Company Report
Felix Luo 罗 磊
+86-(0)755-23976685
[email protected]
China Life (02628 HK)
27 March, 2009
中国人寿（02628 HK）
FY09 new business value expected to grow well, Reiterate ‘Buy’
预计 09 年新业务价值取得良好增长，重申“买入”
z
z
z
Rating: Buy
FY08 embedded value precisely meets our estimates. FY08 one-year’s
new business value is 6.7% lower than our estimates.
评级：买入
Since (refer to our report on Jan 14, 2009) we assigned “Buy” rating and
TP of HKD28.5 to the Company, its share price has increased by 17%.
6-18 TP 目标价: HK$30.0
Share price 股价：HK$26. 45
Reiterate “Buy” because in FY09: 1) participating life insurance will be
more popular due to low benchmark deposit rate; 2) therefore we expect
one-year’s new business value will grow by 29.3% YoY; 3) A-share
market indexes have already achieved 30% plus growth compared to
FY08, positively impacting on investment incomes (one of the reasons
we revised up FY09 EPS); 4) as economies gradually recovering, the
market will accept relatively higher new business value multiplier.
Stock performance
股价表现
20%
10%
0%
-10%03/08
z
Raise our FY09 TP from HKD28.5 to HKD30.0 due to more positive
outlook of the Company, representing 3.7x 09PB or 2.6x 09P/EV.
Reiterate “Buy”. Also, the estimated FY10 per share value is HKD37.4.
05/08
07/08
08/08
10/08
12/08
02/09
-20%
-30%
-40%
-50%
-60%
z
08 年内涵价值完全符合预期，08 年一年新业务价值高于我们预期 6.7%。
z
自我们（参照我们 2009 年 1 月 14 日的公司报告）评级“买入”和目标价 HKD28.5
China Lif e
港元以来，公司股价上升 17%。
z
重申“买入”评级，理由如下: 1) 低通胀和低存款利率环境对分红险的销售有利；
2）因此我们预测公司 09 年一年新业务价值同比增长 29.3%； 3）A 股指数已相对
Change in Share Price
股价变动
Abs. %
绝对变动 %
Rel. % to HS index
相对恒指变动 %
HSCEI
1 M
1 个月
3 M
3 个月
1 Y
1年
18
16
-4
9
17
34
08 年收盘价上升 30%以上，对公司投资表现有正面作用，我们亦因此上调每股 EPS，
上调幅度请见正文；4） 随着经济恢复和市场估值中枢上升，市场将逐渐认同相比
08 年下半年更高的新业务价值倍数。我们在 09 年 1 月的报告中已调高至 25.2 倍。
z
小幅上调 09 年目标价由 HKD28.5 至 HKD30.0，以反映公司的正面前景。目标价相
当于 3.7 倍 09 年 PB,或 2.6 倍 09 年价格与内涵价值的比率。重申“买入”。另外，
我们预测公司 10 年每股公允价值为 HKD37.4。
Year End
年结
12/31
Turnover
收入
(RMB m)
Net Profit
股东净利
(RMB m)
EPS
每股净利
(RMB)
EPS
每股净利变动
(△%)
PER
市盈率
(x)
DPS
每股股息
(RMB)
Yield
股息率
(%)
ROE
净资产收益率
(%)
22.5
2007A
191,372
38,879
1.376
25.4
18.3
0.420
1.7
2008A
166,811
21,277
0.753
(45.3)
30.9
0.230
1.0
11.0
2009F
217,898
29,941
1.059
40.7
22.0
0.324
1.4
15.6
2010F
265,406
33,872
1.198
13.1
19.4
0.366
1.6
15.0
2011F
324,765
40,701
1.440
20.2
16.2
0.440
1.9
14.2
Shares in issue (m) 总股数 (m)
Market cap. (HK$ m) 市值 (HK$ m)
09 P/B (x) 市净率 (x)
52 Weeks high/low (HK$) 52 周高/低
1,419.2
747,601.4
2.9
35.600/15.300
Major shareholder 大股东
Free float (%) 自由流通比率 (%)
09 NBV per share (HK$) 每股净资产 (HK$)
09 Est. NAV (HK$) 每股估值（港元）
China Life Group 68.4%
26.3
8.1
30.0
Source︰the Company, Guotai Junan (HK)
Company Report
See the last page for disclaimer
Page 1 of 6
Summary of FY08 results and FY09 outlook
FY08 Gross Written Premiums (GWP) and policy fees under HK GAAP is RMB135billion, meeting our
estimates. The Company’s FY08 GWP and policy fees under GAAP is RMB 135billion, representing a 20.9
growth YoY and in line with our estimates of RMB137billion. Approximately 90% of total GWP and policy fees
under HK GAAP is from individual channel in FY08, and the rest mainly is Accident and Health insurance.
