CHINESE INSURERS TO REAP HIGH INVESTMENT YIELD IN Q4

Chinese insurance companies are expected to keep their investment yield at a high level in the fourth quarter of this year, in view of the turnaround of the stock market and the rise of bond yields, analysts.
The view is that the continuous growth in premiums and the improved business structure will lift up the industry's performance in the following months.

By the end of the first half, China Life Insurance (SSE:601628, SEHK:2628) kept its equity holdings at 13.41 per cent, the highest among China's three listed insurers.

Due to the correction of the stock market during the third quarter, China Life incurred a loss of 9.7 billion yuan (US$1.4 billion) in the third quarter, and its net assets dropped 2.5 per cent over the previous quarter.

The insurer's total investment yield reached 4.71 per cent in the first three quarters. In view of the turnaround of the market, the insurer is expected to post a 6 per cent investment yield this year, said Xiao Chaohu with Everbright Securities.

Ping An Insurance (SSE:601318) witnessed its net assets increase by 1.4 per cent in the third quarter. Currently, the insurer maintained its equity holding lower than the 9.6 per cent at end of the first half. Its investment yield was at 4.8 per cent to 5 per cent in the first three quarters, and will reach 5.5 per cent for the year.

Net assets per share of China Pacific Insurance (Group) Co., (CPIC) (SSE:601601) fell 3.27 per cent over the first half. Analysts attribute this to CPIC's low equity holding.

Insurers are prudently optimistic about China's stock market. Zhang Zixin, general manager of Ping An, said that the insurer is optimistic about China's A-share market in the long run, but predicted that the market will still fluctuate this year.

Analysts hold that in view of the clear recovery of the global economy and the strong inflation expectations, bond yields will go up, which in turn will ensure insurance companies' investment yield.

Thanks to its business structure adjustment, CPIC began to see growth in its life insurance premiums in September. It realized premiums of property and life insurance of 77.8 billion yuan in the first three quarters, and its premiums are expected to exceed 100 billion yuan this year.

Guohai Securities predicts that CPIC's value of new business will grow 25 per cent this year.

China Life's value of new business reached 10.346 billion yuan in the first half, up 37.8 per cent year on year. Analysts predicted that China Life's value of new business would go up 30 per cent this year.

According to a prediction of Shenyin & Wanguo Securities, Ping An will realize a premium growth of around 30 per cent this year, and its value of new business will increase over 30 per cent.