UPDATE: China Life Eyes Overseas M&A, To Diversify Local Operations
March 26 2009 - 2:29AM
Dow Jones News
China Life Insurance Co. (LFC) said Thursday it will continue to
look for overseas merger-and-acquisition opportunities, diversify
its domestic business and remain conservative in capital markets
investment this year.
Chairman Yang Chao told reporters the company is in talks over
possible overseas acquisitions while it also looks for a foreign
strategic investor.
The comment came after Yang said earlier this month China Life
had decided not to bid for American International Assurance Co.,
the Asian unit of American International Group Inc. (AIG), because
of big changes to AIA's operations and damage to the perception of
the brand.
From the second half of 2007 until the first half of 2008, China
Life carried out extensive research on investment opportunities in
the U.S., Europe, Southeast Asia and the Middle East, Yang said. He
didn't say whether the company had continued to study overseas
opportunities since then.
On potential overseas investments and introducing foreign
strategic investors, he said only that any decision would "need
time and prudence."
"Our top priority is to develop the domestic market," Yang
said.
The company said in a statement it would actively seek to invest
in infrastructure projects, unsecured bonds, real estate, and
private placements this year.
China Life reported Wednesday a 45% slide in 2008 net profit to
CNY21.28 billion (US$3.1 billion), from CNY38.88 billion a year
earlier, because of investment losses resulting from the slump in
the local capital market.
China's benchmark Shanghai Composite Index lost nearly
two-thirds of its value last year, making China's stock market one
of the worst performers worldwide.
The insurer recorded a fair value loss of CNY7.30 billion on its
traded financial assets in 2008, compared with a fair value gain of
CNY18.84 billion in 2007.
Nonetheless, Yang said the board of directors is "very
satisfied" with the insurer's performance during the global
financial crisis.
President Wan Feng said in a statement that during 2008 "the
company correctly assessed the situation in the international
financial markets and effectively controlled its investment risk
during the market turmoil."
China Life didn't invest in any foreign debt, stocks or
derivatives directly related to the subprime crisis, Wan said. He
didn't say whether the company has any indirect exposure to
subprime assets.
China Life said it aims to maintain stable insurance premium
growth, while optimizing its business mix to improve profitability
by introducing new long-term insurance products with better
returns.
Premium income rose 21% last year to CNY135.33 billion from
CNY111.89 billion in 2007.
China Life said it will remain conservative in investing in the
capital market, after it cut the proportion of its investments in
equities to 8.0% at end of 2008 from 23.0% a year earlier, and
increased the proportion of its investments in fixed-income
securities to 61.4% from 52.1% over the same period.
China Life Vice President Liu Jiade said it is difficult to
assess when the stock market will bottom out, but many Chinese
stocks now offer high investment value. He said, however, China
Life would continue to invest primarily in the bond market.
Yang also told reporters China Life remains interested in taking
a stake in Agricultural Bank Of China, the last of China's Big Four
state-owned banks that has yet to list. He didn't elaborate.
-Victoria Ruan and Chen Juan in Beijing, and Aries Poon in Hong
Kong contributed to this story; Dow Jones Newswires; 8610 6588
5848; victoria.ruan@dowjones.com