China Life Eyeing Large Banks

China Life Insurance Co., Ltd. (SHSE: 601628 and SEHK: 2628) is attaching more importance to investing in banks due to dropped premium revenue.

It has cast eye on China Development Bank (CDB) and Agricultural Bank of China (ABC), Yang Chao, president of the company, said days ago. CDB shifted into a commercial bank from a policy bank in December 2008 and is weighing a plan to be listed on both the domestic stock market and the Hong Kong stock market. ABC, the sole bank out of the nation's Big Four state-owned commercial lenders to retain unlisted, will get listed after it completes disposal of non-performing assets. It issued CNY 50 billion subordinated bonds in May 2009, of which over CNY 6 billion ones were subscribed by China Life.

China Life aims to control a majority stake in a large bank, finally, reiterated Yang. Actually, it has invested in China Minsheng Banking (SHSE: 600016), Hua Xia Bank (SHSE: 600015), China Construction Bank (CCB, SHSE: 601939, and SEHK: 0939), Industrial and Commercial Bank of China (ICBC, SHSE: 601398, and SEHK: 1398), Shenzhen Development Bank (SDB and SZSE: 000001), China Merchants Bank (CMB, SHSE: 600036 and SEHK: 3968), and Guangdong Development Bank, since 2005.

As the biggest life insurer in China, it is under rising pressure from its domestic archrival Ping An Insurance (Group) Company of China, Ltd. (SHSE: 601318 and SEHK: 2318). Ping An inked a contract to buy into SDB, a Shenzhen-based city-level commercial lender, in June, pending approval from concerned authorities now. Its total assets will reach about CNY 1.37 trillion, exceeding CNY 1.1 trillion of China Life, provided that it gains regulatory approval for the deal.

China Life reported unaudited premium revenue of CNY 191.1 billion for the first seven months of 2009, down 5.8 percent compared to CNY 203 billion a year ago. The figure it achieved in July reached CNY 18.4 billion, representing a yearly drop of 12 percent, the fifth consecutive month for it to suffer negative premium growth this year. Statistics show that its premium revenue fell 13.3 percent, 15 percent, 16.5 percent and 11.4 percent in March, April, May and June this year, respectively. The drops should be mainly attributed to less attraction of its products, said industry experts.

(USD 1 = CNY 6.83)