UPDATE 1-Competitors, regulations to pressure China Life H2 earnings
(Adds outlook, context, details)
HONG KONG, Aug 28 (Reuters) - China Life Insurance Co Ltd , the world's biggest insurer by market capitalization, posted a higher-than-expected 68 percent increase in first-half net profits but regulatory changes and fierce competition will pressure its earnings for the rest of the year.
The company said it had earned 16.2 billion yuan ($2.65 billion) in the first half of the year compared to 9.6 billion yuan in the same year ago period.
Four analysts polled by Thomson Reuters had forecast an average profit of 14.8 billion yuan. China Life had also said last month that its first-half profit could rise more than 50 percent on stronger investment returns and fewer impairments.
The increase, however, comes off a low base as weak investment returns and impairments in the A-share market have depressed insurers' earnings in recent years.
Chinese financial institutions are now under additional pressure due to weaker economic growth and weak equity markets, which analysts have said could spark a round of capital raising.
"We are wary of China Life's new business growth momentum in 2H13 given the still weak fundamentals of the China insurance sector," CCB International insurance analyst Kenneth Yue wrote in a research note earlier this month.
Yue lowered his price target for China Life to 19.90 Hong Kong dollars ($2.57) and downgraded it to neutral from outperform.
China Life in June began selling a new single-premium insurance product through banks in order to defend its market share from competitors like China's No. 2 insurer, Ping An Insurance Group Co of China Ltd .
The product, however, could hurt margins at a time when Chinese insurers are facing pricing competition and policy cancellations after a recent rule change removed the interest rate cap on certain life insurance products, Yue said.
The Hong Kong-listed shares of China Life have fallen 24 percent this year compared with a 5 percent fall in the benchmark Hang Seng index. The Shanghai-listed shares are down 36 percent versus the 7.4 percent drop in the Shanghai Composite Index.
Ping An, whose businesses also include banking, will report interim results later this week. ($1 = 6.1217 Chinese yuan) ($1 = 7.7563 Hong Kong dollars)
(Reporting by Clare Baldwin; Editing by Miral Fahmy)