Company Reports

China Life's first-half profit surged 229% year on year as total investment yield increased 229 basis points to 5.58%. New business value, or NBV, rose 34%, the strongest among peers.

As the largest and oldest state-owned life insurer, China Life Insurance enjoys a reputable brand, giving it a leg up in sales of commodity-like insurance products. We think China Life is well-positioned for ongoing urbanization and the government’s increasing efforts to boost rural residents’ welfare. The large scale and strong foothold in underpenetrated rural markets translate to low administration expense for China Life.

China Life's first-quarter profit fell 32% year on year from a high base on lower equity market gains, but new business value surged 76%, the strongest among listed peers.

China Life's 2025 profit growth slowed to 44% from 61% in the first nine months, due to weak investment returns and impairment charges, implying a CNY 13.7 billion fourth-quarter loss. New business value, or NBV, grew a solid 36%.

H-shares of China's life insurers rallied 6%-21% year to date following robust insurance sales in the new year and alongside strong performances of the A-shares.

As the largest and oldest state-owned life insurer, China Life Insurance enjoys a reputable brand, giving it a leg up in sales of commodity-like insurance products. We think China Life is well-positioned for ongoing urbanization and the government’s increasing efforts to boost rural residents’ welfare. The large scale and strong foothold in underpenetrated rural markets translate to low administration expense for China Life.

China Life and China Pacific Insurance (CPIC)'s first-nine-month net profits accelerated to 61% and 19%, respectively, year on year thanks to surging investment return and solid new business growth.

As the largest and oldest state-owned life insurer, China Life Insurance enjoys a reputable brand, giving it a leg up in sales of commodity-like insurance products. We think China Life is well-positioned for ongoing urbanization and the government’s increasing efforts to boost rural residents’ welfare. The large scale and strong foothold in underpenetrated rural markets translate to low administration expense for China Life.

As the largest and oldest state-owned life insurer, China Life Insurance enjoys a reputable brand, giving it a leg up in sales of commodity-like insurance products. We think China Life is well positioned for ongoing urbanization and the government’s increasing efforts to boost rural residents’ welfare. The large scale and strong foothold in underpenetrated rural markets translate to low administration expense for China Life.

China Life's interim revenue growth accelerated to 2% year on year, thanks to a recovery in investment returns in the second quarter. However, interim net profit growth fell to 7% on higher insurance expenses.

As the largest and oldest state-owned life insurer, China Life Insurance enjoys a reputable brand, giving it a leg up in sales of commodity-like insurance products. We think China Life is well positioned for ongoing urbanization and the government’s increasing efforts to boost rural residents’ welfare. The large scale and strong foothold in underpenetrated rural markets translate to low administration expense for China Life.

Despite revenue falling as investment income declined 17% year on year, China Life's first-quarter net profit grew 40%, outperforming peers Ping An and China Pacific Insurance.

We maintain our fair value estimates for China Life at HKD 20 per share, China Pacific, or CPIC, at HKD 30, and New China Life, or NCI, at HKD 22. These companies reported strong 2024 net profit growth of 109%, 65%, and 201% respectively, driven by solid investment gains. China Life and CPIC are undervalued at 0.3 to 0.4 times 2025 embedded value, while NCI is overvalued. Ping An and CPIC remain our top picks among Chinese insurers due to better dividend visibility, lower policy costs, and substantial improvements in agent productivity. We believe the rebound in government bond yields and insurers’ downward adjustment to key economic assumptions should ease concerns about spread loss risks. However, further rerating will likely require greater dividend visibility and more insight into 2025 new business growth.

We retain our fair value estimates for Chinese insurers after a recent regulatory announcement that establishes a dynamic adjustment mechanism for the pricing rate on life insurance products. The current pricing rate remains unchanged, as the latest published reference rate did not trigger the adjustment mechanism. While market concerns over insurers’ spread loss risks are likely to persist, the pricing adjustment mechanism, coupled with recent central bank warnings about risks in China’s overheated bond market—where long-term yields have reached record lows—should help support long-term rates and enhance insurers’ liability cost management.

