Life sector’s outlook is more positive in 2H22
Resilient performance expected for China Life in 2H22
Valuation undemanding; maintain BUY
　　1Q22 performance better than peers
　　Shareholders’ NP of China Life decreased by 46.9% yoy, and total comprehensive income was negative in 1Q22. Total NBV dropped by 14.3% yoy in 1Q22, outperformed all major peers. Also, the Company has maintained satisfactory solvency ratios under the C-ROSS (Phase II) Regulation implemented since 1Q22.
　　Positive sector outlook; resilient performance expected for China Life as a leading life player
　　The life sector’s outlook is more positive in 2H22, given potentially stabilizing NBV growth and agent team in 2H22. Recently insurance savings products have gained increased popularity, which might help to support agent team income and stability, and the negative NBV growth rates might narrow across the sector in 2H22. China Life, as a leading life player, is more likely to show resilient performance in 2H22. The Company actively explored sales system reform, aiming at building a more professional and specialized sales force.Despite the number of its agents in the individual channel dropped by ~5% qoq in 1Q22 from 820k at end-2021 to 780k at end-1Q22, it still owns the largest sales force in the industry, and the Company achieved enhanced agent productivity in 1Q22 (vs. 1Q21) under its strategy of ‘productive agents-driven business’. The Company also emphasized technology-empowered development. According to the Company, its management system based on tech products was comprehensively implemented to facilitate the integration of technology and business operations. China Life “internet of things” fully cover all business units and sales outlets across China, and the technology empowerment has demonstrated effectiveness. We expect resilient performance for the Company in 2H22, and its NBV to contract ~8% yoy in 2022, meaning a performance that is better than peers.
　　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 will still fall short of 1x (Fig. 7) if we assume its entire VIF is zero and further assume a valuation discount equivalent to 5% of its investment assets. Maintain BUY on valuation. Maintain TP at HKD17.7, equivalent to ~0.32x 22E P/EV, or 40% discount to its past 5- yr average P/EV. China Life remains our top pick of the sector. Key catalysts: robust NBV growth, good investment performance, China’s recovery policies might impact capital market and in turn life players’ EV (Fig. 5); Key downside risks: lower-than-expected NBV growth, adverse capital market.