FY08 embedded value is RMB240billion, meeting our estimates. FY08 embedded value precisely meets
our estimates of RMB240billion, representing a decrease of 4.9% YoY. The decrease is mainly due to
investment losses as a result of FY08 A-share market poor performance.
FY08 one-year’s new business value is RMB139billion, 6.7% lower than our estimates. The released
FY08 one-year’s new business value increased by 15.6%, and is 6.7% lower than our estimates. However, this
is mainly due to the economic assumption changes. According to the management, if without assumption
changes, FY08 one-year’s new business would have grown by approximately 20% YoY.
FY09 macroeconomic environment is in favor of the Company. FY09 will be more likely to remain in low
CPI and low benchmark deposit rate due to relatively slower economic growth (although there are inflation
concerns in medium term). This will be in favor of the promotion of participating life insurance, as people are
seeking insurance protection and are willing to take relatively lower investment returns. Participating life
insurance is the major product of the Company, accounting for approximately 50% of total HK GAAP life
premiums. Therefore, the Company will benefit from the favorable macroeconomic environment in FY09.
FY09 life insurance sector regulation changes are in favor of the Company. There are two moves in life
insurance sector are in favor of the Company: 1) the CIRC is promoting life insurance that are more risk linked
rather than investment linked. This is in line with the Company’s strategy evidenced by its strong focus on
participating life insurance. The Company has already tuned down universal insurance settlement rate to
approximately 3.8%; 2) the CIRC signaled broadened investment channels for insurance players, such as
infrastructure projects. With the strong state-owned background, the Company may be able to secure more
infrastructure projects than rival insurance players. Both investment performance and asset-liability maturity
matching may benefit from it.
A-share market indexes are higher than CY08 year-end. A-share market indexes increased by 30% plus
based on CY08 closing indexes. This will positively impact on the fair value of equity investment of the
Company and also on embedded value.
FY09 and FY10 EPS revised up. Due to upward revision in HK GAAP GWP and the 30% plus increase in
A-share market indexes, we revised up FY09 from RMB0.875 to RMB1.059. Revise up FY10 EPS from
RMB1.156 to RMB1.198. Our estimated FY11 EPS is RMB1.440.
Raise our FY09 TP from HKD28.5 to HKD30.0. FY10 fair value per share is estimated to be HKD37.4.
Reiterate ‘Buy’ for the Company’s positive outlook. In summary, we think: 1) its FY09 one-year’s new
business value will grow by 29.3% YoY, supported by new sales of participating life insurance; 2) A-share
market indexes have already achieved 30% plus growth compared to FY08, positively impacting on investment
incomes (one of the reasons we revised up FY09 EPS); 3) as economies gradually recovering, the market will
accept relatively higher new business value multiplier. We have already revised up our new business value
multiplier to 25.2x in Jan. 2009. Applying the 25.2x multiplier, we raise FY09 fair value per share from HKD28.3
to HKD30.0. Raise our FY09 TP from HKD28.5 to HKD30.0 to factor in the positive outlook of the Company.
The target price represents 3.7x 09PB or 2.6x 09P/EV. Our estimated FY10 fair value per share is HKD37.4.
Reiterate “Buy”.
Company Report
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Page 2 of 6
Company Financials and Valuation
Expect 25.7% growth YoY in FY09 GWP and policy fees under HK GAAP, or 6.9% growth YoY in FY09
GWP under PRC GAAP. Our major implied assumptions are: 1) FY09 premium deposits in the individual
channel reach RMB143billion (approximately 8% decrease YoY); 2) FY09 HK GAAP GWP and policy fees in
the individual channel reach RMB155billion (approximately 27% increase YoY), and FY09 Accident and Health
premiums reach RMB14.5billion (approximately 10% increase YoY).
Fig. 1: HK GAAP GWP and policy fees (RMB’m)
300,000
70%
242,541 60%
59.5%
250,000
202,699
200,000
50%
170,115
40%
39.8%
135,325
150,000
81,022
99,417
111,886
100,000
22.7%
12.4%
20.9%
25.2%
66,257 22.3%
47,077 52,925
50,000
30%
25.7%
20%
19.2% 19.7%
12.5%
10%
33,675
0
0%
2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009F 2010F 2011F
GWP
YoY Growth
Fig. 2: Estimated breakdown of FY09 Total GWP and Policy Fees
43%
49%
4%
4%
Individual Life GWP
Accident and Health
Premium Deposits
0%
Group GWP
Policy fees
Source︰Guotai Junan (HK) estimates
Estimated FY09 total investment income (reflected in P&L) is RMB46.8billion. We expect FY09 total
investment income is RMB46.8billion with total investment yield of 4.70%. We also expect FY09 net investment
income is RMB49.7billion with net investment yield of 4.99%. Our major assumption is that A-share SH-SZ 300
index will close at 2500 at CY09 year-end, which is achievable. For details please refer to Fig. 3.
