BEIJING (Bloomberg) — China's insurance companies posted 53.1 billion yuan ($7.8 billion) in combined profit last year as a stock-market rally boosted investment returns, according to the industry regulator.

Investment gains in 2009 totaled 214.2 billion yuan, representing a 6.41 percent yield, China Insurance Regulatory Commission said in a statement on its website yesterday, without giving comparative figures. Premium income rose 13.8 percent to 1.1 trillion yuan.

The benchmark Shanghai Composite Index surged 80 percent last year as the world's third-largest economy recovered from the global recession, boosting the value of insurers' stock holdings. Ping An Insurance (Group) Co., China's second-largest insurer, had "relatively desirable" investment returns last year, deputy chief investment officer Chen Dexian said on January 12.

"The insurance industry's development was better than expected," CIRC chairman Wu Dingfu said in the statement.

Insurers' returns from equity holdings totalled 103.6 billion yuan, while fixed-income investments brought 102.9 billion yuan of gains, CIRC said in the statement.

China's life insurance companies posted combined profit of 43.5 billion yuan last year and the nation's property insurance companies generated 3.5 billion yuan in profit, CIRC said.

Still, the industry's rapid growth may "easily lead to failures to meet solvency requirements" at many insurers, Wu said, adding that his commission will take "more stringent" measures in the event of failures to meet solvency requirements, which gauge companies' ability to settle claims.

The CIRC may take over insurers whose solvency margins have long stayed below requirements, Wu said, without specifying. Eight companies were unable to meet the regulator's standards as of December 31, down from 13 a year earlier, he said.

Chinese insurers' profits dropped in 2008 due to a decline in the stock market and natural disasters such as snowstorms. Profit at China Life Insurance Co., the nation's biggest insurer, fell 45 percent that year. The Shanghai Composite Index slumped 65 percent in 2008.

The CIRC will "steadily" increase insurers' investment scale in infrastructure to ensure more stable returns, Wu said, without providing details. Some insurers had "relatively strong impetus" to expand investments in real estate, which may lead to new risks, he added.