We maintain our fair value estimates for China Life at HKD 20 per share, China Pacific Insurance at HKD 30, and New China Life at HKD 22 following third-quarter results, which showed robust year-over-year net profit growth of 174%, 65%, and 117%, respectively. These results were largely in line, with strong growth driven by investment returns amid a 17% rise in the CSI 300 Index during the quarter following a lackluster market environment in the first half of the year. Trading at 0.3-0.4 times their 2024 embedded value, China Life and China Pacific remain undervalued, while New China Life is fairly valued. New China Life and China Life led earnings growth among Chinese life insurers due to their high sensitivity to stock market movements. Mark-to-market equity investments represent 141% of New China Life’s and 81% of China Life’s net assets, significantly above the 8%-60% of their peers. As both companies base dividends on net profit, we anticipate strong dividend growth per share versus 2023, though we are skeptical the higher payments can be maintained longer-term. China Pacific's dividend outlook is less certain, as its policy is based on factors including net profit, post-tax operating profit, and solvency ratio.

We retain our fair value estimate for China Life Insurance at HKD 20 per share, China Pacific Insurance, or CPIC, at HKD 30 per share, and New China Life, or NCI, at HKD 22 per share, following their interim results that reported strong recovery in respective net profit growth at 11%, 37%, and 11% year on year. We expect upside risk to our current 15% to 30% year-on-year net profit growth forecast in 2024 given a low base in the second half of 2023. The stronger-than-expected net profit growth was primarily boosted by strong investment return, and we’ve factored in a gradual pickup in investment return over our forecast period. We leave our major assumptions unchanged.

As the largest and oldest state-owned life insurer, China Life Insurance enjoys a reputable brand, giving it a leg up in sales of commodity like insurance products. We think China Life is well positioned for ongoing urbanization and the government’s increasing efforts to boost rural residents’ welfare. The large scale and strong foothold in underpenetrated rural markets translate to low administration expense for China Life.

We expect China’s life insurers under our coverage to report a double-digit increase in second-quarter net profits versus the year-on-year contraction in the first quarter. While we expect their new business value growth in the first half will slow from 20%-50% in the first quarter, growth should stay healthy at 10% to 25% thanks to margin improvement and resilient demand for savings products as the deposit rate continues to trend down. We also expect property-casualty underwriting margin to improve from the first quarter, helped by reduced catastrophe losses. Despite the earnings improvement, we expect industrywide headwinds, including falling asset yield, potential commission rate cut in the agent channel, and uncertainty in catastrophe losses, will continue to weigh on investor sentiment.

We retain our fair value estimate for China Life at HKD 20 per H-share (CNY 19 per China A-share) and China Pacific Insurance, or CPIC at HKD 30 per H share (CNY 26 per China A-share), following their first-quarter results, which reported new business value, or NBV, growth at 26% and 31%, respectively, year on year on a like-for-like basis. We leave our major assumption largely unchanged, as we expect full-year NBV growth to moderate to mid- to high-teen level, as a result of high base in the second and third quarters created by the strong sales of 3.5% pricing products in the year-ago period. The stronger-than-expected growth was attributable to lower product pricing rate after the regulatory cut starting from August 2023; longer payment duration of insurance policies; and double-digit growth in agent first-year premium. Bancassurance NBV also reported strong growth on lower commission rate despite falling first-year premium. We expect China Life will see less negative base effect in coming quarters as the company did not actively sell the 3.5% pricing rate products in 2023, when compared with CPIC which reported over 50% year-on-year NBV growth in the second and third quarters of 2023. As China Life started to put more strategic focus to bancassurance sales after margin improvement on lower commission rates in 2024, we expect the company should have more room to expand its bancassurance business.

We retain our fair value estimates for China Life at HKD 20 per H share (CNY 19 per A share) and New China Life, or NCI at HKD 26 per H share (CNY 23 per A share), following their 2023 results, which saw 34% and 59% year-on-year declines in net profits to CNY 21 billion and CNY 8.7 billion, respectively. As China Life was not actively selling the popular savings type products and its agent reform was less aggressive than peers, the company reported lower-than-peer net book value, or NBV, growth at 14% in 2023, before the changes in actuarial assumptions. In contrast, growth in NCI's NBV exceeded our expectation at 65% year on year. But it was largely driven by the 3.5% pricing traditional life insurance products, which were pulled off shelves by regulators in August 2023. In light of tightened bancassurance expense control and rising interest spread risks for life insurers amid falling interest rate cycle, we expect such robust NBV growth is not maintainable. Thus, we expect NBV growth for Chinese life insurers will decelerate to single-digit levels in 2024.