NCI’s 3Q Reported Larger-Than-Peer Contraction in New Regular Premium

No-moat New China Life Insurance, or NCI's, third-quarter results continued to reflect challenges in agent recruitment and retention as the macroeconomic activities were dampened by sporadic and repeated COVID-19 lockdowns and poor consumer outlooks. Nine-month total revenue and net profits further declined 7% and 57% respectively against the year-ago period, versus the 5% and 51% declines in the first half. The wider year-on-year decline was attributable to 3% and 29% declines in premium and investment income in the third quarter, versus the 0.5% growth in premium and 27% decline in investment income in the first half. As results were largely in line, we retain our FVE for NCI at CNY 27 per A-share, and HKD 30 per for H-share. H-shares are significantly undervalued, trading close to its historical low of below 0.2 times 2022 price to embedded value. We believe overall agent productivity and qualified agent headcount are two important leading indicators for future development of NCI's agent force. We expect the marginal improvement in agent productivity to continue due to ongoing cleanup of unqualified or inactive agents in coming quarters.