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* 2016 FY profit down 45pct
* Annual profit at 19.13 bln yuan vs year-ago 34.7 billion yuan
* Insurer to benefit from higher treasury bond rates (Adds earnings details and context)
SHANGHAI/BEIJING, March 23 (Reuters) - China Life Insurance Co Ltd reported a lower annual profit on Thursday for the first time in four years on Thursday, saying interest rates had dragged down investment income by more than a fifth.
China's largest insurer said net profit for the year ended December 2016 fell 45 pct to 19.13 billion yuan ($2.8 billion) from 34.7 billion yuan a year earlier, in line with expectations.
Analysts on average were expecting the company to report net profit of 19.2 billion yuan, according to Thomson Reuters data.
Its investment income tanked 22.8 percent to 108.15 billion yuan. However, a recent rebound in treasury bond interest rates is positive for the insurer this year because it is the most sensitive among its listed peers to treasury yield rises, Daiwa Capital Markets said in a note in January.
The yield on China's 10-year treasury bonds has risen from a low of 2.66 percent in October last year to around 3.34 percent on Wednesday.
Earlier this week, China's No.2 insurer by market value - Ping An Insurance Group Co of China Ltd - posted its highest annual profit in over a decade on strong sales and higher yields from property and casualty policies.
Debt levels and capital costs at China Life are higher than at Ping An, said Dayton Wang, an analyst at Guotaijunan International, according to their internal calculations.
Written premiums for life insurance bolstered the results, rising 17.4 percent to 361.9 billion yuan.
But the China Insurance Regulatory Commission has, over the past year, introduced new rules to rein in sales of universal life policies. These measures were aimed at reducing risks from insurers investing in stocks and long-term assets using short-term funds that could lead to a sudden tightening of liquidity in the event of market volatility.
Last year, Chinese insurers pulled in 3 trillion yuan of premiums, up around 28 percent from 2015, according to data from China's insurance regulator. "So the challenge they face in the future is how to reduce their debt and capital costs if universal life insurance should shrink," said Wang, who added that new regulations would reduce the growth of such insurance.
Shares of China Life closed up 0.61 percent in Shanghai on Thursday ahead of the results, against a 0.35 percent rise for the broader market. ($1 = 6.4968 Chinese yuan) (Reporting by Engen Tham in Shanghai and Shu Zhang in Beijing; editing by David Clarke/Ruth Pitchford)