China Life reported 14.3% YoY decline of VNB for 1Q22, largely in line with our estimates (link), outperforming major peers based on our estimates. Net profit decreased by 46.9% YoY to RMB15.2bn, tracking 29% of our FY22 forecast. The earnings decline was primarily due to a 30% YoY decrease in investment income on the back of dim A share market performance in 1Q22 (SHCOMP Index down 10% in 1Q22 vs flattish in 1Q21) and high base of capital gains from bond trading in 1Q21. Total FYP declined by 1.5% YoY, while the FYP contribution of 10-year+ regular pay products remained stable at 19%. On the bright side, agent productivity and agent income both improved on a YoY basis, and the agent headcount start to gradually stabilize. China Life-H is trading at 0.5x P/BV FY22E and 0.2x P/EV FY22E. We think the slowdown in new business is already fully priced in. Looking forwards, we expect to see sequential improvements in new business momentum starting from mid-2022. Maintain Buy on China Life-H.
　　Agency headcount to gradually stabilize. Agent headcount slid to 0.78mn at end-1Q22, down only 5% QoQ. We notice the decline of agent number is narrowing in 1Q22, comparing to the double digit QoQ decline in 1Q21-4Q21.In near term, we think the life insurer might still see some volatility in agent headcount and agent income due to pressure from pandemic outbreaks. We expect the scale of the agency force to stabilize around mid-2022, which will underpin a turnaround in new business growth.
　　Outperform major peers in new business momentum. Based on our estimates, we think China Life’s VNB momentum in 1Q22 outperformed major listed peers. And the management are also confident to deliver better - than-peers new business growth in FY22.
　　Sound capital position under C-ROSS 2.0. China Life shifted its solvency reporting to C-ROSS 2.0 (China Risk Oriented Solvency System 2.0) in 1Q22. Under the new solvency regime, the insurer’s core solvency and comprehensive solvency margin stood at 176% and 248%, respectively, at end-1Q22, safely above the regulatory requirement (50% for core, 100% for comprehensive solvency). We believe China Life’s solvency position is at the higher end among listed peers, and expect the sound capital position to sustain with continuous surplus generation.