China Life net more than doubles, outlook positive
* China Life Q3 profit up 155 pct, lags forecasts
* Q3 net fell 30 pct Q/Q as stocks, bonds dipped
* Analysts upbeat on earnings outlook due to stock uptrend
* ADRs up 2.8 percent
By Samuel Shen and Michael Wei
SHANGHAI, Oct 26 - China Life Insurance Co <2628.HK>, the world's top life insurer by market value, said third-quarter earnings more than doubled, and analysts said rising financial markets should sustain its long-term growth.
After the results, the insurer's <LFC.N> American Depositary Receipts rose nearly 3 percent on the New York Stock Exchange.
"The stock market has rebounded strongly this year, and so have insurers' profit," said Everbright Securities Co analyst Xiao Chaohu.
However, the third-quarter earnings lagged analysts' forecasts and were lower than the previous quarter as China's stock market pulled back during the reported period after a sharp rise in the first half.
After jumping 60 percent in the first half, China's stock market shed 6 percent in the third quarter as investors worried about a possible tightening in monetary policy following a surge in lending and government-led investment. Bond prices also fell during the period as the economy recovered.
China Life <601628.SS>, which leads rival Ping An Insurance Co <2318.HK> in the domestic market, said on Monday that earnings rose to 5.95 billion yuan from 2.34 billion yuan a year earlier, based on Chinese accounting standards.
The net fell short of an average forecast of 7.49 billion yuan profit by four analysts polled by Reuters and was down 30 percent from the company's second-quarter profit of 8.53 billion yuan.
Chinese insurance companies used complicated ways to treat their investment returns and provisions, which made forecasting difficult, analysts said.
But they were generally upbeat on China Life's long-term growth due to the potential of the Chinese markets.
"I think in the longer term, China's stock market still trends upward and the bond market will also recover," said Oriental Securities Co analyst Wang Xiaogang.
The sequential profit drop "could just be a short-term phenomenon," he said.
China Life's smaller rival, Ping An, is scheduled to report third-quarter earnings on Tuesday.
CAPITAL MARKETS RECOVERY
Chinese insurers are allowed to invest up to 25 percent of their assets in stocks and mutual funds. That has helped insurers like China Life post strong profits this year.
The profits were higher in the third quarter "because a recovery in capital markets boosted total investment returns," the company said in a brief statement.
The Beijing-based insurer booked 1.18 billion yuan in gains from changes in fair value of assets in the first nine months against a loss of 8 billion yuan a year earlier, when the market tumbled amid the global financial crisis.
Equities accounted for 14.41 percent of China Life's investment portfolio as of June 30, compared with 51.51 percent for bonds. China Life did not disclose its asset allocation at the end of September.
"Insurers' profits are closely interrelated with the stock market performance in China," said Everbright Securities' Xiao. "That may change after the government widens their investment channels."
China plans to allow insurance companies to invest in infrastructure projects, real estate and equities in unlisted companies, enabling them to improve returns and better allocate their assets.
Shares of China Life rose 3.85 percent in Shanghai on Monday. Its Hong Kong-traded shares have risen 60 percent this year, in line with a 57 percent gain on the benchmark stock index <.HSI>. China Life ADRs trading on the New York Stock Exchange were up 2.8 percent at $74.20. (Additional Reporting by Alison Leung and Lilla Zuill in New York; Editing by Muralikumar Anantharaman, Jacqueline Wong and Lisa Von Ahn)