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Dealers said the 32 pct decline in first-half earnings that it reported was better than market estimates of as much as a 50 pct profit drop.
At 11:10 am, the stock was up 0.15 hkd or 0.54 pct at 28, off a low of 27.30 and a high of 28.30. The Hang Seng index was down 167.73 points or 0.79 pct at 20,937.06.
"The market expected China Life to report a first-half profit drop of as much as 50 pct and the fact that the extent of the decline was significantly less than forecast came as positive news to investors," said Kenny Tang, research director at Tung Tai Securities.
"Investors also reacted positively to China Life's decision to cut drastically its exposure in China's volatile stock markets and expand its investments in debt instruments," he said.
The country's largest insurer said its net profit for the first half to June fell 32 pct to 15.84 bln yuan from 23.29 bln a year earlier as it incurred a 6.5 bln yuan revaluation loss in its investments in mainland stock markets.
The net earnings beat a market consensus of 11.7 bln yuan.
The life insurer attributed the revaluation loss mainly to the "deep downturn of the capital market in the first half of this year."
Tang said the change in China Life's investment strategy is expected to benefit the company.
"With China's stock markets still volatile, it is reassuring to see China Life reducing its exposure in risky investments in favor of safer investment instruments amid a slowing global economy," he said.
In its interim results announcement, China Life said sharp fluctuations in equity markets forced management to adjust its investment strategy in the first half, reducing its exposure to the equity markets and expanding its investment in fixed income assets.
At the end of June, equities made up 13.28 pct of its total investment assets, compared with 22.95 pct at the end of December.
During the same period, the group expanded its exposure to debt instruments to 58.57 pct of total investment assets from 52.13 pct at the end of December.
Tang said China Life is on the right track by trying to maximize growth in its life insurance business in the face of continuing uncertainties in the investment market.
"It achieved robust growth in its life insurance business and it has signified its intention to accelerate its sales of banc assurance products. This move will certainly help to a certain extent compensate for a drop in investment income in the second half," he said.
China Life said gross written premiums and policy fees in the first half rose 24.36 pct to 79.29 bln yuan, with first-year regular gross written premiums up 22.87 pct to 19.87 bln.
"With the penetration rate in China's life insurance very low at only 2 pct, there is plenty of room for China Life to expand its sales of life insurance products," he said.
Tang estimates China Life's full-year earnings growth at 20 pct, down sharply from the 95 pct earnings growth that it achieved last year.
(1 usd = 6.8 yuan, 7.8 hkd)
jun.concepcion@xfn.com
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