尽管资本市场表现更好，第四季度净利润可能下降

4Q netprofitcoulddeclinedespite better capitalmarket China Life released prelim. earningsalert.The company expectsnetprofit to grow122%-144% YoY (or at RMB56.2-66.4bn) under IFRSand100%-120% YoY (oratRMB 51.2-61.4bn) under China Accounting Standards (ASBE)in FY24, easingfromtheincreaseof174%in year-to-3Q24.4Q bottom-line could range from a netloss of RMB 2.16bn to againof RMB 8.08bn, implying at most 0.8% YoYincreasevs RMB8.02bn in 4Q23. We attributethismore-than-doubled net profitprimarilytotheequity market rallyin 3Q, whichsurgedthe insurer’s totalinvestment incomeby+152.4% YoY in 9M24.Givenbettercapital market asCSI300 down 2% in 4Q24(vs 4Q23:-7%) and 10yr CGB yielddownbelow 1.7% by end-FY24(vs FY23:2.56%),we think this potential 4Q net profit decline could result frominvestment volatilities,as the insurer continuesfine-tuning itsstrategic assetallocation (SAA)structurebyincreasing HDY stocksunderFVOCI,and balancingequity exposure toFVTPLandFVOCI,in our view.By 1H24, core equities (incl.stocksand equity funds)under FVTPL and stocks under FVOCI made up11.2%/0.6%of total investment assets.Considering investmentfluctuations, wereviseFY24E/25E/26E EPS forecasts to RMB 3.85/2.68/2.81(vs previous:4.45/2.58/2.61,implying changes asof-14%/4%/8%).WeexpectFY24/25E NBVto growby19.2%/9.2%,withTP unchanged at HK$20.0.Maintain BUY.4Q net profit could decline YoY due to investment volatilities.The insurer’s Target PriceHK$20.00Up/Downside38.1%Current PriceHK$14.48China Insurance Nika MA(852) 3900 0805nikama@cmbi.com.hk Stock Data FY24 net profitranges atRMB102.4bn-112.6bn, implying 122%-144% earningsgrowth (or at RMB56.2-66.4bn)based on IFRS; and100%-120% YoYincrease(or atRMB 51.2-61.4bn) based on ASBE.Net profitin year-to-3Q24edged up174% YoY to RMB104.5bn, thanks tothebeta-driven equity market rallythatboostedthenet fair value gains by 80.1x/73.3x YoY to RMB 147.7bn/99.9bn in9M/3Q24.We stated in our last report(link) that such soaring investmentincome may not be sustainable, andthe insurer shouldhaveaddressedmore on steady growth of net investment income over the long run.4Qbottom-lineresults from a net loss of RMB2.16bn to anetgain of RMB 8.08bn,suggestingat most 0.8% YoYincrease (vs 4Q23: RMB 8.02bn).We attributethispotential 4Qnet profitdeclinetoinvestmentvolatilitiesgiven1)higher-than-mostlistedpeers'exposure toFVTPLcoreequities,comprising11.2% of totalinvestment assetsby 1H24 (second highestafterNCI: 16.3%); and 2) themajority of bond investments(83%)wereassigned to FVOCI,whichmightlagon seizing the fair value gains fromabullish bond marketamid descendinginterest rates in 2H24 (10YR CNGB yield downmore than 80bpsto<1.7% byend-FY24), in our view.Expectresilient NBV growth by 19%/9% in FY24/FY25E.Total premium grew 4.7% YoY to RMB 671.7bn in FY24, with quarterly premium increasesby3.2%/6.3%/9.3%/1.1% YoY in 1Q/2Q/3Q/4Q24.We expect to see resilient NBVgrowth by 19%/9% YoY in FY24/25,bolsteredbycontinuedmargin expansion.Valuation:The stock is trading at 0.24x FY25E P/EV and 0.67x FY25E P/BV Auditor: Ernst & Young Related reports: 1.China Life(2628 HK)-3Q NPATboosted by net fair value gains; expectresilient full-year NBV upswing, 5 Nov,2024 (link) with annualized ROE at 21% in FY24E, aswe estimate. On dividends front, weproject China Life will increase DPS but may not be as much as earnings growthas net fair value gains are unsustainable to transfer into direct S/H gains.Consideringinvestmentfluctuations,we adjust FY24/25/26E EPSforecaststo RMB3.85/2.68/2.81 (previousRMB4.45/2.58/2.61, implying changesof-14%/4%/8%).Maintain BUY, with TP at HK$20.0,indicating0.4xFY25EP/EV. 2. China Life (2628 HK)-Strong liftinbanca NBV margin; investmentincomemay continue to rebound in 2H24M, Sep2, 2024 (link) 3. China Life (2628 HK)-Highest VNBgrowthin years;net profit declinenarrowed on track, May 2, 2024 (link) 4. China Life (2628 HK)--4Q net lossmarkedly narrowed; VNBgrew in low-teens despite revised EV assumptions,Apr 8, 2024 (link) 5. China Life (2628 HK)-3Q NP draggedby investmentsetbacks;first-in-sectorsteady agent scale props up 2024 NBV,Oct 31, 2023 (link) 6.China Life (2628 HK)–Outpaced VNBgrowth in 1H23; short-term NPpushbacknotaffect value growth, Aug 25, 2023(link) Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or in part, certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was,is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered