China Life Insurance Co, the country's largest life insurer, will increase investments in infrastructure and look out for acquisition opportunities in the financial industry, the company's top management said yesterday.
The insurer's growing interest in fixed-income products and stake investment stems from the uncertain outlook for the country's stock market in the second half of the year.
"The US subprime crisis is not yet over and will further affect the domestic A-share market," said Liu Jiade, China Life's vice-president, adding the market may see a continuous adjustment or even a further decline in the short term.
The company's first-half profit fell 32 percent year-on-year to 15.8 billion yuan ($2.31 billion) after China's stock market plunged 55 percent this year, eroding the value of its investments. Premiums and policy fees grew 24 percent.
To decrease potential risks, the insurer increased its debt securities and time deposits to 79.5 percent of total investment assets at the end of June, from 72 percent at the end of December, while equity investments decreased to 13.3 percent from 23 percent over the same period.
In the second half, China Life will "actively participate" in infrastructure projects including energy, electricity and transport, Liu said.
The company will take a "prudent" stance on overseas acquisitions, focusing on financial firms that "provide synergies", he added.
According to Liu Lefei, China Life's chief investment officer, the company is "very optimistic" about China's corporate bond market. "We'll also actively seek pre-IPO investment opportunities."
China Life's market share jumped from 39.7 percent late last year to 42.8 percent this June on the back of rapid increase of bancassurance that accounts for nearly 40 percent of its overall premium income.
The market share of foreign insurers, however, saw a big drop from 8 percent in early 2008 to 4.8 percent in June. That of Ping An, the country's second largest life insurer and China Life's major rival, shrank 3.33 percentage points, falling from 16 percent in late 2007 to 12.67 percent in June this year.
"As unit-linked insurance takes a bigger proportion of their product line, it's no wonder that their market share dropped as unit-linked policies largely hinge on the stock market," said Wang Xiaogang, an analyst with Shanghai-based Orient Securities.
The dip in Ping An's market share, Wang added, is mainly because of the company's slower growth in bancassurance, a sector with a slim profit margins.