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Analyst Blog

On Mar 27, 2014, we issued an updated research report on China Life Insurance Co. Ltd. (LFC - Analyst Report). The company’s full-year 2013 earnings significantly beat the year-ago number.

China Life’s strong market position, growth in premiums and investment income are expected to offset higher expenses and declining cash flow, as reflected in its 2013 results.

China Life has the most extensive distribution and service network among all insurance companies operating in China, making it one of the largest brands in China. To cater to its huge clientele, the company has established a strong customer service network with dedicated customer service representatives. Also, the company constantly upgrades its existing services.

China Life is experiencing an increase in net premiums earned aided by strong premium growth in the Individual Life insurance business. As a leading life insurance company with a strong brand value, China Life is benefiting from this opportunity. Moreover, diversification of business has reduced the company’s operational risk.

The investment income of China Life has also shown substantial improvement over the past few years primarily due to increased volumes. With the improvement in the economic scenario, investment income is expected to increase.

However, with government supporting more new establishments of health insurance companies to improve healthcare in China, China life is facing increasing competition risk as the company is largely dependent on the domestic market. Alongside, substantial interest rate and currency risks pose direct threat to long-term growth.

Zacks Rank

China Life presently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the life insurance industry worth mentioning are Aviva plc (AV), Fidelity & Guaranty Life Common (FGL - Snapshot Report) and Primerica, Inc. (PRI - Snapshot Report). While Aviva sports a Zacks Rank #1 (Strong Buy), Fidelity & Guaranty Life and Primerica carry a Zacks Rank #2 (Buy).

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