China Life plans to complete $6 billion sub-debt sale in 2012

Tue Mar 27, 2012 6:39am EDT
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By Alison Lui and Clare Baldwin

HONG KONG (Reuters) - China Life Insurance Co Ltd said on Tuesday it plans to complete the issuance of 38 billion yuan ($6 billion) of subordinated debt this year, a day after the world's biggest life insurer by market value posted its worst-ever quarterly profit slump.

If the issue is approved by shareholders, it would add 50 percentage points to China Life's solvency margin, Vice-President Liu Jiade told a news conference.

China Life's (2628.HK: Quote)(601628.SS: Quote) solvency margin is currently between 170 percent and 180 percent, he said. The company announced the debt issue on Monday.

"If the solvency ratio remains around 200 percent, we will be quite comfortable with that," he said, adding that external financing will become the main means for China Life to replenish its capital base.

Liu also said that China Life's profitability should improve in 2012.

The company reported on Monday that fourth-quarter net profit plunged 82 percent to 1.6 billion yuan from the same period a year earlier, hit by lower investment returns and slower growth, and said it faced further headwinds from economic and market uncertainty and fiercer competition.

For the full year, China Life said profit fell nearly 46 percent.

Chinese insurance companies, which invest around 10 percent of their assets in equities, have been badly hit by a 22 percent slump in the domestic stock market last year.   Continued...