Fitch Ratings has affirmed China Life Insurance Company Limited’s Insurer Financial Strength (IFS) Rating of ‘A+’ (Strong) and Long-Term Issuer Default Rating (IDR) of ‘A’. The outlook for both ratings is stable.
Fitch’s analysis suggests that China Life remains resilient to potential future downgrades in China’s sovereign credit rating, which currently sits at ‘A+/Negative’. The ratings agency also noted that the insurer’s strong standalone fundamentals and limited foreign currency obligations contribute to this stability.
Key Ratings Factors
China Life’s new business value (NBV) saw substantial growth, rising by 18.6% year-on-year in the first half of 2024, compared to an 11.9% increase in 2023. This growth was mainly driven by its core individual agent channel, along with strong bancassurance performance due to tightened rules on commission costs.
According to Fitch, China Life’s financial performance remained strong with an average return on equity (ROE) of 14% between 2022 and 2023, although the figure dipped to 11% in 2023. However, the insurer’s annualised ROE for the first half of 2024 surged to 16%, bolstered by significant unrealised gains.
The insurer experienced lower investment income in 2023, largely due to realised disposal losses and increased unrealised losses. Despite these challenges, China Life’s profitability was supported by a focus on quality business growth, particularly in its NBV and premium performance.
China Life’s capital position remains strong, with a core solvency ratio of 152% as of the end of the first half of 2024. Although the comprehensive solvency ratio fell slightly to 205%, it is still robust compared to its peers. The capital score under Fitch’s Prism Global model remains in the ‘Adequate’ range.
By the end of the first half of 2024, after redeeming its capital supplementary bonds, the insurer had no financial leverage. However, its financial leverage ratio was 3% at the end of 2023, a figure expected to remain low despite issuing a new CNY35 bn bond in September 2024.
About China Life
China Life Insurance Company Limited is one of the largest and most established life insurers in China, with a strong market presence and a wide-reaching distribution network. The company is a market leader, known for its extensive agency sales force and diversified business operations.
China Life is majority-owned by the Ministry of Finance and plays a crucial role in the nation’s insurance sector, providing a wide range of life insurance, annuity, and health insurance products. Its scale, brand strength, and strategic positioning solidify its leadership within the Chinese insurance market.
