China Life Shows Narrowing Decline in Agent Head Count and Better-Than-Peer NBV Contraction

We reduced our fair value estimate for China Life to CNY 20 from CNY 21 per A-share and to HKD 21 from HKD 23 per H-share after the company reported first-quarter results, including a 47% decline in net profits to CNY 15.2 billion. This was primarily attributable to a sharp decline in total investment income from a high base in the year-ago period. Net investment return was largely steady at 4% versus 4.08% in the year-ago period. Total investment return narrowed 2.6 percentage points to 3.88%. Total investment income contracted CNY 20.6 billion from the year-ago quarter to CNY 44.6 billion versus the realized equity investment gain of about CNY 20 billion in the first quarter of 2021. Positively, the 14.3% year-on-year decline in new business value slightly exceeded our expectations. This validated our view that China Life’s traditional strength in the bancassurance channel and early preparation last October for its New Year sales campaign for 2022 translated to less downward pressure than industry peers in the first half. Despite a better-than-peer net interest margin performance in the first quarter, we expect the company to face additional headwinds from the upcoming rules on managing life insurance product sales set by the regulator.