(Yicai) Aug. 25 -- China Life Insurance recorded a 36 percent decrease in net profit in the first half, mainly due to more modest equity investment returns and rising claims, but the nation’s largest life insurer expects the second half to be better for investors.

From January to June, China Life earned CNY16.2 billion (USD2.2 billion) in net profit, down almost 40 percent from a year ago, the Beijing-based company said in its interim earnings report recently. Revenue rose by nearly 5 percent to CNY553.6 billion (USD76 billion). Premium income totaled CNY470.1 billion, up 7 percent.

But business performance should improve as mainland stocks are currently valued below the historic average, and market opportunities should exceed the risks in the second half, Liu Hui, vice president, said during a press conference held for the results yesterday.

In the first half, equity returns tallied CNY87.6 billion, down 11 percent from the same period of last year. The rate of return was only 3.41 percent, down about 80 basis points.

The sluggish stock markets caused the firm's life insurance profit to drop by 52 percent. A reduction in premium income, as well as increase in claim costs, resulted in a 67 percent decline in health insurance profit, and a 90 percent reduction in that of casualty insurance.

China Life’s equity holding in Sino-Ocean is purely a financial investment, and any risks caused by that are limited and under controlled, Zhao Guodong, board secretary, said at the conference, referring to China Life's 26 percent stake in the troubled property developer.

On Aug. 14, Sino-Ocean announced that it has defaulted on a US dollar-denominated bond as it did not pay interest on time. The real estate firm also expects its first half net loss to be as high as CNY20 billion, up from CNY1.1 billion recorded in the same period of last year. China Life is Sino-Ocean’s largest shareholder.

However, China Life’s exposure to the property sector is generally limited, according to Liu. Property stocks make up less than 0.4 percent of the firm's total assets and those are equities of high-quality developers, per the VP. The corresponding share of real estate bonds is less than 0.2 percent and those are all from large issuers.

China Life also holds some nonstandard products such as trust guarantees in the real estate sector, but that category accounts for less than 0.6 percent of its total assets, according to Liu.

Editors: Tang Shihua, Emmi Laine