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LFC Capital Injection Analysis

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statistics_2 July 5, 2011 (Wu Dawei) Stock price of China Life Insurance (NYSE:LFC) increased to 4.4% to $51.46 that day the Company announced capital injection to China Life Property and Casualty Insurance Co., Ltd. (P&C Company). China Life Insurance  (NYSE:LFC) and CLIC have agreed to inject further capital into P&C Company. The total amount of capital to be injected by LFC and CLIC into P&C Company is RMB1.6 billion and RMB2.4 billion by the subscription of 1.6 billion shares and 2.4 billion shares at RMB1.00 per share, respectively. Upon completion of the capital injection, P&C Company will continue to be held as to 60% and 40% by CLIC and the China Life Insurance, respectively.
China Life Insurance (NYSE:LFC) has a market cap of  $95.42 billion, making up for 42% of the Chinese insurance industry. China Life Insurance (NYSE:LFC) derives most of its profit from the life-insurance business segments, including individual life insurance and group life insurance. Revenue of these two segments made up 95% of the total revenues in 2010. Investors consider the latest capital injection to P&C Company not be a significant shift from life-insurance to non-life insurance.

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China Life Insurance’s capital injection to P&C Company enables the company to benefit from the non-life insurance market. More importantly, it enables the company to diversify its business operation and expand its profit drivers in the long term. But in the short term, it just has limited revenue effect of the China Life Insurance (NYSE:LFC).



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