China Life and New China Life Saw Increased Divergence in New Business Value Growth in 2023

We retain our fair value estimates for China Life at HKD 20 per H share (CNY 19 per A share) and New China Life, or NCI at HKD 26 per H share (CNY 23 per A share), following their 2023 results, which saw 34% and 59% year-on-year declines in net profits to CNY 21 billion and CNY 8.7 billion, respectively. As China Life was not actively selling the popular savings type products and its agent reform was less aggressive than peers, the company reported lower-than-peer net book value, or NBV, growth at 14% in 2023, before the changes in actuarial assumptions. In contrast, growth in NCI's NBV exceeded our expectation at 65% year on year. But it was largely driven by the 3.5% pricing traditional life insurance products, which were pulled off shelves by regulators in August 2023. In light of tightened bancassurance expense control and rising interest spread risks for life insurers amid falling interest rate cycle, we expect such robust NBV growth is not maintainable. Thus, we expect NBV growth for Chinese life insurers will decelerate to single-digit levels in 2024.