BEIJING (Bloomberg) — China Life Insurance Company, the world's biggest insurer by market value, rose to a record after reporting first-half profit that beat analyst estimates by 40 percent.

The 5.7 percent gain in China Life's Hong Kong shares brought its market capitalisation to $190 billion.

China Life said net income more than doubled to 23.3 billion yuan ($3.1 billion), topping the average 16.6 billion yuan forecast among five analysts surveyed by Bloomberg News.

China Life benefited from soaring returns on stock market investments, allowing it to boost profit even as growth in premiums cooled.

Shares of the company and smaller rival Ping An Insurance Company have rallied this year as the government relaxed rules on how much they can invest in equities.

"China Life's Hong Kong shares have been undervalued for awhile, so there's a lot of catching up to do after the spectacular earnings," said Zhang Ling, who manages the equivalent of $1.1 billion at ICBC Credit Suisse Asset Management in Beijing.

Beijing-based China Life's Hong Kong stock climbed to HK$37.15 at the market close.

It has risen for seven straight sessions, taking gains since August 17 to 34 percent.

China Life's Shanghai shares soared by the 10 percent daily limit to 56.09 yuan yesterday.

Citigroup raised its price target on China Life, which in January became the first insurer to go public in China, by 13 percent to HK$40.42.

China Life overtook New York-based American International Group this month in terms of market value.

The nation now boasts the world's most valuable companies in the insurance, banking and mobile-phone carrier industries, according to data compiled by Bloomberg.

Net investment income jumped to 24.1 billion yuan in the six months through June 30 from 11.3 billion yuan a year earlier, helped by a quadrupling in the nation's benchmark CSI 300 Index in the past year.

The government said it would allow insurers to double the share of assets directly invested in domestic equities to 10 percent, industry executives briefed by the insurance regulator said last month.

China Life's holdings of domestic stocks have already reached the maximum 10 percent permitted, Liu Lefei, chief investment officer, said today in Hong Kong.

The insurer spent $2bn of the $3bn raised by its share sale this year on investments bought on the mainland, including stocks and bonds, while purchasing shares of Chinese companies traded in Hong Kong with the rest, he said.

Liu also said China Life isn't at risk from a US subprime crisis that has roiled global markets.

"China Life's investment principle has always been cautious, so we haven't invested in assets related to US subprime mortgages and the related derivatives, such as CDOs."

China Life's net premiums minus reinsurance costs grew 17 percent to 63.4 billion yuan, slowing from expansion of 29 percent a year earlier.

The firm's share of the nation's life insurance market shrank to 46.9 percent in the first six months from 49.4 percent a year earlier, according to China's industry watchdog.

Growth in policy sales may rebound in the second half as China Life uses its extensive network to serve a growing middle class in the nation's countryside, wrote HSBC analysts including John Russell in an August 1 report.

The company's Hong Kong stock trades at about 43 times estimated full-year profit, according to data compiled by Bloomberg.

That compares with a price-earnings multiple of 10 for American Insurance Group, the world's second-largest insurer by market value.