China Life disclosed 3Q results with net profit attributable to shareholders declined by 36.0% YoY in 9M23, indicating a net loss of RMB610mn in 3Q23 (vs a net gain of RMB16.2bn in 3Q22). The drop under the old standard was sharper, shown as - 47.8%/-99.1 YoY in 9M/3Q23. We see the 3Q net earnings setback a result of: 1) pressured investment income, with total investment yield down to 2.81%, -1.22pct/- 0.52pct from 9M22/1H23; and 2) enlarged impairment loss on equities of RMB19.7bn in 3Q, versus RMB9.1bn in 2Q (+117% QoQ). Despite investment underperformance, the company showed in-line NBV growth by +14.0% YoY in 9M23, driven by +14.8% YoY in first-year premiums (FYP). We estimate that 3Q NBV was down by ~6% YoY, possibly caused by certain demands released in advance before Jul 31. Given the equity market fluctuations likely continue to pressure on earnings, we lower the FY23-FY25E earnings forecasts to RMB21.9bn/RMB 42.3bn/RMB47.4bn (vs prior: RMB 40.8bn/RMB45.3bn/ RMB50.2bn).
　　Investment pressure continued in 3Q. The company recorded a net loss of
　　RMB610mn in 3Q, -104% YoY amid continued fluctuations in Chinese equity markets. The CSI 300/SHCOMP/GEI Index fell by 3.98%/2.86%/ 9.53% in 3Q (vs 2Q: -5.15%/-2.16%/-7.69%), giving rise to more volatile returns during transitions to new accounting standard. The insurer’s total investment income declined 22.8%/57.5% YoY in 9M/3Q23 to RMB110bn, sliding from - 7.3%/-28.8% YoY in 1H/2Q23. The mgt. addressed the decline was due to the added positions of equity instruments in 3Q22, at the market lows by then, yet given continued weakness in fair value over costs for more than a year, the paper loss ultimately being reflected into spread and impairment losses, and negatively affected to P/L net income. In our interim report, we viewed the NP pushback of China Life as a common topic of the sector (link), not representing the company’s underwriting fundamentals. We still maintain that stance and yet considering the investment volatility to sustain in 4Q, we see possibilities of further equity impairments to be recorded, which may stress the Group’s overall profitability. Given this, we revise down FY23-25E earnings to RMB 21.9bn/RMB42.3bn/RMB47.4bn, with corresponding est. total investment yield at 3.1%/3.5%/3.6% over the period.
　　Steady agency and resumed services for jumpstart pre-paid clients. The
　　company reported a total number of 0.66mn agents in 3Q, stabilizing from a scale of 0.661mn in 1H23 (-0.2% QoQ), as the industry-first to see a steady agent team. We estimate the 3Q NBV down by ~6%, largely in line, with NBV margin staying flat. The resumption of the jumpstart services to pre-paid customers lowered concerns on the company's recent operations. With increased productivity (3Q: FYRP per agent +28.6% YoY) and a steady team size, we maintain a positive outlook on the insurer's NBV growth in 2024.
Valuation: The Company is now trading at 0.2x FY23E P/EV and 0.6x FY23E P/B, well below 2yr/5yr avg.-1std. With GCNY10 steady above 2.7% , we expect the valuation to enjoy a rebound with economic recovery.