China's top life insurer China Life Insurance reported a 61 percent fall in first-quarter profit, according to Chinese accounting standards, dented by a poor investment performance.
Net profit fell to 3.47 billion yuan ($495.2 million) from 8.89 billion in the year-ago period, the company said.
Due to a plunge of the Shanghai stock market earlier this year, China Life booked a 5.5 billion yuan loss on the fair value of its investment portfolio, mainly in stocks, the company said in a statement to the Shanghai stock exchange on Sunday.
That compared with a fair value gain of 3.9 billion yuan in the same period last year.
Shanghai's stock market, on which China Life depends for a sizeable portion of its investment income, has dropped by around 32 percent since the start of the year on expectations of slowing income growth and rising interest rates to combat inflation.
China's life insurance market, dominated by China Life and Ping An Insurance, has grown dramatically as Beijing dismantles a cradle-to-grave welfare system, although the rate of premium growth is slowing.
China Life raked in investment income of 15.1 billion yuan for the first quarter, a 10 percent decrease compared with a year earlier and the investment yield was 1.09 percent during the reported period.
The insurer said last month its net investment yield for 2007 was 5.76 percent, according to International accounting standards.
The group has said it will cut its allocation to publicly traded equities this year because of turbulence in financial markets.
The Shanghai benchmark stock index rose 97 percent last year, boosting profits at China Life. The index hit a record high in mid-October before retreating amid a global selloff.
In order to participate in a wider a range of securities, China Life is actively investing in offshore equities, such as Hong Kong IPOs.
China Life's gross written premiums and policy fees rose 39.5 percent during the quarter to 101.6 billion yuan.
China Life's Hong Kong shares are down 16 percent so far this year, compared with an 8 percent fall in the benchmark Hang Seng Index. China Life trades at 26.4 times forecast 2008 earnings while its rival Ping An trades at 30.9 times earnings, according to Reuters data.