[Incident] China Life Insurance announced results for the third quarter of 2024:1) Net profit of 104.5 billion yuan to mother for the first three quarters, +194% year-on-year under comparable caliber (traceability I9 criteria), 66.2 billion yuan in Q3, and 0.61 billion yuan in the same period last year, mainly due to a sharp increase in investment income due to the stock market rebound. 2) The net assets of the parent at the end of Q3 were +14.8% compared to the middle of the year, mainly due to the increase in undistributed profit and other comprehensive income. 4) Under comparable caliber, NBV was +25.1% year-on-year in the first three quarters.

Life insurance: New policy premiums increased dramatically in Q3, and the NBV growth rate continued to increase. 1) The premium growth rate for new Q3 orders increased markedly, and the business structure continued to be optimized. New policy premiums, new instalments, and premiums for a ten-year period and above were +0.4%, +6.8%, and +17.7%, respectively, in the first three quarters, and +46.4%, +85.5%, and +74.9%, respectively. It is expected to be mainly affected by short-term speculation due to lower scheduled interest rates. Premium premiums for a ten-year term or more in the first three quarters accounted for +4.3pct to 46.4% year-on-year. 2) Driven by the rapid growth of new orders in Q3, NBV was +25.1% year-on-year in the first three quarters, and continued to increase from 18.6% in the first half of the year.

Manpower: The scale of manpower has risen, and the quality of the team has improved markedly. 1) The team size has reached an inflection point. At the end of 2023, 2024H1 and 2024Q3 were 0.694 million, 0.685 million, and 0.694 million respectively, the same as at the beginning of the year, and +1.3% compared to mid-year. At the end of 2023, 2024H1 and 2024Q3 were 0.634 million, 0.629 million, and 0.641 million, respectively, +1.1% compared to the beginning of the year and +1.9% compared to the middle of the year. 2) Team quality has improved markedly. The scale and proportion of the company's high-performing manpower continued to increase, and first-year premiums per person per month of insurance increased 17.7% over the same period last year. The pilot of a new marketing model for individual insurance progressed rapidly, and the “Seed Program” was piloted in 24 cities including Nanjing and Shenzhen, with initial results.

Investment: Driven by a low rebound in the stock market, investment returns have increased dramatically. 1) Investment assets reached 6.36 trillion yuan, +12.3% compared to the beginning of the year. 2) Net investment income reached 144.7 billion yuan, +3.9% year-on-year. The total return on investment reached 261.4 billion yuan, +152% compared with the same caliber. The net and total return on investment were 3.26% and 5.38%, respectively. The figures for the same period last year were 3.81% and 2.81%. Due to differences in standards, direct comparison is not appropriate. 3) Profit and loss from fair value changes in the first three quarters reached 147.7 billion yuan (comparable caliber was -12.1 billion yuan in the same period last year), with a single quarter increase of 99.9 billion yuan in Q3 (-24.6 billion yuan in the same period last year), mainly driven by the rise in the stock market.

The valuation is still low, and the rating is “superior to the market”. We believe that the company focuses on the “Eight Major Projects” and continues to implement the “Strong Sales Channel Project” to further push forward the reform of the marketing system, and is expected to maintain steady operation and stabilize its dominant position in the market in the future. As of November 1, 2024, the company's stock price corresponds to 2024E PEV 0.9x. We gave 1.0-1.1 times 2024E PEV, a reasonable value range of 47.59-52.35 yuan, and a “superior to the market” rating.

Risk warning: Long-term interest rates are trending downward; new premium growth falls short of expectations.