报告名称：China Life Insurance-H (02628.HK)2H15 first cut： Liability reserving status in 4
报告类型：港股研究
报告日期：2016-03-24
研究机构：摩根大通
股票名称：中国人寿
股票代码：LFC,601628,02628
页数：8
简介：Besides an 8% annual profit increase y/y (NP: ~Rmb 34B), which was pre-announced with 5-10% of annual profit growthon 30 Jan-16, we think the company broadly delivered a good quality result in 2H15. For the last three months, investorshave penalised the company, reflecting China’s lower bond yield outlook and rising systemic risk concern (post thecompany’s announcement on an additional 20% stake increase in China Guangfa Bank a month ago). Thus, the share pricehas already dropped to the trough level, which is close to the company’s share price 10 years ago. Although the company’ssmaller-than-expected liability reserving in 4Q15 looks questionable in the result presentation (9:30AM Hong Kong Time,24 Mar-16), we cannot rule out the possibility of smaller-than-expected remaining balance on the traditional policy reserveconsidering the nature of relatively short liability duration (< 5 years). Reviewing the company’s first-year premium trendsince 2011, we think the company’s cash outflow pressure due to a higher portion of the short-term single savings reservebook looks largely stabilised for now with higher volume growth on longer-duration regular policy sales. The improvedquarterly policy surrender ratio also supports this argument. Improved product margin (2H15 NBV margin: 28%, +9%py/y) with strong 2H15 NBV growth (+32% y/y) suggests fast-growing mortality/morbidity profit growth potential. (i.e., thecompany’s business transformation into higher-margin product mix looks on track). Moreover, a strong balance sheetposition (solvency ratio: 330%, +37%p y/y) suggests the company’s buffer to absorb losses on the balance sheet under thestress scenario. As the company does not disclose product mix details, we are not sure whether the company’s liabilityreserve status has clearly improved following the policy’s scheduled maturity table. To be fair, as the company’s shareprice has already largely priced-in major negatives in tandem with volatile financial market conditions, better-than-expectedquality reporting in 2H15 should suggest improving risk/reward at the current share price level. We maintain our forecastspending further review following the analyst briefing.

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