"The big story behind China Life Insurance (NYSE: LFC) is still the demographic one, as the population of China urbanizing and aging," says Paul Goodwin, a specialist in Asian stocks.
In his Cabot China & Emerging Markets Report, the advisor offers a fascinating look into the company, reviewing its firm's history, it's current state and assessing its future outlook.
"Our latest pick is an old friend of the Cabot China & Emerging Markets Report, China Life Insurance, the biggest insurer in China and the largest in the world by market value. It’s also one of the biggest companies in China, with a market cap of $105 billion and sales of $24.4 billion a year.
"The insurance story in China is an interesting one, an industry that’s still getting a huge boost from the rapid transition of China from a village- and family-based society to an urban individualist society.
"The people who leave their villages also leave behind the traditional family roles that call for the family to stay together and the young to care for the aged. Once that tradition is broken, people who have left the village need to ?nd new ways to ful?ll their obligations, and insurance is one popular answer.
"China Life Insurance, like most Chinese companies that have been around since Mao was in power, has an interesting history.
"The company began life in 1949 as the People’s Insurance Company of China (PICC), a state-owned enterprise that functioned as a virtual monopoly through the 1950s as the Revolution ran its capitalist competitors out of town.
"In 1958, the paradox of having an insurance business in a cradle-to-grave welfare state ?nally impressed itself on China’s rulers and the company went into suspended animation until economic reforms revived it in the late 1970s. PICC began selling property and casualty insurance in 1979 and life insurance in 1982.
"In the late 1980s, China actually allowed competitors to spring up, and PICC began to act like a real company, not a state service.
"As a real company, China Life Insurance (the new name was part of its transformation into a for-pro?t entity) emerged as a joint stock company, established an asset management division (both in 2003) and worked hard to make itself attractive to investors.
"It had a huge head start in infrastructure, and is adapting well to a world in which PingAn Insurance and China Paci?c Insurance present increasingly competent competition.
