China Life 2628; ADR (LFC)

[winston]

not vested

DJ MARKET TALK: CS Cuts China Life To Neutral From Outperform

1318 [Dow Jones] STOCK CALL: Credit Suisse cuts China Life (2628.HK) to Neutral from Outperform, following another weak month of top-line premium growth, and trims its target price to HK$24.75 vs HK$25.50.

CS expects the sales of life insurance will still be subdued both in bancassurance channel and agency channel in the short term, given the prevailing high yields from competing products such as bank deposits and wealth management products, and sees downside risk in the next few months:

4Q11 new business release (mid-to-late February), which will continue to show negative new business growth;

FY11 results (Mar. 26) which will likely show weak value of new business, net profit, book value and solvency position. China Life is up 2.2% at HK$21.20 midday.

Source: Dow Jones Newswire

[winston]

not vested

DJ MARKET TALK: BNPP Hikes China Life Target By 30%; Keeps At Hold

1509 [Dow Jones] STOCK CALL: BNP Paribas raises China Life's (2628.HK) target price by 30% from HK$17.48 to HK$22.80 based on better NBV growth outlook from improved agency channel management under the new leadership, and a 10% A-share proxy premium as China Life is most sensitive to investment gains among life insurers.

"China Life released better-than-expected January premiums but growth headwinds remain," the house says and keeps its Hold rating on China Life.

BNPP says in the near term, China Life is likely to continue to trade as an A-share market proxy; it estimates that every 5% additional A-share investment gains (10% gains in its base case) will result in 13% upside to China Life's EV and 16% to its fair value.

China Life is up 1.7% at HK$24.00 on top of its 3.5% rally Friday.

Source: Dow Jones Newswire

[winston]

China Life profit to dive at least 40pc by Grace Cao

China Life Insurance (2628) issued a profit warning for last year yesterday, indicating that earnings may have halved compared with 2010.

The country's biggest life insurer in premium terms said net profit may fall by 40 to 50 percent from 33.6 billion yuan (HK$41.3 billion) in 2010, due to declining investment yields and rising impairments caused by market fluctuations.

Kenneth Yue, CCB International Securities non-bank financials analyst, said the news was "not surprising."

He added: "As a pure life insurer, the company has been largely impacted by capital market volatility. It suffered losses, especially in the equity market in the second half of last year."

Net income was down 33 percent in the first nine months of last year, although investment income increased slightly to 50.9 billion yuan over the same period.

Net investment income is expected to tumble by 12 percent, according to CCBI.

They attributed the decline to a disappointing stock market performance as the benchmark Shanghai Stock Exchange Composite Index slumped 20.3 percent from July to December.

CCBI forecast investment yield to come in at 4 percent, compared with 5.2 percent and 5.8 percent in 2010 and 2009, respectively.

Premium growth was also weak, with income in this regard amounting to 318.3 billion yuan, compared with 318.2 billion yuan in 2010.

But the solvency margin ratio is expected to become healthier after the company issued subordinated debt in October.

As of the end of June, the ratio stood at 164 percent. CCBI said new business could also grow at a slower pace, with the rate expected to be 5 percent.

"We maintain a neutral rating on China Life," CCBI said, adding that the stock was more expensive relative to its peers.

Shares of China Life Insurance fell 3.7 percent to HK$22.15 yesterday.

http://www.thestandard.com.hk/news_deta ... 20307&fc=4

[winston]

Back to the future with China Life By Craig Stephen

HONG KONG (MarketWatch) — Investors never like a profit warning, and even less so when it’s from a bellwether like China Life Insurance Co., the world’s largest insurer by market capitalization.

Profits could be down as much as 50% when results come out on March 27th, the insurer announced last week.

The sharp sell-off in its shares suggests many funds were caught wrong footed, although investors with a long memory were surely forewarned.

Anyone who kept a copy of the prospectus when China Life /quotes/zigman/336639/quotes/nls/lfc LFC -1.04% /quotes/zigman/29330 HK:2628 -1.67% /quotes/zigman/29330 HK:2628 -1.67% listed just over eight years ago will find it had one of the largest risk disclaimers ever tacked onto a listing document.

