BEIJING, Nov. 16 (InfoChina) – China’s insurance industry will implement new accounting standards starting from January 1, 2007, which will adopt the concept of fair value and may lead to sharp fluctuations of annual investment gains of Chinese insurers.

Under the acting standards, gains from stocks are defined as short-term investment with the book yields not reflected in intra-year profits, therefore, insurance companies can decide whether or not to cash book yields in accordance with their performance. However, as an industry insider says, under the new standards, stock investment will be listed under the transactional investment assets, thus, the book gains will be included in the profit for the current period. It means that insurers must cash the gains before the yearend otherwise their book investment returns will be recorded as reserved proceeds and directly entered into shareholders’ equity.

       In this case, it is recognized that insurers will try to sell certain amount of their stocks before the yearend especially when the domestic stock index has hit five-year high at present.

If China Life cashes part of its share holdings, its 2006 profit may be lifted significantly, market analysts say.

China Life injected 374.288 billion yuan in investment in the first half of 2006 with a return of 4.24 percent.