Company Report
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Page 3 of 6
Table 1: Investment performance (RMB’m)
2009F
1,142,515
22.7%
49,687
4.99%
(2,915)
46,772
4.70%
2010F
1,399,720
22.5%
61,267
5.26%
545
61,811
5.30%
2011F
1,722,448
23.1%
75,420
5.68%
5,988
81,407
6.14%
Investment assets structure (as a percentage of total investment assets):
Debt securities
52.2%
61.8%
61.5%
Equity securities
23.0%
8.1%
10.0%
Bank Deposits
19.9%
24.5%
21.5%
Loans
0.8%
1.9%
1.4%
Cash
2.9%
3.7%
3.7%
Others
1.2%
0.0%
2.0%
Total
100.0%
100.0%
100.0%
61.0%
10.5%
21.5%
1.5%
3.0%
2.5%
100.0%
60.5%
10.5%
21.5%
1.5%
3.5%
2.5%
100.0%
Net investment income structure (as a percentage of total net investment income):
Interests on debt securities
37.9%
51.5%
50.2%
48.3%
Interests on equity securities
44.1%
22.9%
19.1%
22.4%
Interests on bank deposits
20.7%
25.8%
26.2%
23.6%
Loans
0.6%
1.6%
1.8%
1.5%
Others
0.5%
0.2%
0.3%
0.6%
-3.7%
-2.0%
2.4%
3.5%
Minus: expenses
Total
100.0%
100.0%
100.0%
100.0%
47.8%
22.8%
23.6%
1.6%
0.7%
3.5%
100.0%
Investment assets
Growth YoY
Net investment income
Implied net investment yield
Total realized and unrealized gains/losses
Total gains/losses reflected in P&L
Implied total investment yield
2007A
847,982
23.1%
44,020
5.73%
34,228
78,248
10.18%
2008A
931,250
9.8%
44,050
4.95%
(13,812)
30,238
3.40%
Source︰the Company, Guotai Junan (HK) estimates
Expect 21.5% growth YoY in FY09 embedded value. We expect FY09 embedded value is RMB291.7billion,
a 21.5% growth YoY, supported by the accumulation of VIF and the increase in net adjusted asset value.
Expect 29.3% growth YoY in FY09 one-year’s new business value, implied margin on FYP is 8.8%. As
we have discussed, current macroeconomic conditions are in favor of the Company’s products. We expect the
Company’s regular life FYP (First Year Premium) in the individual channel to reach RMB42billion in FY09. We
also expect FY09 one-year’s new business value to reach RMB18billion, representing a 29.3% growth YoY.
The implied margin on FYP is 8.8% in FY09, compared to 6.8% in FY08.
Fig. 3: New business value and margin (RMB’m)
30,000
25,000
9.3%
8.8%
6.8%
20,000
15,000
10.2%
9.9% 24,852
10.0%
12%
10%
22,158
18,009
12,047 13,924
8%
6%
10,481
10,000
4%
5,000
2%
0%
0
2006A 2007A 2008A 2009F 2010F 2011F
New business value (RMB'ml)
New business margin (on FYP)
Source︰the Company, Guotai Junan (HK) estimates
Company Report
See the last page for disclaimer
Page 4 of 6
FY09 Appraisal Value per share (AVPS) is HKD30.0. FY10 AVPS is HKD37.4. Raise FY09 TP from
HKD28.5 to HKD30.0. Reiterate ‘Buy’ for the positive outlook of the Company. Applying 25.2x new
business value multiplier, our FY09 AVPS is HKD30.0, FY10 AVPS is HKD37.4. Raise our FY09 TP from
HKD28.5 to HKD30.0. The target price represents 3.7x 09PB or 2.6x 09P/EV. Reiterate ‘Buy’ for the
Company’s positive outlook as we have discussed.