Much of this was because pre-IPO China Life was in a right mess, having written millions of negative spread policies that guaranteed years of losses after being caught out by declining interest rates. For the listing to proceed these toxic policies were removed from China Life and ring-fenced.

This allowed it to debut as the world’s biggest IPO of the year in 2003, after a joint listing in New York and Hong Kong. Investors were happy to overlook the state-owned insurer’s blundering past, betting it would reform alongside the mainland’s financial industry.

After all, the growth story sounded compelling, buying into a state-backed giant with 50% of the market, in potentially the biggest growth market in the world for life insurance and savings products.

And if you look at China Life’s turnover of 318 billion yuan ($50.4 billion) and 33 billion yuan net profit in 2010, it has lived up to expectations of generating some massive numbers.

But with profits now set to halve, has China Life reverted to its accident-prone habits of old?

The company blamed a decline in investment yield and increase in impairment losses for its profit warning last week. Granted the poor investment returns from A-shares last year will have hurt, but this was widely known.

What looks to have tripped up the insurer is its failure to wean itself off a reliance on selling single-premium savings products and sell more life insurance policies. Further, once again it has been left exposed by a reversal in the mainland interest rate cycle.

A long-standing criticism of the behemoth is its inability to develop a sales force that can sell traditional life products. Instead, China Life has relied on the easy growth in single-premium saving products, often sold through banks.

According to company data in the first half of 2011 single-premium was 38% of China Life’s product mix, whereas by comparison for Ping An Insurance Group Co. /quotes/zigman/372285 PNGAY -0.31% /quotes/zigman/8216 HK:2318 +0.08% that figure was 17%.

Typically single-premium products (which are similar to time deposits) are easier to sell than life or long-term saving products. But they are also lower margin and do not bring a long-term recurring income stream. They are also more prone to being terminated early.

China life showed a 50% jump in the number of customers surrendering policies in its third-quarter report. Further, it is easy to see how pressure is building on redemptions after China’s recent cycle of rate increases.

China’s fifth rate hike last July pushed annual bank deposit rates to 3.5%, which also meant the payout on a five-year term bank deposit reached 5.5%.

Insurers will have a hard time matching this with their single premium savings products. Regulations restrict them from guaranteeing more than 2.5% a year (so at to avoid a repeat of negative spread products) although they can try and make it up in discretionary bonus dividends.

Adding to China Life’s troubles is a new aggressiveness by mainland banks towards attracting funds after seeing their deposit bases shrink.

It is easy to imagine how mainland banks could make life uncomfortable for China Life if they encouraged customers to redeem funds sitting in low yielding insurance saving products.

China Life is also reliant on bank channel distribution where it sells 50% of its products. Ping An Insurance, by comparison, sells 86% of its business through its agents, according to Nomura data.

How much of a hit China Life takes from early policy surrenders will depend on the surrender charge and its negotiating power with the banks. This is one area to watch closely when results do finally come out.

Meanwhile, the profit warning from China Life is likely to intensify the debate on China’s industrial policy of supporting its state industry flagships with kid glove regulation.

In recent years authorities have increasingly restricted the presence of foreign firms entering its insurance market. But this also has a downside as the absence of robust competition removes a key driver of change and innovation. You could argue China Life never changed its old habits because it never really had to.

Ultimately, investors will need to be convinced this state dinosaur can learn how to sell life insurance as well as just savings products.

http://www.marketwatch.com/story/back-t ... e_carousel

[winston]

Insurer's earnings disappoint again by Natallie Cai

China Life Insurance (2628), the world's largest insurer by market value, has broken investors' hearts once again, after posting its sixth consecutive decline in quarterly earnings.

It's first-quarter net profit dropped 29.4 percent to 5.625 billion yuan (HK$6.92 billion), or 20 fen per share, from 12 months earlier.

That was revealed after a forecast by China International Capital Corp had been for a 7.4-billion-yuan profit.

The market had indeed expected the insurer's earnings just had to rebound after it posted a 82-percent, year-on-year decline during the fourth quarter last year - its sharpest plunge on record.

"Stock markets remained at a low level continuously, though there was a slight recovery during the reporting period," China Life noted. "As a result, impairment losses increased, which caused a decrease in profit."

