China Insurer Earnings: Accelerated Earnings Growth Supports Better Dividend Outlook

We maintain our fair value estimates for China Life at HKD 20 per share, China Pacific Insurance at HKD 30, and New China Life at HKD 22 following third-quarter results, which showed robust year-over-year net profit growth of 174%, 65%, and 117%, respectively. These results were largely in line, with strong growth driven by investment returns amid a 17% rise in the CSI 300 Index during the quarter following a lackluster market environment in the first half of the year. Trading at 0.3-0.4 times their 2024 embedded value, China Life and China Pacific remain undervalued, while New China Life is fairly valued. New China Life and China Life led earnings growth among Chinese life insurers due to their high sensitivity to stock market movements. Mark-to-market equity investments represent 141% of New China Life’s and 81% of China Life’s net assets, significantly above the 8%-60% of their peers. As both companies base dividends on net profit, we anticipate strong dividend growth per share versus 2023, though we are skeptical the higher payments can be maintained longer-term. China Pacific's dividend outlook is less certain, as its policy is based on factors including net profit, post-tax operating profit, and solvency ratio.