China Life announced 1Q20 performance on 23 Apr. Overall speaking, the Company showed resilience amid COVID-19 by achieving +13% GWP growth, +8.3% YoY NBV growth, +13.9% FYRP growth. Net/total investment yield recorded 4.29%/5.31%, respectively.
- Result highlight. 1) NBV rose 8.3% YoY, which was remarkable against the backdrop of COVID-19 and given last year’s high base. Among the driving forces, first-year regular premiums rose 13.9% YoY. We believe NBV margin compressed a bit in 1Q due to difficulties in selling longer-term and higher margin products. 2) Investment assets increased 2.8% from YE19. Net investment yield in annualized term was 4.29%, which was down only 2bp YoY and remained steady growth in the environment of declining interest rate. 3) Agent team in good shape and achieved quality improvement – monthly average productive agents from strengthened sales force rose by 18.4% YoY. Total number of sales force from all channels was >2 million.
- Negatives/risks. Net profit declined 34.4% YoY to RMB 17.1bn primarily because capital market volatilities resulted in RMB 5.4bn fair value loss on trading securities in contrast to RMB 13.9bn fair value gain in the same period last year (booked in P&L) and fair value loss on AFS securities (booked in OCI). Underwriting cost also went higher in 1Q20. Claims payments related to COVID-19 was RMB 23.2mn.
- COVID-19 negatives could linger in Apr. Life premium growth still faces pressures. Headline premium growth of the Company was 22.6%/9.9%/-4.1% in Jan/Feb/Mar, respectively, leaving growth during 1Q20 at 13.0% YoY. Although China Life’s premium growth outpaced major peers in 1Q20, decline enlarged in Mar, manifesting that restricted social activities is still crunching on life insurance business entering 2Q. Recovery will be gradual.
- Reiterate BUY. The Company’s 1Q performance was in-line with our and market expectation, including negative profit growth on last year’s extraordinary investment gains. We maintain our financial forecasts. Target price is unchanged at HK$24.95, which corresponds to 0.62x FY20E P/EV.
