China Life outsources investment in senior credit bonds; expands allocations to alternatives

Written by Adam Cadle

26/08/2021

China Life chose to outsource its investments in senior credit bonds due to the “complicated and challenging” external environment and an “unsteady and imbalanced” domestic economy in H1 2020.

In its 2021 interim results, the life insurance company said it also made an allocation to government bonds with long durations by taking advantage of interest rate hikes. Furthermore, it said it “closely kept pace” with equity market fluctuations, optimised its investment strategies and position structure, and seized the opportunity to realise investment gains.

Due to the decline in the supply of appropriate non-standard assets, China Life explored a new strategy for alternative investments and optimised the entrustment mode of alternative investment management for creating an alternative investment portfolio with prime prospects.

As at the end of the reporting period, the company’s invested assets reached RMB 4,457,269m, an increase of 8.8% from the end of 2020. Among the major types of investments, the percentage of investment in bonds rose to 44.23% from 41.97% as at the end of 2020, the percentage of term deposits changed to 12.45% from 13.32% and the percentage of investment in debt-type financial products changed to 10.44% from 11.08%. The percentage of investment in stocks and funds (excluding money market funds) changed to 9.88% from 11.31%.

In H1 2021, the company’s net investment income was RMB 89,764m, an increase of RMB 12,373m from the corresponding period of 2020, rising by 16% year-on-year.

Since the company consistently increased its allocation in bonds with long durations in recent years and continued to diversify the type of fixed income products, net investment yield was 4.33% for the first half of 2021, up by four basis points from the corresponding period of 2020, remaining relatively stable. The company seized the market opportunities to flexibly adjust the pace of realising gains from equity products, so as to achieve steady contribution to the profits. Gross investment income of the Company reached RMB 117,638m, an increase of RMB 21,504m from the corresponding period of 2020. The gross investment yield was 5.69%, up by 35 basis points from the corresponding period of 2020.

The comprehensive investment yield taking into account the current net fair value changes of available-for-sale securities recognised in other comprehensive income was 5.61%, up by 21 basis points from the corresponding period of 2020.

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