China Life Insurance Co, the nation's largest insurer, increased equities holdings in its investment portfolio in the first quarter as the stock market rebounded, Vice President Liu Jiade said.

The company also raised holdings of higher-yielding bonds and term deposits, Liu said at the annual general meeting in Beijing yesterday. Fixed-income investments "remained above 80 percent" of the insurer's portfolio at the end of March.

The benchmark Shanghai Composite Index has rallied more than 40 percent this year amid optimism that government measures including a 4 trillion yuan ($590 billion) stimulus package will stem a slowdown in the world's third-largest economy, boosting insurers' investment returns. China Life's profit rose 55 percent in the first quarter, after a 45 percent decline last year when the domestic stock market tumbled.

"The weighting of equity investments increased to a certain degree and was still in the process of changing as of the end of April," said Liu without giving a figure. Profit for 2009 will be "more worth anticipating than last year."

Ten-year regular premiums rose by 50 percent in the first quarter, and the pace picked up further in April, President Wan Feng said yesterday. Total premium income fell by 2 percent to 126 billion yuan in the first four months as the company boosted sales of longer-term products.

Landscape 'Revised'

The company will step up marketing efforts in bigger mainland cities this year to bolster a declining market share, Wan said. The Beijing-based insurer won't make "massive" forays into the nation's rural areas because the costs are high, he added.

The landscape of the mainland's insurance industry will be "revised" this year as a result of the regulator's efforts to curb sales of investment-type products and a proposed change in accounting rules that will exclude parts of policy sales from premium income, Wan said.

China Life is "least affected" by the accounting rule change, which has the biggest impact on investment-linked and universal life insurance products, Wan said. The insurer this year stopped selling such products, which accounted for a very small part of China Life's premium income, he added. The Ministry of Finance has yet to announce details of the change.

China Insurance Regulatory Commission banned sales of investment-linked insurance products at bank counters designed for depositors from March 15, to curb misguidance that had led to consumer complaints and after high commissions squeezed insurers' margins.

"Many" life insurers will face a decline or no growth in premium income this year, Wan said.

Bloomberg News

(HK Edition 05/26/2009 page4)