China Life Insurance (LFC) & Prudential Public (NYSE:PUK) Critical Review

Prudential Public (NYSE:PUK) and China Life Insurance (NYSE:LFC) are both large-cap finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their earnings, risk, valuation, profitability, dividends, analyst recommendations and institutional ownership.

Earnings & Valuation

This table compares Prudential Public and China Life Insurance’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Prudential Public $32.89 billion 1.65 $4.02 billion $4.94 8.48
China Life Insurance $91.03 billion 0.75 $1.72 billion $0.28 43.39

Prudential Public has higher earnings, but lower revenue than China Life Insurance. Prudential Public is trading at a lower price-to-earnings ratio than China Life Insurance, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Prudential Public and China Life Insurance, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Prudential Public 1 1 2 0 2.25
China Life Insurance 1 6 2 0 2.11

Institutional and Insider Ownership

1.7% of Prudential Public shares are owned by institutional investors. Comparatively, 0.3% of China Life Insurance shares are owned by institutional investors. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Profitability

This table compares Prudential Public and China Life Insurance’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Prudential Public N/A N/A N/A
China Life Insurance 3.60% 7.04% 0.75%

Dividends

Prudential Public pays an annual dividend of $1.79 per share and has a dividend yield of 4.3%. China Life Insurance pays an annual dividend of $0.26 per share and has a dividend yield of 2.1%. Prudential Public pays out 36.2% of its earnings in the form of a dividend. China Life Insurance pays out 92.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Prudential Public is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk and Volatility

Prudential Public has a beta of 1.37, indicating that its share price is 37% more volatile than the S&P 500. Comparatively, China Life Insurance has a beta of 1.36, indicating that its share price is 36% more volatile than the S&P 500.

Summary

Prudential Public beats China Life Insurance on 8 of the 12 factors compared between the two stocks.

About Prudential Public

Prudential plc, through its subsidiaries, provides a range of retail financial products and services, and asset management services in Asia, the United States, the United Kingdom, Europe, and Africa. The company offers health and protection, as well as other life insurance products, including participating business; mutual funds; and personal lines property and casualty insurance, group insurance, and institutional fund management services. It also provides fixed annuities, such as fixed interest rate, and fixed index and immediate annuities; variable annuities; institutional products comprising guaranteed investment contracts and funding agreements; and savings and investment products. In addition, the company offers long-term products, which include pension products and annuities; conventional annuities, including level, fixed increase, and RPI annuities; onshore and offshore bonds; corporate, individual pension, and income drawdown products; and investment funds. Prudential plc provides its products and services through an agency sales force together with various banks, brokers, local partners, independent insurance agents, independent broker-dealers, regional broker-dealers, wirehouses, credit unions, and other financial institutions. The company was founded in 1848 and is based in London, the United Kingdom.

About China Life Insurance

China Life Insurance Company Limited, together with its subsidiaries, operates as a life insurance company in the People's Republic of China. It operates in four segments: Life Insurance Business, Health Insurance Business, Accident Insurance Business, and Other Businesses. The company offers individual and group life, annuity, accident, and health insurance products, as well as pension products. It is also involved in the asset management, annuity, retirement properties investment, fund management, financial service, health management, investment, investment management, and reinsurance businesses. China Life Insurance Company Limited sells its products through agents, direct sales representatives, and dedicated and non-dedicated agencies. The company was founded in 1949 and is headquartered in Beijing, the People's Republic of China. China Life Insurance Company Limited is a subsidiary of China Life Insurance (Group) Company Limited.

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