China Life Insurance Company Ltd. (NYSE: LFC) operates, along with its many subsidiary businesses, as one of the primary life insurance providers in the People's Republic of China. Its major insurance divisions include life, health, accident and business insurance. In addition, LFC has separate asset management and trustee services, a major consulting wing and a diversified pool of fund offerings. LFC has its own investments in retirement properties in China. As of early 2016, China Life employs more than 100,000.
Despite relatively strong performance during the three-year period from 2013 to 2015 and the five-year period from 2011 to 2015, there are reasons to be pessimistic about the near-term prospects for LFC. These include potential overvaluation, even in the face of slumping share prices; low projected future cash flow; and potentially risky balance sheet foundations.
Dividends for LFC pay above what low-risk savings vehicles pay but still well below the top player in the income market. Dividends per share have been volatile since 2011, generally falling in absolute terms when compared to insurance industry averages.
Dividend Policy
China Life paid one dividend a year, every year between 2006 and 2015. The first three of these dividends, from 2006 to 2008, were paid in July. Between 2009 and 2015, dividend payments occurred in August, although they rotated between the first and fourth weeks of the month. The dividend for 2015 was payable on Aug. 21; the dividend was declared June 8, just two weeks before a 3:1 split was announced.
Dividends per share declined by more than 60% between 2010 and 2012 but swiftly rebounded from 18 cents to 32 cents in 2015. Dividends were slightly down over five years, although growth was strong over three years. This trendline matches up with earnings per share (EPS), which declined from $4.40 in 2010 to just $1.95 in 2012, but an impressive 131.8% EPS growth from 2013 to 2014 brought EPS back to $5.70.
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