报告名称：China Life Insurance(02628.HK)Investment headwinds
报告类型：港股研究
报告日期：2016-01-23
研究机构：大和证券
股票名称：中国人寿
股票代码：LFC,601628,02628
页数：5
简介：What's new: We recently spoke to management to get an update on ChinaLife, particularly its product and investment strategy for 2016.
What's the impact: Traditional products account for over 60% of premiumincome in 2015, according to China Life. We think this has been a positive for2015 and bodes well for its VNB growth in 2H15. We understand that most ofChina Life’s traditional products, besides “Xin Ru Yi”, in 2015 have guaranteerates of 2.5%, which gives a decent VNB margin. Arguably, going forward, wewould be concerned if traditional products still account for such a highproportion of its premiums, especially if they have high guarantee rates.
Continued push for high-guarantee-rate products could be a risk.China Life launched a new product called “Xin Fu Nian Nian” in December2015 to replace its star product in 2015, “Xin Ru Yi”, which it will stopselling at end-2015. China Life plans to use “Xin Fu Nian Nian” as its keyproduct in its 2016 “New Year Sales”. Though we look forward to seeing agood FYP sales volume for this product, its high guarantee rate (4.025%)overshadows our confidence in the VNB margin that it delivers.
Reluctant to increase NSAs. Compared with most of its peers, China Lifeseems to be the most reluctant to increase its investment in non-standardassets (NSAs). It has said that it will “pay attention to opportunities inNSAs” but does not have specific plans in terms of how or how much itwants to invest. We think that as China Life has a much larger totalinvestment portfolio than its peers, it is difficult to find a large number ofdecent NSA projects in a short time and to quickly increase its proportion.
On its upcoming bond re-pricing, it has said there is “significant pressure interms of bonds maturing” in 2016. From its 2014 annual report, we understandthat 21% of its bonds will mature in 2016-17. This compares with 11-18% ofbonds to be re-priced next year for the other insurers.
What we recommend: Though we still appreciate China Life’s solid VNBgrowth turnaround in 1H15 and expect it to be sustained in 2H15, itsreluctance in making decisive changes to its investment strategy makes usslightly concerned about its recurring investment yield into 2016. Hence,although we maintain our Buy (1) rating on the stock, we cut our GordonGrowth Model-derived 12-month TP to HKD35.5, from HKD44.0, implying a2016E P/EV of 1.5x. Key downside risk to our call would be a VNB marginsqueeze for traditional products due to deregulated guaranteed rates.
How we differ: We are more confident than the market on China Life’sVNB growth, which we forecast to grow YoY by 30% and 25% for 2015-16.

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