NCI’s 2022 New Business Value Growth Weaker Than Peers on Sharp Contraction in Agent Headcount

We lower our fair value estimate for no-moat New China Life Insurance, or NCI, to HKD 26 per H-share and CNY 23 per A-share to factor in our weaker assumptions for premium income and underwriting margins in 2023 and 2024. NCI’s full-year 2022 results continued to reflect significant challenges in ongoing agent reform and it experienced larger-than-peer declines in both new business value, or NBV, and agent headcount. Full-year net profit declined 34% from 2021, driven by a 3% and 29% year-on-year contraction in premium income and investment income, respectively. Dividend per share also declined 25% to CNY 1.08 per share. We think the market’s pessimism is fully reflected in its current H-share price, which prices NCI at below 0.2 times 2023 price/embedded value, but we also don’t see any urgency in buying the shares with earnings performance likely to lag peers in 2023.