Yesterday,
China Life Insurance Co. Ltd.
(
LFC
) reported its 2012 interim results. The company witnessed
operating earnings of RMB0.34 per share (81 cents per ADR) in the
first half of 2012, witnessing a plunge of 26.1% from RMB0.46 per
share (US$1.05 per ADR) in the first half of 2011.
Net income also declined 25.7% to RMB9.64 billion (US$1.52 billion)
from RMB12.96 billion (US$1.98 billion) in the year-ago period.
Additionally, China Life's total revenue declined 8.3% to RMB208.6
billion (US$32.98 billion) from RMB227.5 billion (US$34.74 billion)
in the prior-year period.
Further, gross premiums written declined 5.1% to RMB185.4 billion
(US$29.3 billion) from $195.5 billion (US$29.86 billion) in the
first half of 2011. Net premium earned during the first half of
2012 also declined 5.2% to RMB184.7 billion (US$29.2 billion) from
RMB194.8 billion (US$29.75 billion).
Meanwhile, investment income increased 16.5% year over year to
RMB35.3 billion (US$5.58 billion).
Segment Results
Individual Life Insurance Business:
Net premium earned in the reported period moved down 5.5% to
RMB176.5 billion (US$27.9 billion) from the year-ago period.
Group Life Insurance Business:
Net premium earned showed a 5.7% year-over-year improvement to
RMB316 million (US$49.96 million).
Short-Term Insurance Business:
Net premium earned during the reported period was RMB8.6 billion
(US$1.36 billion), showing a 3.5% hike over the comparable period
of 2011, primarily due to a 9% improvement in the short-term
accident insurance business.
Financial Update
As of June 30, 2012, China Life had total assets amounting to
RMB1,769.2 billion (US$279.95 billion), rising 11.7% from December
31, 2011. The company's investment assets also increased 11.2% to
RMB1,661.7 billion (US$262.94 billion) at the end of June 2012.
China Life's shareholders' equity totaled RMB213.5 billion
(US$33.78 billion) as of June 30, 2012, growing 11.5% from RMB191.5
billion (US$30.09 billion) at 2011-end. Return on equity declined
to 4.71% from 6.22% in the first half of 2011.
Conclusion
China Life has reported lower top as well as bottom line in the
first half of 2012 due to poor operating performance. However,
investment income witnessed a remarkable improvement. Asset
position and shareholders' equity also improved significantly,
although return on equity disappointed. The company needs to
improve its operating efficiency, particularly in the Individual
Life Insurance business.
China Life's main competitors include
ING Group NV
(
ING
),
Manulife Financial Corporation
(
MFC
) and
Sun Life Financial Inc.
(
SLF
).
China Life carries a Zacks #3 Rank, implying a short-term Hold
rating. However, considering the fundamentals, we maintain our
long-term 'Neutral' stance on the shares.
ING GROEP-ADR (ING): Free Stock Analysis Report
CHINA LIFE INS (LFC): Free Stock Analysis
Report
MANULIFE FINL (MFC): Free Stock Analysis Report
SUN LIFE FINL (SLF): Free Stock Analysis Report
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