Impairment losses in the first quarter jumped 391.1 percent year on year to 7.7 billion yuan, while premium income fell 10.4 percent.

Headline premium growth is expected to remain negative, Credit Suisse said in a recent research note.

China Life's operating expenses jumped 56.7 percent to 1.4 billion yuan in the first quarter after its subordinated bond issues last year to boost capital.

The company's shares closed 1.2 percent lower at HK$20.50 yesterday.


http://www.thestandard.com.hk/news_deta ... 20426&fc=7

[winston]

not vested

China Life Insurance Co Ltd said accumulated premium income for the first five months totalled 154 billion yuan, down 7.5 percent from a year earlier.


Source: WEN WEI PO

[winston]

China Life warns of big dent in first-half earnings

China Life Insurance, the biggest life insurer on the mainland, yesterday warned its first-half net profit would be hit by a decline in investment yield and impairment losses.

Source: SCMP

[winston]

not vested

DJ MARKET TALK: China Life Falls 0.7%; KGI Tips HK$20-HK$23 Band

1048 [Dow Jones] China Life (2628.HK) is only down 0.7% at HK$21.40, as its 1H12 profit warning shows the worst may be over for China's largest life insurer.

China Life expects its 1H12 net profit to fall "significantly" from a year earlier, but adds the earnings decline isn't likely to be as sharp as the 29.4% drop in its 1Q12 net profit, which implies a 1H net profit of at least CNY9.15 billion.

KGI says the market anticipates that 2Q12 net profit will improve due to a lower comparable base, but full-year performance will be hindered by the decline in investment income and a slowdown in the insurance market.

KGI tips China Life shares to "range trade" between HK$20.00 and HK$23.00. Volume is modest at HK$231.0 million.

Source: Dow Jones Newswire

[winston]

not vested

China Life H1 profit tumbles

China Life Insurance (2628), the world's largest insurer by market value, posted a 25.7 percent drop in first-half earnings as China's sluggish stock market hurt investment returns and eroded assets, Reuters reports.

Net profit during the first six months fell to 9.64 billion yuan (HK$11.77 billion) versus 12.96 billion yuan a year earlier.

Six analysts surveyed by Reuters had forecast an average first-half profit of 10.17 billion yuan.

Earlier this month the insurer warned of a "big fall'' in profit for the January-June period although it said the drop would not exceed the 29.4 percent drop seen in the first quarter of this year.

Source: The Standard HK

[winston]

Investment losses bite at China Life by Grace Cao

Losses on its investments played a big part in China Life Insurance (2628) suffering a hefty decline in profit for the first six months of this year.

First-half net profit for the country's top insurer was 9.6 billion yuan (HK$11.7 billion) - a decline of 25.7 percent on the six months last year - and earnings per share came in at 34 fens.

The numbers were in line with market expectations.

The profit fall came with rising losses on investments and declines in yields on others amid volatile capital markets.

China Life's financial assets took a loss of 13 billion yuan in the first six months compared with a gain of 601 million yuan 12 months earlier.

Its gross investment yield fell to 2.83 percent in the first half from 3.51 percent at the end of 2011. The net premium was 184.7 billion yuan for the six months, down 5.2 percent on a year back.

China Life's individual life insurance business - the major generator of revenue - saw a 5.5 percent decrease in premium turnover when facing more robust demand for higher-yielding products offered by commercial banks.

It was not all down for China Life. New business value grew more than expected to 12.5 billion yuan by June 30, which was up 2.5 percent year on year.

But its share in the domestic life insurance market shrank to 32.4 percent from 33.3 percent at the end of 2011.

Embedded value - a gauge for future profit - rose by 14.2 percent to 334.3 billion yuan in the first six months.

And capital adequacy improved in the first six months with the solvency ratio jumping 230.56 percent from 170.12 percent at the end of last year. That followed China Life issuing 28 billion yuan in subordinated debt.

No interim dividend was proposed.

Shares of China Life fell 1.2 percent to HK$20.30 yesterday. The results were revealed after the market closed.


http://www.thestandard.com.hk/news_deta ... 20829&fc=4