China Life 2628; ADR (LFC)

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Not vested.

Goldman Sachs named the stock as its top pick in the sector for short-term trading.

Goldman Sachs said in a note that it sees trading opportunities in Chinese insurance stocks following mainland government efforts to boost investor sentiment and shore up the markets.

Credit Suisse, meanwhile, raised the proportion of China Life to 10 pct from 8 pct in its China stocks portfolio model.

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Not vested. From UOB-Kay Hian:-

China Life & Insurance (2628.HK): Target: HK$36.00

− Good medium- to long-term prospects given the strong secular growth of China’s life insurance industry over the next few years; impact of a global slowdown will be limited;

− The government’s decision to support the A-share market will greatly benefit the company because of its large A-share equity portfolio. Investment returns should improve in 2009

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Not vested.

Citigroup upgrades China Life to buy from hold

HONG KONG, Oct 14 (Reuters) - Citigroup upgraded top insurer China Life to buy from hold after factoring in the company's relatively secure earnings, stable margins and faster-than-expected premium growth.

The investment bank said market concern over the insurer's interest income amid rate cuts in China had been overdone as China Life's investment portfolio consisted of "negotiated deposits" spanning five years, offering downside protection on older deposits.

Citi raised its target price on the stock to HK$31.20 from HK$30.

The stock closed Monday at HK$26.

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China Life Profit Falls 70% on Stock Market Decline (Update1)
By Zhang Dingmin and Helen Yuan

Oct. 27 (Bloomberg) -- China Life Insurance Co., the nation's biggest insurer, said third-quarter profit fell 70 percent as a plunge in the nation's stock market crimped investment returns.

Net income dropped to 2.34 billion yuan ($341 million), or 0.08 yuan a share, from 7.82 billion yuan, or 0.27 yuan a share, a year earlier, the Beijing-based insurer said in a statement to Shanghai's stock exchange today after the market closed.

A more prudent investment strategy has protected China Life from risks that have mired smaller peer Ping An Insurance (Group) Co., which made a loss due to a 15.7 billion yuan impairment charge on its investment in Fortis, bailed out by BNP Paribas and three governments.

The relatively good third-quarter performance of financial stocks China Life owned and increased fixed-income holdings bolstered returns.

``China Life's performance has been more stable than peers as it's not expanding as aggressively,'' said Peng Yulong, a Shanghai-based analyst at Guotai Junan Securities Co. ``But the stock market is weak, so profit won't be too good.''

Investment income fell 44 percent to 11.1 billion yuan, the statement said today without providing year-earlier figures. China Life held 1.054 billion shares in Citic Securities Co., the nation's most-profitable broker, at the end of June, which rose 11.7 percent in the third quarter, compared with a 17 percent drop in the benchmark CSI 300 Index.

Fixed Income

China Life Vice President Liu Jiade said Aug. 26 the insurer will boost investments in fixed-income products and infrastructure. China Life will buy 8 billion yuan of bonds for an infrastructure project in the northern city of Tianjin, it said last month.

First-half net investment income rose 5.1 percent to 25.3 billion yuan after the insurer ``timely'' increased bond holdings to 58.6 percent and trimmed equities by almost 10 percentage points, the company said earlier.

China's government bonds gained 2.7 percent in the three months through September, according to an Asian local-currency debt index compiled by HSBC Holdings Plc.

Third-quarter premium income rose 81 percent to 65.7 billion yuan, compared with a 24 percent increase in the first half, today's statement said.

``China Life's premiums will likely slow down next year as the regulator tries to curb growth in bancassurance sales, which it relies on,'' said Liu Peng, a Nanjing-based analyst at Huatai Securities Co. ``Dividends on participating policies this year will also probably fall short of investor expectations, therefore affecting sales going forward.''

Product Mix

Insurers should slow policy sales through bank outlets this year and improve their product mix to focus more on risk- protection products and regular-premium policies, China Insurance Regulatory Commission Assistant Chairman Chen Wenhui said in an Aug. 20 statement.

The global financial turmoil has had a ``relatively small'' impact on Chinese insurers, although ``high attention'' must be paid to cross-border contagion of financial risks, CIRC's Chairman Wu Dingfu said in a statement posted on the regulator's Web site Oct. 23.

China Life had been approached by foreign banks and securities firms seeking to raise money after more than $500 billion of credit market losses worldwide, Chairman Yang Chao said Sept. 9.

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China Life eyes overseas acquisitions - report

BEIJING (XFN-ASIA) - China Life is eyeing overseas acquisitions as it seeks to take advantage of the global financial crisis to gain a foothold in foreign markets, the Financial Times reported.

Citing Liu Lefei, chief investment officer of China Life, the world's largest life assurer, the newspaper said the moment to begin making overseas investments was fast approaching.

"We are cautiously but actively looking for M&A opportunities... We have been doing a lot of research and the opportunities are becoming more and more obvious," Liu told the newspaper, adding that potential targets are likely to be small or medium-sized financial firms or larger ones that had run into trouble and were likely to start selling off non-core assets.

The targets could be anywhere in the US, Asia or Europe, he said.

China Life has not made any overseas strategic investments, and its investment portfolio is almost entirely domestic, the newspaper noted.

It added that China Life has been mentioned as a potential buyer for parts of AIG's Asia Pacific business if the troubled insurance group puts the assets up for sale.

At the end of September, China Life had 30.5 bln yuan of cash on its balance sheet, the newspaper said.

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20081218 Macquarie China Life Insurance (Downgrade to Neutral) - Premium growth slows upside margin

Event
China Life reported premium income for the period ended 30 2008.

