Bullish Bets On China Life Surge As Profit May Reach Record
By Jonathan Burgos
Bullish bets on China Life Insurance Co. surged to an all-time high on optimism government support for the world?s fastest-growing insurance industry will drive profit to a record this year.
Calls that pay should China Life gain 10 percent cost 6.4 points more than equivalent bearish bets on Friday, three-month options data show. The gap climbed to 7.4 points on May 4, the widest in Bloomberg data dating back to February 2010. China Life reported last month that quarterly profit jumped 70 percent from a year earlier, boosted by growth in the value of new insurance policies and higher investment income amid the mainland?s world-beating equity rally.
?Earnings growth in the near term will continue to be favorable,? Pauline Dan, head of Greater China equities at Pictet Asset Management Ltd. in Hong Kong, said by phone. ?Insurance penetration in China is still low, and once you start putting in a well-trained sales force, the numbers will continue to climb. Insurers are getting better returns from investments, particularly in the stock market.?
The insurance industry is getting a boost as China encourages citizens to purchase policies, with the government saying last week it will test tax deductions for buyers of health coverage. Insurers? investment income has surged as the Shanghai Composite Index more than doubled in the past 12 months on a flood of liquidity to stimulate growth. China Life rose 1.6 percent today at the close in Hong Kong.