We issued an updated research report on China Life Insurance Co. Ltd. LFC on Jul 20, 2015.

China Life’s strength lies in its robust market position and organic growth initiatives. China Life has the most extensive distribution and service network among all insurance companies operating in China. Additionally, the company has established a strong customer service network with dedicated representatives operating its innumerable sales outlets. The company also boasts several customer service counters and helplines that operate in every major city of China.

Also, the constant upgrades in its existing services are expected to enable China Life to reach out to potential clients and help in generating new businesses while effectively managing its existing clients. Moreover, China Life is gaining with the first mover advantage as the first Chinese company to obtain a private equity fund license and enter the private equity business. Furthermore, diversification of its business is reducing operational risks for the company.

China Life’s investment portfolio remains strong, as is reflected by substantial improvement in its investment income and net investment yield. Moreover, the company’s strong balance sheet is indicated by an improved solvency ratio. The company also scores strongly with the credit rating agencies.

However, China Life’s exposure to market risks, given that the majority of its investments are limited to China, makes the company highly vulnerable to a downturn in the Chinese economy. Further, the investments outside China are exposed to foreign exchange risks along with volatility in the concerned markets.

China Life has been incurring higher-than-expected operating expenses owing to increased expenses in its individual, group and short-term insurance businesses. The rise in expenses is primarily attributable to an increase in costs associated with the health insurance, accident insurance business, investment contracts, higher policyholder dividends, underwriting and policy acquisition costs, finance costs and administrative expenses. Also lower cash flow levels raise caution.

China Life currently sports a Zacks Rank #1 (Strong Buy). Investors interested in the life insurance space can also consider stocks like Primerica, Inc. PRI, American Equity Investment Life Holding Co. AEL and Reinsurance Group of America Inc. RGA. While Primerica has the same Zacks Rank as China Life, both American Equity and Reinsurance Group hold a Zacks Rank #2 (Buy).

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CHINA LIFE INS (LFC): Free Stock Analysis Report
 
AMER EQUITY INV (AEL): Free Stock Analysis Report
 
REINSURANCE GRP (RGA): Free Stock Analysis Report
 
PRIMERICA INC (PRI): Free Stock Analysis Report
 
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