\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 628 China Life Insurance Company Limited(601628) )
The performance in the first quarter was in line with the expectation, the performance of personal insurance channels exceeded the expectation, the performance of new orders on the asset side was under pressure, the performance of channels exceeded the expectation, and the performance on the liability side was beautiful: the value of new business decreased by 14.3% year-on-year, but the number of personal insurance channel agents decreased by 40% year-on-year and 5% month on month. The team foundation remained stable. At the same time, the first-year premium was about 65.4 billion yuan (- 4%), of which the first-year premium of ten years and above was 19.1 billion yuan (- 3%), The per capita capacity of the team increased steadily, the channel performance exceeded expectations, and the new orders performed beautifully.
Financial performance, pressure on the asset side and decline in net profit: in the first quarter, the operating revenue was about 343.8 billion yuan (year-on-year – 8%), and the net profit attributable to the parent was about 15.2 billion yuan (- 47%), of which the change in accounting estimates increased the provision, resulting in a year-on-year decrease in pre tax profit of 5.3 billion yuan and investment income of about 54 billion yuan (- 27%), a year-on-year decrease of 19.5 billion yuan. At the same time, the group increased the allocation of short-term assets, and the return on net investment was under pressure. Although the gains and losses from changes in fair value were basically stable, the gains and losses from changes in fair value of available for sale financial assets were turned negative to – 33.2 billion yuan. The asset side is under pressure, and the corresponding net return on investment is 4% and the total return on investment is 3.9%.
Investment allocation: asset allocation is under pressure, and short-term assets are allocated, waiting for the interest rate to repair
In the same period, the cash received from the recovery of investment was about 347.1 billion yuan (104% month on month), the scale reached a record high in the same period, or the fixed income assets such as non-standard assets allocated in 2017 expired. In terms of specific allocation, the group reduced the allocation of rights and interests and increased the allocation of short-term assets, reflecting the pressure on the contribution end, and the interest rate repair in the second and third quarters became the key.
The group’s assets measured at fair value and whose changes are included in the current profits and losses are about 189.4 billion yuan, a month on month decrease of 17 billion yuan, about 1.38 trillion yuan available for sale, a month on month decrease of about 52 billion yuan, about 1.53 trillion yuan held to maturity, a month on month decrease of about 2.7 billion yuan, 266.8 billion yuan of long-term equity investment, a month on month decrease of about 1.1 billion yuan, but about 42.2 billion yuan of resale assets (month on month + 227%) and 82.9 billion yuan of monetary funds (month on month + 36%), The scale of such short-term assets increased significantly month on month, and the asset side was under pressure.
Investment suggestion: the liability side stabilizes, but the asset side is under pressure. When the interest rate improves, it will be lowered to the “overweight” rating
China Life Insurance Company Limited(601628) relying on the flexible sales strategy, it mainly promoted fixed income savings products such as increased lifetime life insurance in the early stage, including Zhenxiang Chuanjia increased lifetime life insurance. The value rate of new business is high (40% – 50%), which not only stabilized the team, but also boosted the growth of new business value in March, and achieved good performance in terms of channels and new orders as a whole. We expect this trend to continue and focus on the manpower situation in the second quarter.
However, at the same time, the long-term interest rate has been continuously adjusted since February, and then superimposed with the gradual maturity of medium and long-term fixed income assets, resulting in China Life Insurance Company Limited(601628) adjusting the allocation rhythm, adding short-term assets, increasing the reinvestment risk and putting pressure on the return on net investment. At present, asset side risk has become the core factor to suppress the stock price. We are concerned about the changes in the interest rate of 10-year Treasury bonds in the second and third quarters. Under this trend, we maintained our profit forecast and downgraded our investment rating to “overweight”.
Risk tip: long-term interest rate declines; New order sales fell year-on-year.
