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China Life Insurance Co Ltd, the country's top insurer, plans to boost its investment in real estate and infrastructure to shore up its investment yields which have been sapped by the slump in the capital market in the first half of the year, chairman Yang Mingsheng said.

Speaking at a press conference in Hong Kong on Wednesday to announce the company results, Yang said that the company recorded net profit of 9.6 billion yuan ($1.51 billion) in the first half of the year, a 25.7 percent profit fall from a year ago. The company cited lower premium income and higher asset impairments arising from sluggish domestic capital markets for its dismal performance.

Pointing out that China Life's investment yield in the first half was "far from ideal", Yang said the company's gross investment yield in the first half was 2.83 percent, a 1.67 percentage points fall from the same period a year ago.

Yang ascribes China Life's poor investment performance to the downturn in the stock market and the bond market in the mainland as well as its increased impairment losses.

He said that boosting the company's investment yield is not an easy thing to do, but since the China Insurance Regulatory Commission recently broadened investment channels, he expects China Life's investment yield to be "slightly increased" in the second half.

"The key to broadening our investment channels is to enter into the real economy, especially the real-estate sector and major infrastructure construction projects led by the government," said Yang.

The chairman said that the investment returns from real estate is as much as 6 percent, equity market investment returns about less than 1 percent and the bond market about 2 percent.

But Yang stressed that evaluations have to be made before the company could invest in real-estate projects, and the decision-making period could be relatively long, so the effect would be "more obvious" by the end of this year or next year.

Responding to a question regarding the company's exposure to the mainland equities market that has been in continuous depression in the first half, China Life's Vice-President Liu Jiade said the company has decreased its investment proportion in equities to 10.01 percent, down from 12.17 percent previously, in its portfolio.

Liu believes that China's A-share market will remain volatile in the second half and the economic slowdown will continue to put pressure on A-share prices in the second half as well.

"China Life will seize opportunities in the market and (will) continue to reduce its risk exposures to equity assets," said Liu.

Kenneth Yue, analyst at CCB International, told China Daily that China Life's investment yield in the second half still faced many uncertainties.

On the one hand, as the company has realized an impairment loss of 15.2 billion yuan from equity investments in the first half, so the impairment loss in the second half should be less and should be good for its investment yield, said Yue.

On the other hand, China Life's investments in bonds which accounts for a large portion of its portfolio may record a drop in its investment yield because the bonds yields have been picking up in August, (meaning the market's bond prices are falling), and could lead to potential losses in its available-for-sale (AFS) assets, he added.

sophiehe@chinadailyhk.com

(HK Edition 08/30/2012 page2)