* 2016 FY profit down 45pct
* Annual profit at 19.13 bln yuan vs year-ago 34.7 billion
* Insurer to benefit from higher treasury bond rates
(Adds earnings details and context)
SHANGHAI/BEIJING, March 23 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
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
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
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)