American Equity Investment Life Holding (NYSE: AEL) and China Life Insurance Company Limited (NYSE:LFC) are both mid-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, institutional ownership, dividends, risk, analyst recommendations, earnings and valuation.

Profitability

This table compares American Equity Investment Life Holding and China Life Insurance Company Limited’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American Equity Investment Life Holding 6.48% 6.84% 0.30%
China Life Insurance Company Limited 3.52% 6.67% 0.75%

Insider and Institutional Ownership

93.3% of American Equity Investment Life Holding shares are held by institutional investors. Comparatively, 0.2% of China Life Insurance Company Limited shares are held by institutional investors. 4.1% of American Equity Investment Life Holding shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares American Equity Investment Life Holding and China Life Insurance Company Limited’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
American Equity Investment Life Holding $3.00 billion 0.86 $343.94 million $2.16 13.46
China Life Insurance Company Limited $92.94 billion 0.92 $5.79 billion $0.53 28.40

China Life Insurance Company Limited has higher revenue and earnings than American Equity Investment Life Holding. American Equity Investment Life Holding is trading at a lower price-to-earnings ratio than China Life Insurance Company Limited, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and price targets for American Equity Investment Life Holding and China Life Insurance Company Limited, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Equity Investment Life Holding 0 5 2 0 2.29
China Life Insurance Company Limited 0 3 3 0 2.50

American Equity Investment Life Holding currently has a consensus price target of $24.43, indicating a potential downside of 16.00%. Given American Equity Investment Life Holding’s higher possible upside, equities analysts clearly believe American Equity Investment Life Holding is more favorable than China Life Insurance Company Limited.

Dividends

American Equity Investment Life Holding pays an annual dividend of $0.24 per share and has a dividend yield of 0.8%. China Life Insurance Company Limited pays an annual dividend of $0.14 per share and has a dividend yield of 0.9%. American Equity Investment Life Holding pays out 11.1% of its earnings in the form of a dividend. China Life Insurance Company Limited pays out 26.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. American Equity Investment Life Holding has increased its dividend for 3 consecutive years and China Life Insurance Company Limited has increased its dividend for 4 consecutive years. China Life Insurance Company Limited is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

American Equity Investment Life Holding has a beta of 2.5, suggesting that its stock price is 150% more volatile than the S&P 500. Comparatively, China Life Insurance Company Limited has a beta of 1.38, suggesting that its stock price is 38% more volatile than the S&P 500.

Summary

China Life Insurance Company Limited beats American Equity Investment Life Holding on 9 of the 17 factors compared between the two stocks.

American Equity Investment Life Holding Company Profile

American Equity Investment Life Holding Company is engaged in the development and sale of fixed index and fixed rate annuity products. The Company issues fixed annuity and life insurance products through its life insurance subsidiaries, American Equity Investment Life Insurance Company, American Equity Investment Life Insurance Company of New York and Eagle Life Insurance Company. Its target market includes the group of individuals aged 45 to 75 seeking to accumulate tax-deferred savings or create guaranteed lifetime income. The Company distributes through a range of distribution channels, including independent agents, broker/dealers, banks and registered investment advisors. Its product types include fixed index annuities, annual reset fixed rate annuities, multi-year fixed rate annuities and single premium immediate annuities. Its life insurance products include traditional ordinary and term, universal life and other interest-sensitive life insurance products.

China Life Insurance Company Limited Company Profile

China Life Insurance Company Limited is a life insurance company. The Company provides a range of insurance products, including individual and group life insurance, health insurance and accident insurance products. It operates through three segments: Life Insurance, Health Insurance, and Accident Insurance. Its Life Insurance segment provides participating and non-participating life insurance and annuities to individuals and groups. Its Health Insurance segment provides short-term and long-term health insurance to individuals and groups. Its Accident Insurance segment provides short-term and long-term accident insurance to individuals and groups.

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