中国人寿：Strong lift in banca NBV margin; investment income may continue to rebound in 2H24

Investment Rating - The report maintains a "BUY" rating for China Life with a revised 12-month target price of HK$15.5, implying a 31.1$11.82 [4][6]. Core Insights - China Life reported strong first-half results with a year-on-year increase in new business value (NBV) of 18.6% to RMB32.3 billion and a 11.4% growth in embedded value (EV) to RMB1.4 trillion [2][11]. - Investment income surged 140.3% year-on-year to RMB56.7 billion, significantly contributing to a 27.6% increase in pre-tax profit to RMB47.9 billion in 1H24 [2][10]. - The bancassurance segment showed remarkable margin expansion, with NBV margin increasing by 13.4 percentage points to over 17% [2][11]. Financial Performance - Total investment assets reached a record high of RMB6.1 trillion, with a notable increase in fair value through other comprehensive income (FVOCI) stocks, which rose 131% from the beginning of the year to RMB34.1 billion [2][15]. - The company achieved a net investment yield of 3.33% and a total investment yield of 3.59% in 1H24, reflecting a positive investment variance in EV of RMB6.7 billion [10][15]. - The first-year regular premiums (FYRP) grew by 9.4% year-on-year to RMB42.6 billion, accounting for 43.8% of total FYRP in 1H24 [2][12]. Valuation Metrics - The stock is currently trading at 0.2x P/EV and 0.6x P/B for FY24E, indicating potential for a stock re-rating based on resilient financial results [6][8]. - The report highlights a target price of HK$15.5 based on a P/EV versus return on embedded value (ROEV) approach, reflecting improved underwriting and investment outcomes [6][8]. Business Segments - The agency channel remains the primary contributor to NBV, accounting for 90.8% of total NBV in 1H24, with a margin increase to 30.6% [11][12]. - The bancassurance channel experienced a significant decline in single-paid premiums, down 78.2% year-on-year, indicating a strategic shift towards higher-margin products [2][11]. Future Outlook - The company anticipates a rebound in investment income in the second half of 2024, supported by a low comparative base from the previous year [2][6]. - Management expects a diversification in product mix with a higher proportion of participating policies following recent interest rate cuts [2][11].