Market Overview

China Life Insurance Taking On Risk To Maintain Growth

Share:

Morgan Stanley’s Jenny Jiang believes China Life Insurance Company Ltd. (ADR) (NYSE: LFC) has made “dramatic” changes in its product strategy and business model over the last 18 months, which have led to a worsening of the risk-reward.

Jiang downgraded the rating on the company from Overweight to Equal-weight, with a price target of HK$20.

Concerns

“We believe interest rate, credit, and capital risks are all on the rise for China Life for the next couple of years, a tougher period for earnings and margins in view of pressure from lower yield. On the other hand, the benefit of bank/insurance synergy, in our view, could take a long time to materialize,” the analyst mentioned.

China Life announced its average liability costs continued to be low in H1 2016 at 2.58 percent, driven by its large and robust in-force business.

However, the analyst expressed concern regarding the company’s product strategy and cost of liabilities trends over the near to medium term, given the rapid growth of the sales force and persisting rate decline in China.

Rate Risk

“By our projection, China Life’s average minimum guaranteed rate could rise more quickly than the market expects, owing to renewals. Potential regulatory tightening could help slow down the deterioration, but China Life may choose to maintain a more aggressive pricing strategy than peers to keep its distribution force from falling,” Jiang said.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!

Latest Ratings for LFC

DateFirmActionFromTo
Mar 2019Goldman SachsDowngradesNeutralSell
Jan 2019HSBCDowngradesBuyHold
Nov 2018UBSDowngradesBuyNeutral

View More Analyst Ratings for LFC
View the Latest Analyst Ratings

 

Related Articles (LFC)

View Comments and Join the Discussion!

Posted-In: Jenny Jiang Morgan StanleyAnalyst Color Downgrades Analyst Ratings

Latest Ratings

StockFirmActionPT
HYMCBMO CapitalInitiates Coverage On
DEMorgan StanleyMaintains335.0
SBNYRaymond JamesMaintains138.0
CORTHC Wainwright & Co.Maintains32.0
CYBBFCitigroupDowngrades
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com