China Life Insurance (NYSE:LFC), the largest Chinese life insurer, reported accumulated premium income of yuan 172.7 billion ($25.262 bln.) for the first six months of 2009. This represents an increase of 23.1% from same period last year. Shares of the company fell both in Shanghai and Hong Kong following the announcement. The Hong Kong listed H-shares fell 0.16% to HK$30.60 while Shanghai listed A-shares fell 0.01% to yuan 30.01.
China Life First Six Months Premium Income Growth 2006-2009
While the chart looks impressive, premium income growth slowed from 38.5% in 2008 to 23.1% in 2009. Another important measure is to see how did China Life (NYSE:LFC) growth look like in 2009. According to the following chart, the growth was almost linear with no acceleration of growth in the second part of the examined six month period.
China Life Premium Income Growth in 2009
Taking a closer look at 2009 income growth, June was obviously a much better month than May but altogether June income was just around the average for the period.
China Life Premium Income by Month in 2009
One may ask why did China Life sink following the news? The reason is valuation and lack of explosive growth. Regarding valuation, China Life (SHA:601628) (NYSE:LFC) (HKG:2628.HK) is trading at 52 week high with a P/E of 40.15. This is in line with Ping An Insurance (HKG:2318) (SHA:601318), its main competitor, except that Ping An reported a net income growth of 30% for the same period. And as our overbought/oversold report revealed earlier, (Correction looms for China Life) China Life is overbought. With a good but not exceptionally good premium growth report, the stock price is facing a short term correction. However it doesn't alter our bullish view on the long run. But bulls have exercise patience for now.
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