Chinese Life Insurers: VNB Growth Accelerates but Net Profit Under Pressure

We expect the upcoming interim earnings results to show that new business value, or VNB, growths of China’s insurers accelerated between 15% and 35% in the first half of 2023, from 8% to 17% year on year in the first quarter of 2023, as customers rushed to buy high-yield savings products before the pricing rate cut by end-July. However, the weaker equity market performance and falling interest rates in the second quarter are likely to weigh on net profits and shareholders’ equity under the new accounting rules. Nevertheless, we think downside risk to H-share prices is contained, with the H-shares of Chinese insurers trading at a historical low of 0.2 times to 0.6 times forward price/embedded value, or EV.