China Life Takes to Private Equity

On Tuesday, China Life Insurance Co. Ltd. (LFC - Analyst Report) announced its entry into the private equity business. It is the first Chinese insurance company to obtain a private equity fund license.

The company has already formed a 20-30 member team to identify investment opportunities and is expected to make its first investment soon. The move by China Life to obtain a license for a private equity fund came after the China Insurance Regulatory Commission (“CIRC”) permitted Chinese insurance companies to branch out into private equity and real estate businesses. Earlier, companies had to obtain permission from CIRC before making any kind of investment.

However, CIRC has imposed investment limits of 5% and 10% of total assets, respectively, that insurance companies can make in private equity and real estate. Nevertheless, the move is expected to lead to a combined investment of over $100 billion in the two sectors by Chinese insurance companies.

China Life is a globally leading insurance company in terms of market capitalization. The company earned 204.6 billion Yuan in premiums during the period of January to July, this year.

Additionally, in June this year, China Life had announced a plan to invest 1.6 billion Yuan in P&C Company, along with its parent company China Life Insurance (Group) Company, which planned to invest 2.4 billion Yuan, taking their combined investment in P&C Company to 4 billion Yuan ($615 million). The payment will be made in cash, out of the company’s internal resources.

China Life’s main competitors are ING Group NV (ING - Snapshot Report), Manulife Financial Corporation (MFC - Analyst Report) and Sun Life Financial Inc. (SLF - Snapshot Report).

China Life carries a Zacks #3 Rank, implying a short-term Hold rating. On Tuesday, the shares of the company closed at $44.71, down 1.78%, on the New York Stock Exchange.

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