China Life Insurance Co. Ltd. (LFC): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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We are downgrading our recommendation on China Life to Neutral owing to the absence of any near-term catalyst and no estimate revisions. The company's strength lies in its robust market position and business development initiatives. Its third-quarter earnings increased year over year banking on higher investment income. The product upgrade, higher life insurance sales and strong score with credit rating agencies also remain impressive. However, the new entrants in the China market will likely raise competitive pressure for the company, going forward, as its operations are largely concentrated on the domestic front. Alongside, substantial interest rate and currency risks pose direct threat to long-term growth. Also increased benefits and expenses owing to increased expenses in its individual, group and short-term insurance businesses are a drag.


Headquartered in Beijing, China, China Life Insurance Company Ltd. is China's leading life insurance company. It is a subsidiary of China Life Insurance (Group) Company (CLIC), which is a Fortune Global 500 company. China Life is a leading provider of annuity products and life, accident and health insurance in China. It is also involved in short-term health insurance and other insurance-related services for individuals and groups.

China Life was established on Jun 30, 2003 as part of the restructuring process of CLIC, which was formed in Oct 1949 and was the first insurance company to be set up in China. Additionally, China Life is the first Chinese company to be listed on three stock exchanges.

The initial public offering (IPO) of China Life was the world's largest IPO in 2003. It was listed on the New York Stock Exchange, the Hong Kong Stock Exchange and the Shanghai Stock Exchange on Dec 17, 2003, Dec 18, 2003 and Jan 9, 2007, respectively. Additionally, China Life is the solitary company listed on the Hong Kong Stock Exchange that is a constituent stock in each of the three indices of the Hang Seng Sustainable Development Enterprises Indexes Series.

China Life is the holding company of China Life Pension Co. Ltd. and China Life Insurance Assets Management Co. Ltd. (AMC) with 87.3% and 60% ownership, respectively. The company also owns a 40% stake in China Life Property and Casualty Insurance Co. Ltd. (P&C company). Through its controlling ownership in the AMC, China Life became China's largest insurance asset management company and one of the largest institutional investors.

China Life has the most widespread distribution network in China. It had over 653,000 exclusive agents and 17,000 direct sales representatives as of Dec 31, 2013.

China Life had about 177 million individual and group life policies, annuities and long-term health insurance policies in force at the end of Dec 31, 2013. The company's extensive distribution network enabled it to develop a huge customer base, which is managed by numerous sales outlets and customer service counters.

China Life provides its products and services through the following main business segments:

Individual life insurance (93% of the total premiums earned in 2013): This segment primarily relates to the sale of insurance contracts and investment contracts to individuals and comprises participating and non-participating life insurance, health insurance, accident insurance and annuity businesses. All products in this segment are issued for the long term.

Group life insurance (1%): This segment primarily deals with the sale of long-term insurance contracts and investment contracts to group entities and comprises participating and non-participating business.

Short-term insurance (5%): This segment relates to the sale of short-term accident and health insurance to both individuals and groups. Short-term products are issued for a period of 1 year or less.

Corporate and other (1%): This segment covers incomes and expenses of subsidiaries and insurance agency business related to the provision of services to CLIC. Additionally, it includes unallocated income and expenses of CLIC and share of results of associates.

China Life has received various honors for the strong brand name it possesses. It has been enlisted in the Fortune 500 companies for 10 consecutive years, the Global Top 500 Most Valuable Brands for 5 consecutive years and Forbes Global 2000 companies for 9 consecutive years. It also occupied the 129th place in the FT Global Top 500 companies on the basis of market valuation and held the 106th place in the Forbes Global 2000 list in 2013. Further, it is placed fifth in the list of China's Top 500 Most Valuable Brands and is the top-ranked insurance company in the nation.

China Life Insurance Co. Ltd. (LFC): Read the Full Research Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks
Referenced Symbols: IPO , AMC , LFC

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