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
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
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
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
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
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
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
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