China Life, China Pacific see investment income fall sharply YOY through Q3

Both China Life Insurance Co. Ltd. and China Pacific Insurance (Group) Co. Ltd. saw sharp declines in investment income year over year through the first nine months of 2023, according to an S&P Global Market Intelligence analysis.

Investment income for China Life, the country's largest life insurer by reserves, fell to 22.58 billion yuan from 156.92 billion yuan. The company also reported a net profit of 36.56 billion yuan, much lower than the 56.67 billion yuan recorded in the first nine months of 2022. Total expenses dropped year over year to 208.43 billion yuan from 236.30 billion yuan, while total revenue — which includes investment income — slid to 244.99 billion yuan from 292.97 billion yuan.

Third-quarter investment losses dragged down total revenue by 44% year over year under new accounting standards, CGS-CIMB analyst Michael Chang wrote in a note. Chang adding that impairment losses accounting for 61% of investment losses were led by overall equity investments made in 2022 instead of a single stock.

China Life will likely continue to be under impairment loss pressure, Chang said.

In the property and casualty space, China Pacific saw its nine-month investment income drop significantly to 6.04 billion from 59.08 billion in the year-ago period. Meanwhile, net profit dropped year over year to 23.68 billion yuan from 31.28 billion yuan. Total expenses climbed to 232.25 billion yuan from 222.22 billion yuan while total revenue edged up to 255.93 billion yuan from 253.49 billion yuan.

China Pacific, whose allocation to high-risk assets — including speculative-grade bonds, equity, property and alternative investments — will likely remain elevated, also faces investment challenges, S&P Global Ratings analyst WenWen Chen wrote in a note. These investments accounted for about 39.2% of the group's total invested assets as of June 30, Chen said.

Ping An performs

One major Chinese insurer that saw its investment income move in the other direction was Ping An Insurance (Group) Co. of China Ltd. The Shenzhen-based insurer's investment income increased to 37.80 billion yuan from 5.67 billion yuan.

The company reported a nine-month net profit of 108.11 billion yuan, slightly lower than 111.53 billion yuan a year earlier, as total expenses climbed to 684.41 billion yuan from 636.29 billion yuan, and total revenues grew to 792.53 billion yuan from 747.82 billion yuan year over year.

Ping An pursues long-term stable returns via strategic asset allocation through macroeconomic cycles, disciplined tactical allocation and excess returns generated by value investments, company secretary Ruisheng Sheng said in an earnings call.

Asked about Ping An Real Estate Co. Ltd., Sheng said the company adheres to a long-term investment strategy and that its overall risk is controllable.

Real estate accounted for 4.5% of the insurer's investments. Such investments were primarily rent-collecting properties including commercial and office properties, logistics real estate, industrial parks and long-term rental apartments.