LFC Maintained at Outperform - Analyst Blog
16 Setembro 2013 - 7:07PM
Zacks
We have retained our Outperform recommendation on China
Life Insurance Co. Ltd. (LFC) following impressive first
half results. We expect superior brand name, an extensive domestic
distribution channel and strong investments of China Life to
bolster its operations in the upcoming term. This leading Chinese
life insurance company carries a Zacks Rank #2 (Buy).
Why the Reiteration?
China Life’s earnings for the first half of 2013 came in at RMB0.83
per share ($0.13 per ADR), witnessing a surge of 68.1% year over
year.
The Zacks Consensus Estimate for 2013 moved up by 0.4% to $2.59
over the last 30 days. The estimate also translates to a year over
year increase of 178.5%. Similarly, for 2014, the Zacks Consensus
Estimate improved by 0.3% to $2.94 over the same time frame.
With a strong distribution and service network, China Life is well
positioned to reap benefits of scale from the Chinese insurance
market. In fact China Life became the first Chinese insurance
company to obtain a private equity fund license and enter the
private equity business in Aug 2011. The private equity business
can generate impressive profits if managed properly.
Moreover, the company’s continuous efforts to maintain its huge
clientele base through dedicated customer service are expected to
help the company write new business going forward.
Additionally, the company’s strong brand name and goodwill has
enabled it to achieve success in the new field easily, compared to
lesser-known insurance companies.
China Life has also been facilitated by the increased allocation in
held-to-maturity securities, bank deposits and a higher volume of
policy loans and debt investment plans. As a result, investment
income has been increasing over the past few years and is expected
to improve further with the improving economic scenario. The
Chinese life insurer also scores strongly with the credit rating
agencies.
However, China Life’s declining operating cash flow, exposure to
domestic market risks and higher than expected benefits and
expenses are some of the matters that need attention. Also with the
growth in the Chinese insurance market, China Life encounters
threats from potential new entrants that must be countered through
growth strategies.
Other Stocks to Consider
Among other life insurance companies that are worth considering are
StanCorp Financial Group Inc. (SFG) carrying a
favorable Zacks Rank #1 (Strong Buy) and Health Insurance
Innovations Inc. (HIIQ) and Lincoln National
Corporation (LNC) sharing the same Zacks Rank as China
Life.
HEALTH INS INN (HIIQ): Free Stock Analysis Report
CHINA LIFE INS (LFC): Free Stock Analysis Report
LINCOLN NATL-IN (LNC): Free Stock Analysis Report
STANCORP FNL CP (SFG): Free Stock Analysis Report
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