Table 2: FY09-10 AVPS of the Company
(RMB'm)
FY09
FY10
Adjusted net asset value
A
158,771.6
203,491.5
VIF (after costs)
B
132,898.8
167,924.9
EMBEDDED VALUE
C=A+B
291,670.4
371,416.4
One year's new business value
D
18,009.5
22,157.6
New business multiplier
E
25.2
25.2
NEW BUSINESS VALUE
F=D*E
453,838.3
558,371.3
APPRAISAL VALUE
G=C+F
745,508.7
929,787.8
26.4
32.9
30.0
37.4
10.3
13.1
11.7
14.9
AVPS (RMB)
In HKD (1.00HKD=0.88RMB)
EVPS (RMB)
In HKD (1.00HKD=0.88RMB)
Source︰the Company, Guotai Junan (HK) estimates
Appendix 1: Key Financials
GWP and policy fees
Net premiums earned
Total investment income
Benefits, claims and expenses
Underwriting and policy acquisition costs
Administrative expenses
Net profit before income tax expenses
Net profit
EPS (RMB)
Total investment assets
Shareholders' equity
BVPS (RMB)
FY07A
111,886
111,404
78,248
(76,288)
(2,725)
(11,798)
45,391
38,879
1.376
850,209
205,500
7.469
FY08A
135,325
134,650
30,238
(89,823)
(3,394)
(12,110)
22,804
21,277
0.753
954,105
180,649
6.391
FY09F
170,115
169,284
46,772
(113,268)
(4,644)
(13,287)
32,324
29,941
1.059
1,179,069
202,575
7.167
FY10F
202,699
201,767
61,811
(135,889)
(6,182)
(16,746)
37,514
33,872
1.198
1,430,568
248,866
8.805
FY11F
242,541
241,493
81,407
(163,761)
(7,579)
(20,049)
46,449
40,701
1.440
1,616,940
322,718
11.418
Source︰the Company, Guotai Junan (HK) estimates
Appendix 2: Historical monthly PB (for reference)
7.5x
7.0x
6.5x
6.0x
5.5x
5.0x
4.5x
4.0x
3.5x
3.0x
2.5x
2.0x
1.5x
1.0x
0.5x
0.0x
Jan-04Apr-04 Jul-04 Oct-04 Jan-05Apr-05 Jul-05 Oct-05 Jan-06Apr-06 Jul-06 Oct-06 Jan-07Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09
Implied PB (Left)
$60
$50
$40
$30
$20
$10
$0
Closing Price (Right)
Source︰the Company, Guotai Junan (HK) estimates
Note: based on monthly closing price and on time-weighted average book value in two consecutive years
Company Report
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Page 5 of 6
Company Rating Definition
The Benchmark: Hong Kong Hang Seng Index
Time Horizon: 6 to 18 months
Rating
Buy
Accumulate
Neutral
Reduce
Sell
Definition
Relative Performance >15%;
or the fundamental outlook of the company or sector is favorable.
Relative Performance is 5% to 15%;
or the fundamental outlook of the company or sector is favorable.
Relative Performance is -5% to 5%;
or the fundamental outlook of the company or sector is neutral.
Relative Performance is -5% to -15%;
or the fundamental outlook of the company or sector is unfavorable.
Relative Performance <-15%;
or the fundamental outlook of the company or sector is unfavorable.
Sector Rating Definition
The Benchmark: Hong Kong Hang Seng Index
Time Horizon: 6 to 18 months
Rating
Outperform
Neutral
Underperform
Definition
Relative Performance >5%;
or the fundamental outlook of the sector is favorable.
Relative Performance is -5% to 5%;
or the fundamental outlook of the sector is neutral.
Relative Performance <-5%;
or the fundamental outlook of the sector is unfavorable.
DISCLOSURE OF INTERESTS
(1)
(2)
(3)
(4)
The Analysts and their associates do not serve as director in the listed corporation mentioned in this Research Report.
The Analysts and their associates have no financial interests in the listed corporation mentioned in this Research Report.
Except for Shandong Chenming (01812), Guotai Junan and its group companies do not hold more than 1% of the market
capitalization of listed corporation mentioned in this Research Report.
Guotai Junan and its group companies have not had investment banking relationships within the preceding 12 months for the listed
corporation mentioned in this Research Report.
DISCLAIMER
This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities
(Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in
research reports, including investment banking, investment services and etc. (for example, the placing agent, lead manager, sponsor,
underwriter or invest proprietarily).
Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by
sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may
differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan.
Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does
not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking
estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and
mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks,
and where necessary consult their own financial advisers prior to any investment decision.
© 2009 Guotai Junan Securities (Hong Kong) Limited. All Rights Reserved.
27/F., Low Block, Grand Millennium Plaza, 181 Queens’ Road Central, Hong Kong.
Tel.: (852) 2509-9118
Fax: (852) 2509-7793
Website: www.gtja.com.hk
Company Report
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