China Pacific Insurance: Challenging Q4 but Improving Productivity Bodes Well; FVE Unchanged

China Pacific Insurance, or CPIC, saw full-year 2022 net profit decline 8.3% from 2021 on a 14% decline in investment returns, despite accelerating net earned premium growth to 8.6% year on year. However, we think the market will look ahead and we are positive on CPIC’s improving new business value, or NBV, growth, which continues to recover. NBV growth accelerated to 30% year on year in fourth-quarter 2022, faster than peer Ping An Insurance’s 12% uptick, from 2.5% growth in the third quarter. We retain our fair value estimate at HKD 30 per H share. The H shares are undervalued, trading at a historical low valuation level of 0.3 times 2023 price/embedded value. We believe CPIC has achieved early success in life insurance reform, which was evidenced in robust growth in both premium income and NBV in the bancassurance channel, and in improving agent productivity.