China Life reported +6.7% YoY growth of NBV, the highest among listed lifers, on back of strong FYRP growth (+13.3% YoY) and steady NBV margin. Embedded value rose 7.8% from YE19. In time of COVID-19, China Life showed greater resilience amongst peers and achieved marked growth even on top of last year’s high base. We continue to like the Company’s persistent efforts in promoting customer-centric and value-oriented business. We think the Company will continue to deliver satisfactory results in 2H20.
- Result highlights. 1) NBV +6.7% YoY against COVID-19 headwinds. FYRP increased strongly by 13.3% YoY, among which the percentage of premiums from designated protection-oriented products rose +3.4ppt. NBV margin of individual agent channel was 39.3% in 1H20, largely stable compared to 39.7% in 1H19. 2) Clear positioning of diversified business sectors and bancassurance channel upgrade. In 1H20, bancassurance channel achieved FYRP growth of +43.9% YoY and active account managers increased substantially. 3) Individual agent team maintained quality growth. Number of individual agents reached 1.69 million, +4.8% from YE19 and monthly average productive agents increased by 40% YoY. 4) Embedded value rose 7.8% from YE19 thanks to new business growth and positive contribution from operating variances and market value adjustments.
- Result negatives. 1) Net profit declined 18.8% to RMB 30.5bn, primarily due to discount rate assumption change for insurance reserves, which reduced pre-tax profit by RMB 12.7bn and last year’s pre-tax deduction policies. 2) Net/Gross investment yield edged to 4.29%/5.34%, down 37bp/44bp YoY, under the circumstances of interest rate decline and last year’s high base particularly with respect to fair value gains.
- Reiterate BUY. We revise up NBV, EV, net profit forecast of the Company to reflect better-than-expected 1H20 growth metrics. We therefore raise Target Price to HK$ 28.14, which corresponds to 0.68x FY20E P/EV. Maintain BUY and one of our sector top picks.
