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March 26, 2012updated 15 Mar 2017 6:10pm

China Life dishes up more bad news

The warning from Chinas largest life insurer indicates that it had a very tough second half and will follow a 21.8% decline in its attributable profit in the first half of 2011 to CNY12.96bn ($2.05bn). Taken in the middle of China Lifes expected profit decline 45% its attributable profit in 2011 will come in at about CNY18.5bn

By LII editorial

China Life has more bad news for shareholders, this time a warning that its attributable profit for 2011 will be down between 40% and 50%.

The warning from China’s largest life insurer indicates that it had a very tough second half and will follow a 21.8% decline in its attributable profit in the first half of 2011 to CNY12.96bn ($2.05bn).

Taken in the middle of China Life’s expected profit decline – 45% – its attributable profit in 2011 will come in at about CNY18.5bn.

This will be the lowest level since 2008 when it reported a 51% decline in attributable profit to CNY19.14bn following a slump in investment returns.

In its profit warning, China Life stated that the primary causes of the profit setback are a decline in investment yields and impairment losses.

China Life barchart

 

The yield on Chinese government 10-year bonds declined from 4.2% in July 2011 to 3.5% at year-end. Based on the Shanghai Composite Index, China’s equity market declined by 22% during 2011.

China Life also appears to have fared poorly in terms of premium income in 2011 having fallen 6.2% in the third quarter compared to the life industry’s 13% rise.

Ping An outlook

China Life’s closest rival, Ping An appears set to deliver reasonable results in 2011 unless it suffered a severe setback in the fourth quarter of 2011.

In the first three quarters of 2011 Ping An reported an attributable profit of CNY16.5bn, up 29.1% on the same period in 2010.

This excluded a CNY1.95bn charge related to the consolidation of its 52.4% stake in Shenzhen Development Bank.

 

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