Yesterday, China Life Insurance Company Ltd was one of the companies whose shares (ADRs) touched a new 52 week low. The stock tested a new low of $35.87 before closing high at $36.44.
Since announcing its half-yearly results on August 23, LFC has been following a downtrend. Currently, analysts' consensus one year target price is at $48.97, indicating significant upside potential. Should you now invest in the stock?
Leading player in China's life insurance industry
China Life Insurance, the largest life insurance company (based on a market share of 35.6 percent of total premiums in 2010) in China, provides annuity products and life insurance for individuals and groups, and it also provides accident and health insurance products. Its net earned premiums increased from CNY265.5 billion ($40.3 billion) at end 2008 to CNY318.1 billion ($48.2 billion) at the end of 2010.
LFC is also China's largest insurance asset management company and one of the largest institutional investors in China through its controlling shareholding in China Life Insurance Assets Management Co. Ltd. (AMC). As of December 31, 2010, AMC had total assets of CNY4.65 billion ($705 million), net assets of CNY3.9 billion ($597 million) and net profit of CNY493 million ($75 million).
China Life Insurance provides the products primarily through a distribution force comprised of approximately 706,000 exclusive agents and 14,200 direct sales representatives. The company also operates through approximately 44,000 sales representatives at more than 97,000 bancassurance outlets. LFC provides group life insurance and annuity products through its group life insurance business to the employees of many of China's largest companies and institutions.
LFC offers both non-participating and participating annuities to satisfy asset accumulation and asset distribution needs. Annuitants make deposits or pay premiums into LFC's accounts and receive guaranteed level payments during the payoff period specified in the contracts. LFC also provides accident insurance in China.
Key positives
Apart from its strong market position in life insurance and asset management markets, the company has some exposure to the property and casualty (P&C) business. As of December 31, 2010, CLPCIC, the company's P&C division, had total assets of CNY15.1 billion ($2.3 billion), net assets of CNY 2.9 billion ($444 million) and net profit of CNY 613 million ($93 million).
For the first six months of of 2011, the company's total revenue reached CNY227.5 billion ($34.5 billion), a 5.6 percent increase year-on-year.