NCI Reported New Business Value Declines in Both Agent and Bancassurance Channels

No-moat New China Life Insurance, or NCI’s, posted 4.8% and 51% year-on-year declines in first-half total revenue and net profit, respectively. First-half revenue and net profit growth both improved from the 7.9% and 79% year-on-year declines in the first quarter, as first-half total investment yield increased to 4.2% from the 4% in the first quarter. However, the results showed its agent channel business remained in deep restructuring. As expected, first-half value of new business, or VONB, was weaker than peers, contracting 48% on year to CNY 2 billion, on sharp declines in both VONB margin and agent headcount. We retain our fair value estimate of CNY 27 per A-share, and HKD 30 per H-share. H-shares are undervalued, trading close to their historical low of 0.2 times 2022 price/embedded value. We believe overall agent productivity and qualified agent headcount are two important leading indicators for future development of NCI’s agent force. We expect the improvement in agent productivity to continue due to ongoing cleanup of unqualified or inactive agents, and recovery of offline customer interactions after lockdowns in the first half.