China Life Insurance (Overseas) to stay afloat in the next two years: S&P Global

Its growth-related capital needs and substantial holdings of high-risk assets may surpass earnings.

China Life Overseas' capital position is projected to remain modest over the next two years, based on S&P Global Rating's risk-based insurance capital model.

Despite efforts to focus on profitability, growth-related capital needs and substantial holdings of high-risk assets may surpass earnings and the value of existing business. 

These assets include speculative bonds, equities, real estate, and alternatives. S&P Global said the insurer is likely to maintain a tight rein on investment risk and overall risk management procedures.

Further, S&P Global sees China Life Overseas to proactively ensure regulatory capital adequacy in the next two years. 

As of December 31, 2022, the insurer's regulatory solvency ratio was 244.0%, down from 282.0% in 2021, mainly due to the redemption of its $250m subordinated notes in July 2022 and adverse market movements in 2022.

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The stable outlook for China Life Overseas mirrors the outlook for China Life Group's core operating entity. 

It also reflects the anticipation that China Life Overseas will remain a strategically important subsidiary of the group for at least the next two years.

China Life Group is anticipated to provide timely capital support to China Life Overseas when necessary, given its history of capital injections since 2015. 

The recent capital injection in April 2023, along with ongoing parental backing in branding, strategy, risk management, and personnel, reinforces the insurer's stability.

China Life Overseas holds a solid position in the life insurance sectors of Hong Kong, Macao, and other Southeast Asian markets. 

The insurer's diligent management of liability costs and investment risks is expected to enhance its profitability gradually. However, its debt-servicing capacity could be affected by subdued earnings or market volatility.