Earnings rebounded markedly in the second quarter. In the first half of the year, China Life Insurance achieved a 10.6% year-on-year increase in net profit due to mother (the company officially implemented the new accounting standards in 2024, and retroactive adjustments were made in accordance with the new insurance contract standards in the same period last year). Based on the same accounting standards (I9+I17), profit for the first half of the year increased 5.9% year on year, with profit falling 25% year on year in the first quarter and up 100% year on year in the second quarter.

The premium structure has been optimized, and the number of agents has remained stable. Premium income increased 4.1% year on year in the first half of the year. The increase was mainly due to renewal premiums, and bank insurance payments were significantly compressed; premium structure was optimized, and payments of 10 years or more increased 9.4% year on year, accounting for 43.8% of new single instalment premiums, up 3.8 percentage points year on year. The 14-month continuation rate was 91.5%, an increase of 2.3 percentage points over the previous year. The number of individual insurance agents was 0.629 million, the same as in the first quarter.

The value growth rate of new businesses is relatively lower than that of peers. In the first half of the year, the comparable value of the new business increased 18.6% year over year, and one of the insurance channels increased 14.6% year over year. The banking insurance channel accounted for 9.2% of the value of new business, an increase of 3 percentage points over the previous year. The value rate of the new premium caliber business in the first year of the individual insurance channel was 30.6%, up 5.4 percentage points year on year; the banking insurance channel increased 13.4 percentage points year on year. Intrinsic value increased 11.4% from the beginning of the year, and the growth rate was higher than that of peers.

Total return on investment increased significantly year over year. Total investment income in the first half of the year increased 50% year on year, and the net annualized return on investment was 3.03%/3.59%, -0.28/+0.26 percentage points year-on-year, respectively (same accounting standards). In terms of asset allocation, the share of bonds and funds rose slightly in the first half of the year, and the share of stocks declined slightly. The share of investment assets measured by FVTPL was 30.6%, down 0.9 percentage points from the beginning of the year.

Maintain a buy rating. The company announced an interim dividend of 0.2 yuan per share, with a dividend rate of 14.8%. We raised our profit forecast and expect the annual profit growth rate to increase further from the first half of the year on a low basis. Maintain the purchase rating and target price of HK$14.