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China Life reports rise in embedded value

China Life yesterday reported it had an embedded value of NT$36.18 per share by the end of 2011, a rise of 12 percent from 2010.

The embedded value of an insurance company is its present value of future profits plus adjusted net asset value. China Life was the last insurer in Taiwan to report its embedded value for 2011.

During the insurer's quarterly investors' conference yesterday, it reported a total embedded value of NT$79.6 billion by the end of 2011, or NT$36.18 per share based on the firm's capital of NT$21.994 billion.

Yesterday, China Life closed at NT$26.5, down 1.85 percent. The figure drew complaints from the firm's chairman Wang Ming-yang.

“Our share price should be close to the embedded value,” he said.

Effects of China Life's acquisition of PCA Life have played out as the firm's first-year premium income for 2011 grew to NT$91.719 billion, its highest ever. The figure was a year-on-year growth of 36.97 percent and put China Life's market share at 9.4 percent.

Total premium income was NT$14.478 billion, a growth of 20.4 percent from 2010.

Merrill Lynch had lowered its China Life embedded value forecast from NT$39 to NT$35. Yet the actual value came to NT$36.18 as the firm's value of new business rose by 12 percent from 2010. These figures prompted Merrill Lynch to maintain its “buy” rating for China Life and its target price of NT$42.5.

Of all the insurance firms that have released their embedded values for 2011, Cathay Life led with NT$475 billion, followed by Fubon Life's NT$176 billion and Shin Kong Life's NT$171 billion.

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