China Life Insurance Co, the country's top life insurer, said on Monday its first-half profit more than doubled, topping forecasts, thanks to investment gains in a strong stock market and rising premiums in the fast-growing Chinese economy.

China Life and No. 2 rival Ping An Insurance (Group) Co have benefited on two fronts, as China's emerging wealthy buy more insurance policies and Beijing has relaxed investment rules to invest more in domestic stocks and higher-yielding securities.

China Life, which leads rival Ping An Insurance (Group) Co. in the mainland market, said it earned 23.29 billion yuan

(US$3.08 billion) in the first half, compared with 8.97 billion yuan in the year-earlier period.

On average, four analysts polled by Reuters were expecting first-half profits of 16.7 billion yuan for China Life.

The insurer last month said it expected its first-half profit to more than double based on domestic accounting standards, due to steady growth in its insurance business and a substantial increase in investment income.

Rival Ping An this month posted a 140 percent gain in first-half profit, driven by its fledgling banking operations and strong investment returns.

China Life's net investment income more than doubled to 24 billion yuan from 11.3 billion yuan a year earlier. Its gross written premiums and policy fees rose 17 percent to 63.7 billion yuan in the first-half.

The company lifted its share of the mainland life insurance market by 1.59 percentage point from the end of 2006 to 46.86 percent.

The Shanghai composite index has risen 92 percent so far this year, good news for mainland insurers previously limited to low-yielding bank deposits and government bonds.

Analysts expect rural insurance will be a future earnings driver, thanks to relatively higher margins and an underpenetrated market.

Currently, about 40 percent of China Life's premium comes from rural insurance. We see this increasing to 50 percent in 2010, Merrill Lynch analyst Karen Chan said in a research note.

Hong Kong shares in China Life and Ping An have risen 32 percent and 84 percent, respectively, over the past year. Both China Life and Ping An trade in Hong Kong at 39 times forecast earnings, as investors see the sector as a way to tap booming domestic consumption in China.

By comparison, American International Group, the world's biggest insurer, trades at about 10 times 2007 profit.

Beijing recently allowed Chinese insurers to invest 10 percent of their assets in domestic stocks, up from 5 percent.

It also allowed insurers to invest up to 15 percent of their assets abroad. Previously, China Life and its peers could only invest a portion of their foreign currency holdings overseas.

However, because of anticipated appreciation in the yuan currency and a roaring domestic stock market, Chinese insurers are not expected to invest heavily overseas in the near term.

The assets of all insurance firms operating in China were 2.53 trillion yuan (US$335 billion) at the end of June, potentially making 380 billion yuan available for overseas investment.

(US$1=7.5614 yuan)