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China Life Insurance’s H1 and Investments Are Cause for Concern

China Life Insurance Company [[LFC]] is the top market gainer today by market capitalization – but this surge is curious given its unimpressive first-half performance combined with the opaqueness of its investment portfolio.

China Life Insurance’s gains today now leave it up a staggering 38% year-to-date, but its parent company, China Life Insurance Group., announced that its premium income for the first six months of the year dropped 5% from a year earlier – from $26.6 billion to $25.3 billion.

Some analysts think the optimism driving China Life Insurance’s gains is based on its investment portfolio which could see big gains in the second half of the year from IPOs, but China Life Insurance does not have the best track-record in its investment portfolio. As the Chinese government has encouraged the insurance industry to buoy the financial sector in recent years, insurers like China Life have made big investments in Chinese banks. China Life has stakes in more than 10 Chinese banks and suffered nearly a 5% loss overall on its investment portfolio last year because of it. Unfortunately, China Life Insurance
is as much a macroeconomic play on the Chinese financial sector as it is a play on the life insurance industry in China.

These facts, combined with poor disclosure, make China Life Insurance an unappealing stock right now despite trading at a discount, when accounting for growth prospects, to U.S.-based insurers.

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