuan, based on the assumption that the company existed in its current form for all of 2003. China Life's actual net loss for 2003 was 1.43 billion yuan.
On average, analysts had expected China Life to earn 6.14 billion yuan, according to a Reuters Estimates poll.
China Life also said it plans to enter the non-life market.
China Life Vice President Li Liangwen said some analysts had not factored in the firm's change in product mix. "The growth in risk-based policies is a major factor for the higher profit," Li told reporters.
China Life, which went public in late 2003, said its net premiums earned and policy fees rose 28 percent to 65 billion yuan. Turnover rose 27 percent to 76.8 billion yuan.
Net investment income rose nearly 67 percent to 11.3 billion yuan, although it incurred a net unrealised loss on equity investments of 1.07 billion yuan due to a bad year for mainland markets. Equities accounted for 4.6 percent of China Life's 375 billion yuan investment assets, up from 3.8 percent in 2003.
The main Shanghai composite index dropped 18 percent in 2004.
Ping An said it earned 3.12 billion yuan (US $377 million) last year, compared with 2.32 billion yuan in 2003. Analysts had expected earnings of 3.08 billion yuan for Ping An, which is 20-percent held by HSBC, Goldman Sachs and Morgan Stanley.
Analysts said results for both Ping An and China Life were boosted by setting aside less of its premium income in reserves.
Ping An's turnover dipped 5 percent to 63 billion yuan, while its net earned premiums fell 7 percent to 54.7 billion yuan from 58.8 billion yuan a year earlier.
Ping An's loss on equities was 789 million yuan. Its overall net investment income rose 22 percent to 7.3 billion yuan.