The Zhitong Finance App learned that UBS released a research report saying that China Life Insurance (02628) expects agent's first-year premium payment (FYRP) to record positive growth during the “good start” period. The high-yield stock allocation is in line with the target, maintaining the “buy” rating for H shares, and the target price is HK$36.
According to UBS, China Life Insurance expects a positive increase in first-year premiums paid by agents during the “good start” period, which is supported by a recovery in the number of agents and quality improvements. China Life Insurance believes that the banking insurance channel continues to be dragged down by Document No. 65 (Fee Control); although the Bank Insurance FYRP rebounded month-on-month from July to September, September was still below the average monthly level in the first half of the year, indicating that the impact of Document No. 65 is still there. According to the company, banking insurance accounts for about 40% of the industry's FYRP in the first quarter of 2026. For 2027, the value growth of the new business of double-digit agents is an aggressive goal, while the growth of banking insurance is expected to slow down from the previous year.
The bank indicated that the company targets double-digit growth in operating profit (OPAT) in 2026. OPAT rose 21% year over year in the third quarter (13% in the first half of the year), mainly driven by increased dividend income. OPAT is not an indicator within the Ministry of Finance's assessment framework, and currently dividends are not linked to OPAT. However, the bank believes that OPAT will become more and more important for dividend decisions. The company is committed to providing stable dividend per share growth over the long term.
UBS added that the company's stock exposure has reached 18% to 19%, which is close to the strategic asset allocation target. During the first nine months of this year, we increased our holdings of other comprehensive income (FVOCI) stocks at fair value by about RMB 200 billion, while reducing our holdings of growth shares by about RMB 100 billion. The current allocation of high-yield stocks is in line with the target. If the risk return is more attractive, the company is willing to further increase FVOCI exposure to improve profit stability. The return on new capital is 2.2%, far higher than the break-even yield of the new insurance policy of 1.2%.
Solvency is limited in sensitivity to stock price risk, and interest rates are the more sensitive factor; if interest rates remain at the current level, the solvency ratio is expected to stabilize roughly quarterly in the fourth quarter. The upcoming second and third installment payments are expected to significantly improve the company's solvency.