China Life Insurance Co, the mainland's largest life underwriter, is making smooth progress in its attempt to induct foreign investors; and will concentrate on its core business for now, the top management said yesterday.

"Bringing in foreign investors will help improve corporate governance, product development and internal risk management, but we are very prudent in choosing our partner," Miao Fuchun, vice-president of China Life, said at a press conference yesterday.

He declined to reveal more information of the progress or whether the potential partner is in the insurance business or other industries. "We are in discussions, and we will not rush into it," is all he would say.

Liu Jiade, also a vice-president of China Life, told China Daily: "We do not rule out any potential investor, and will hire a consultant if necessary. The only criterion is to ensure capital safety and offer a high return on investment."

Liu hoped a suitable investor would be found by the end of the year.

The other two listed insurers, Ping An Insurance Company of China and PICC Property and Casualty Company Limited, have inducted HSBC and AIG as their strategic investors before they went public.

"With the top-notch experience of foreign investors, Chinese insurers can expect to boost their profit margins," Wang Guojun, an insurance professor at the University of International Business and Economics, told China Daily. "Foreign investors also help raise investor confidence in the initial public offering (IPO)."

Speaking about China Life's business strategy, Yang Chao, a 55-year-old insurance veteran who was appointed its president in early June, said the company will focus on life insurance instead of expanding into other financial sectors in a rush.

Although rival Ping An Insurance Company of China has branched out into banking by setting up Ping An Bank in July, China Life has no plan of going down that road at the moment.

"But in the long run, we will think about it," Yang added. "We will not miss any good business opportunities to strengthen ourselves."

China Life also plans to set up a pension insurance company and a property insurance branch. "But we will stay out of health insurance and reinsurance," Yang said.

The company is in the process of getting approval from the China Insurance Regulatory Commission (CIRC) to form a pension company with its parent before it applies for a trustee licence.

The licence will allow the new company to choose a fund manager to handle its customers' pension funds.

With total assets of over 600 billion yuan (US$74.1 billion), China Life will be the largest domestic investor in the pension company.

Driven by improved returns from its bond investments and reduced cost, the company reported a higher-than-expected 85 percent jump in net profits for the first six months of the year.

China Life earned 5.21 billion yuan (US$643 million), versus 2.81 billion yuan (US$347 million) in the same period last year

However, like non-life insurer PICC Property & Casualty, China Life was also hit by the mainland's troubled securities industry.

It booked a net realized loss of 383 million yuan (US$47.3 million), mostly linked to stock investments, as the mainland's benchmark Shanghai composite index fell 15 percent in the first half.

The company set aside 92 million yuan to account for holdings with brokerage Min Fa Securities, which is being liquidated. The insurer said the carrying value of its holdings with Min Fa was 412 million yuan on June 30.

But according to Li Liangwei, a vice-president, the slump in A shares market had a limited impact on China Life. "Our direct investment in the stock market is around 0.3 percent, and the indirect investment is below 5 percent."

Most of the company's capital is locked in the bond market and banks.

As the industry watchdog has allowed insurers to invest their foreign exchange on stock markets overseas recently, China Life is eager to make a move.

"We are well prepared and are waiting for detailed regulations from the CIRC," Li said.

(China Daily September 8, 2005)