(Oct. 26, 2009 - Chinavestor) China Life Insurance (NYSE:LFC), the largest life insurer in China, reported 2009 third quarter financials today. According to the company statement, net income in the third quarter grew over 100% to RMB5,954 million ($871.5 million) on strong returns on investment gains.
However when putting these numbers into perspective, the true picture reveals a slightly different story. The growth in net is attributed to a low basis not to a record quarter. Net Incomes is actually lower in Q3 then in Q2, a trend that is just as important.
As the following chart testifies, total revenue growth is much less impressive then net income from 2008 to 2009. This implies that most of the net income growth is attributed to strong investment returns, something that comes "naturally" when the Shanghai Composite index does well.
Remember, China Life Insurance (NYSE:LFC) got preferential treatment in mega IPOs of the past, such as advanced share allocation of Petrochina (SHA:601857) and Industrial and Commercial Bank of China (SHA:601398) before their shanghai IPO. Both companies are index heavy weight with a mega market cap. Given that Petrochina and ICBC have done well in 2009 - see related Google chart - the strong performance of investment income comes as a no surprise.
What I think gets really into the story with China Life (NYSE:LFC) is the dynamics of premium income. The good news is that premium income growth turned positive in August, suggesting the worst is over for the company. See "China Life Premium Income to Reach $30.85 bil." related story. A strong investment return is just icing on the cake.
If you like us, spread the word to the fellow investors on your favorite Social Bookmarking websites
