China Life and CPIC Both Reported Stronger-Than-Expected New Business Value Growth

We retain our fair value estimate for China Life at HKD 20 per H-share (CNY 19 per China A-share) and China Pacific Insurance, or CPIC at HKD 30 per H share (CNY 26 per China A-share), following their first-quarter results, which reported new business value, or NBV, growth at 26% and 31%, respectively, year on year on a like-for-like basis. We leave our major assumption largely unchanged, as we expect full-year NBV growth to moderate to mid- to high-teen level, as a result of high base in the second and third quarters created by the strong sales of 3.5% pricing products in the year-ago period. The stronger-than-expected growth was attributable to lower product pricing rate after the regulatory cut starting from August 2023; longer payment duration of insurance policies; and double-digit growth in agent first-year premium. Bancassurance NBV also reported strong growth on lower commission rate despite falling first-year premium. We expect China Life will see less negative base effect in coming quarters as the company did not actively sell the 3.5% pricing rate products in 2023, when compared with CPIC which reported over 50% year-on-year NBV growth in the second and third quarters of 2023. As China Life started to put more strategic focus to bancassurance sales after margin improvement on lower commission rates in 2024, we expect the company should have more room to expand its bancassurance business.