China Life's H1 VONB Contraction Smaller Than Peers'; New Regular Premium Growth Turns Positive

We retain our fair value estimate for China Life Insurance at CNY 20 per A share and HKD 21 per H share after the company released second-quarter results that were were slightly above our expectation. The H shares remain significantly undervalued, trading at a historical trough valuation of 0.2 times forward price/embedded value on market concerns about further weakening investment return amid heightened stock market volatility and continuous pressure in agent force reform. We expect the company's distribution strength in the bancassurance channel and leading position in rural areas and low-tier cities should help buffer against the weakness in the agent channel. China Life reported better-than-peers performance in agent head count and first-year premium growth in the second quarter. First-year regular premium per agent per month increased 60% year on year. As agent new premium resumed growth in the second quarter, we expect agent head count to lead peers in stabilizing in the second half.