China Life Ins -H- (2628 HK)

Global Markets Comment

We expect 13% NBV (new business value) growth for China Life in 2021E, with stabilization on COVID impact. The reform agenda likely provides benefits to government-owned insurers like China Life. Despite competition from internet players, limitations of mutual life insurance remain and traditional insurers including China Life are unlikely to be significantly affected. Trading at 0.5x 2021E P/EV (embedded value), China Life's share price underperformed sector by 17% since Q420. We believe current valuation has not reflected much NBV growth recovery in 2021E but has reflected much disruption from Internet competition.

Performance since inception*

Company Profile

China Life is a state-owned life insurance company. It provides life, accident and health insurance products and services both to individuals and groups.

Price History 1 year

Investment Case

Top government insurers like China Life could become bigger in the next couple of years in terms of business, earnings metrics and underwriting effi ciencies. We believe NBV growth will soon recover for the company, backed by strong agency sales. Furthermore, an acceleration in the company’s in-force premiums, backed by meaningful product mix enhancement (from single savings to regular/protection premiums), will have a snowball effect on earnings/AUM and be a source of upside potential

Price History 5 years

Risk in Investment Case

We think the main risks to China Life are hefty reserve charges dragging down performance; investment yield falling further; and actuarial assumption changes affecting EV calculation. The company could also face the following risks: 1) economic and policy risks, such as changes to capital or solvency requirements; 2) a prolonged slowdown in economic growth that reduces insurance demand; 3) catastrophes; 4) inadequate solvency; 5) investment risk and risk of a duration mismatch between assets and liabilities; and 6) channel and product risk.

Hong Kong & Singapore Private Clients

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