Impact
Premium growth slows: Monthly premium income of Rmb16bn represented 16% growth vs November 2007, although this compares with 41% and 53% growth in October and September. YTD premium of Rmb281bn was up 53% vs 2007, with China Life's market share slipping slightly to around 40%. We are encouraged by the resilience of the life sector to the broader economic slowdown, with consumers turning to guaranteed insurance products as a safe-haven investment vehicle.

4Q slowdown: Monthly data indicates a sharp slowdown in November. While seasonal factors usually result in a 4Q slowdown, pressure by the regulators to slow the sale of bancassurance products is clearly having an impact. However, with only December's premium to be collected, China Life needs just 10% growth over the month to achieve our full-year target of 50% growth.

New business forecasts intact: Monthly data does not provide us with any detail regarding product mix or the split between renewals and new business. Nevertheless, we remain comfortable with our value of one year's growth assumption of 25%, which is based on PRC Gaap premium growth of 50% and a fall in new business margin from 32.4% to 28.6%.

2009 growth outlook: The key question is what will happen in 1Q09? Will the slowdown in November continue or will China Life continue on its solid growth path? On this front, the high base set in 2008 is likely to make comparisons more difficult. However, with equity markets remaining volatile and deposit rates falling, guaranteed products with dividend upside are likely to remain attractive. In addition, banks will still be keen to sell bancassurance products in order to grow fee income and improve balance sheet efficiency.

Earnings revision
No change.

Price catalyst
12-month price target: HK$26.00 based on a Sum of Parts methodology.

Catalyst: Near-term catalysts are likely to be dominated by sentiment on China and performance of the A-share market; and further cuts in interest rates by the PBoC, which will put further pressure on investment yields.

Action and recommendation

At 2.4x 2009E P/EV and 24x NB, China Life continues to trade at a premium to Ping An's (2318 HK, HK$38.8, OP, TP: HK$63.5) 1.7x P/EV and 9x NB. With newsflow slowly improving for Ping An, we believe the valuation gap will narrow. We would look to take profit in China Life and switch into Ping An. With 4.8% upside to our TP of HK$26, we downgrade China Life to Neutral.

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That’s why Money Morning Contributing Editor Horacio Marquez likes China Life Insurance Company Ltd. (ADR: LFC).

China Life is experiencing continued growth for reasons unique to government regulations. Without a social security system, Chinese consumers must fund their own retirement - one reason the Chinese save an amazing 35 cents of every dollar they earn.

Also, China Life’s investment portfolio hasn’t been hit by the market meltdown, because government regulations prevented the company from owning subprime-related mortgages and securities. With 43% market share, Moody’s Corp. (MCO) expects premiums to grow between 30% and 40% in 2008. And right now, only 3% of China’s consumers own life insurance, leaving plenty more room for growth

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DJ MARKET TALK: Worst For China Life Yet To Come - Guoco

1457 [Dow Jones] STOCK CALL: Guoco Capital says outlook for China Life's (2628.HK) premium growth will be gloomy and face severe challenges in 2009. Notes China Life's remarkable premium growth in 2008 (+50.3% on-year) mainly came from robust momentum in bancassurance business, but adds premium growth weakened in 2H08 (especially 4Q08).

"We do not believe the strong growth will continue in 2009," says Guoco. Tips most difficult time for China Life yet to come as investment yield may further decline under foreseeable low interest rate environment. Keeps at Sell, target HK$16.40 based on 2X 2009 P/B. Stock down 0.9% at HK$22.00.(

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China Life profit seen diving 50pc Katherine Ng

China Life Insurance (2628) sent out its first profit warning since listing, saying its net profit for last year would plunge by 50 percent due to a rapid decline in capital markets and a poorly performing insurance business.

The mainland's largest insurer also revealed that its chief investment officer, Liu Lefei, was to leave the firm for CITIC Securities, in which the insurer and its parent hold a 14.3 percent stake.

Liu's successor has not been named.

Despite the negative factors, Fitch Moody's and Standard & Poor's all see the insurer's outlook as stable. Moody's has assigned China Life an A1 credit rating, while Standard & Poor's and Fitch have each given it A+.

The Beijing-based insurer expects last year's earnings could be half of 2007's 28.116 billion yuan (HK$31.77 billion), resulting in full-year net profit of only 14.06 billion yuan by mainland accounting standards.

Still, according to international accounting standard, China Life recorded a 38.88 billion yuan net profit in 2007.

China Life attributed the significant drop last year to a substantial decrease in investment returns from its equity assets, with a dip of more than 60 percent in the domestic capital market.

Other reasons include increasing competition in the domestic insurance market and a rise in claims in the wake of natural disasters.

Analysts say the 50 percent decline in 2008 earnings is in line with expectations and China Life's performance during the first three quarters of the year.

The fourth quarter might see a year- on-year fall of more than 70 percent, according to one mainland analyst.

For the first three quarters, China Life saw net profit drop 61 percent, 8.6 percent and 70.4 percent respectively compared with the corresponding quarters a year earlier.

This year will be another tough year for China Life as the capital market remains volatile and bleak, analysts say.

Shares of China Life yesterday closed at HK$21.95, down 2.01 percent from Monday.

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DJ MARKET TALK: JPM Still Prefers China Life Despite Pft Warning

1018 [Dow Jones] STOCK CALL: JPMorgan says continues to prefer China Life (2628.HK) for premium business restructuring, long-term profitability generation in 2009, despite company forecasting an over 50% on-year fall in 2008 net profit vs CNY28.12 billion in 2007. Believes lower profits provide a lower base for comparison for 2009, earnings recovery theme remains intact. Keeps Overweight, doesn't specify target price; shares down 5.2% at HK$20.80; HSI down 2.4%.