Summary:
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.
Overview:
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.