China Life's 3Q NBV Contraction Wider Than Before Despite Narrowing Declines in Agent Head Count

We retain our fair value estimate for China Life at CNY 20 per A share and HKD 21 per H share after its third-quarter results. The results were mixed, which highlighted accelerating year-on-year growth in first-year premium in the third quarter, contrary to the double-digit decline of peers. Agent force also looked steadier than peers, which declined only 9% from 2021, versus the double-digit declines of peers in the first half. Agent head count dropped 3% to 720,000 from mid-2022, improving from the 5% and 4% respective declines in the first and second quarter. However, nine-month new business value, or NBV, declined further by 15.4% against the year-ago period, versus the 13.8% decline in the first half. We believe this was attributable to the rising contributions from low-margin products sold in the bancassurance channel, indicating that protection demands remained sluggish. Declines in industrywide agent head count continued to narrow over the past three quarters, but management believes it is still early to predict when the agent head count will bottom out, given growing macroeconomic uncertainties.