NBV dropped by 23.3% yoy in 2021, broadly in line with expectation
Still pursuing high quality development while maintaining stability
Valuation undemanding; maintain BUY on valuation
　　2021 results broadly in line with expectation
　　1） Shareholders’ net profit increased by 1.3% yoy in 2021, slightly below our expectation. Total comprehensive income dropped by 39.0% yoy in 2021, due to fair value changes on available-for-sale securities. 2） Total NBV dropped by 23.3% yoy in 2021, and NBV margin on FYP came in at 25.5%, in line with our expectation （previously estimated to be -20.7% and 25.6%, respectively）。 Facing the weakened insurance demand, regular FYP with duration longer than 10Y decreased by 26.1% yoy in 2021, which is one of the key factors for the worsened NBV and NBV margin. 3） Total number of agents in the individual agent business sector dropped significantly by 40.5% yoy, a trend in line with major peers across the sector. 4） Overall, the Company’s 2021 results were broadly in line with our expectation. Its life business was under pressure in 2021, particularly such as weakened demand and downsized sales force.
　　Management discussion
　　On agent team: The industry is still affected by slowing demand and the pandemic, and the total number of agents may further decline in 1Q22.
　　The company is still pursuing a quality-oriented agent team. On phase 2 of C ross II: The comprehensive and core solvency ratios would remain above the critical levels under the new solvency regime, according to the management. The new regime could have limited negative impacts on EV.
　　On ‘Jumpstart’ sales: The ‘Jumpstart’ sales faced challenging business environment including the recurring pandemic. The performance of the sales campaign might not be perfect but still broadly meet management’s expectation, as the Company was well-prepared.
　　Valuation undemanding; maintain BUY on valuation
　　China Life is trading at ~0.21x 22E P/EV or ~0.55x 22E P/B. Valuation is undemanding. China Life’s P/EV ratio would still fall short of 1x, if we assume its entire VIF is zero and further assume a discount equivalent to 5% of its investment assets. Maintain BUY on low valuation despite challenging business environment of the sector. We revised down 22E NBV growth rate for the Co. （Fig. 2）， taking into account continuing pressure on sales recruitment, weak insurance demand, and potential assumption changes. Maintain TP at HKD18.2, equivalent to ~0.31x 21E P/EV, or 40% discount to its past 5-yr average P/EV. Key catalysts: robust NBV growth, good capital market; Key downside risks: lower-than- expected NBV growth, adverse capital market.