\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 628 China Life Insurance Company Limited(601628) )
China Life Insurance Company Limited(601628) disclosed that in the first quarterly report of 2022, the operating revenue during the reporting period was 343777 billion yuan, a year-on-year decrease of 8.0%; The net profit attributable to the parent company was 15.178 billion yuan, a year-on-year decrease of 46.9%. EPS0. 54 yuan / share, a year-on-year decrease of 46.9%; ROE3. 22%, down 3.01pct year-on-year.
During the reporting period, the investment side remained depressed, resulting in a significant decline in the company’s profit compared with the same period in 2021. In the first quarter, affected by the multi-point spread of the epidemic to suppress economic growth, the expectation of the Federal Reserve to raise interest rates and the outbreak of the Russian Ukrainian war, the performance of the equity market was depressed, and the performance of core indexes such as Shanghai Composite Index, Shanghai Composite Index 50 and Shanghai Shenzhen 300 were weaker than that in the same period in 2021. Affected by this, the total investment income of the company decreased by 31.6% year-on-year during the reporting period, dragging down the sharp decline in profits.
In addition to poor investment performance, the pressure on the liability side of the company remains. The scale of the company’s agents has declined for two consecutive years, and the staff increase strategy and epidemic disturbance have increased the difficulty of staff increase. The personal insurance manpower of the company decreased from 1613000 at the end of 2019 to 820000 at the end of 2021, with a decrease of nearly 50% in two years and an increase year by year. At the end of the reporting period, the company’s personal insurance manpower decreased to 780000, with a narrower decline. However, considering that the opening stage is the “main battlefield” for the annual increase of personnel, or there will be a “peak” of manpower in the year, and the sustainability of the impact of the epidemic in the future can not be ignored, how to achieve efficient increase of personnel in the short term is still an urgent problem to be solved on the liability side of the company.
However, from the premium data, the effect of “improving quality and efficiency” of agents is remarkable. In recent years, the company has been inclined to “quality” in terms of increasing staff. While the team capacity has increased steadily, the retention rate of the core agent team has remained at a high level. In the first quarter of the year, when the agents fell sharply (- 40%) year-on-year, the single digit of new single premium decreased year-on-year, the declining trend of new business value was alleviated to a certain extent, and the business structure continued to be optimized. It is expected that with the promotion of channel reform and the weakening of the impact of the epidemic, the inflection point of the debt end is expected to appear in the second half of the year.
The regulatory rules on solvency have changed, and the company’s core solvency is facing a test, but the two key indicators are still far higher than the regulatory requirements. Since the reporting period, the insurance industry has implemented the second generation and second phase rules in terms of solvency. The new regulations have a greater impact on the core solvency level of insurance enterprises. According to the company’s calculation, under the phase I and phase II rules, the difference between the comprehensive solvency adequacy ratio and the core solvency adequacy ratio is only 2.35pct and 65.31pct respectively. From the current point of view, the company’s business development mode at both ends of the negative capital will continue to be affected by the new regulations, which will put some pressure on the growth of core indicators such as profitability and embedded value. However, the company’s comprehensive and core solvency adequacy ratio are significantly higher than the regulatory requirements, the safety cushion is thick, and there is still enough room for adjustment, which has a controllable impact on the company’s long-term development.
Investment suggestion: the company has continuously promoted the Dingxin project for three years, and has achieved many results at present. However, since the beginning of the year, the impact of the epidemic has continued, and the changes in industry competition pattern and insurance consumption structure have brought many challenges to the company. We expect that 2022 will still be a key reform year for the company to constantly adjust and explore new development paradigms, and the change of product structure and accurate stratification of customer base will become the core concern. However, relying on the company’s strong customer base and group advantages, supplemented by financial technology empowerment and industrial chain extension and expansion, the company is expected to get out of the current situation, and the performance of the whole year can still be expected. After the new chairman takes office and the management adjustment is completed, the company’s “rejuvenating Guoshou” plan is expected to accelerate. We are still optimistic about the company’s long-term development prospects and maintain the “recommended” rating. The current valuation of the company is only 0.52x22evps, which has medium and long-term investment value. It is recommended to choose the appropriate configuration. The target price for the year is 33.5 yuan, corresponding to 0.7x22evps.
Risk tips: macroeconomic downside risk, policy risk, market risk and liquidity risk.
