China Life Insurance-H: Value-Driven Sales Continue, Capital Framework Turns into a Key Focus

Overview

This report is a note on China Life Insurance-H after J.P. Morgan's Asia Insurance Forum. The key conclusion is that China Life's sales momentum is now driven by value-oriented products, liability-side quality keeps improving, solvency has increased materially, and a future adjustment to the solvency regulation framework may make its asset-liability management capability more closely watched.

Core views

The report argues that since 2015, China Life has consistently reduced value lump-sum sales and shifted toward longer-tenor annual-premium products, making the liability reserve structure more balanced and improving compounding characteristics of operating cash flow and the balance sheet. New business is mainly issued as participating products, with lower sensitivity to rates, while high fixed-guarantee-rate policies are gradually maturing, which also helps reduce cyclical interest-rate risk. On the sales side, 1Q26 new-business value rose 75% year-on-year, the share of long-tenor annual-premium products increased, and the agency channel was especially strong. On capital, the core solvency ratio rose to 157%; the company expects, with its relatively strong ALM, solvency resilience could persist if C-ROSS II Phase 3 is implemented.

Analysis framework

The report combines forum management discussions, liability reserve quality, CSM changes, solvency, sales mix, bancassurance-channel strategy, and asset allocation to assess China Life's medium-term earnings quality and adaptability of its capital framework; valuation uses a P/E approach, deriving the Dec-26 target price using 8x FY26E P/E.

Methodology notes

• Valuation methodologyP/E valuation

  Target price is estimated using FY26E P/E of 8 times

  The report applies the P/E method, assigning an 8x valuation multiple to FY26E EPS, resulting in approximately HK$40.3 per share, which is rounded to a Dec-26 target price of HK$40.

• Accounting and insurance liabilitiesIFRS 17 and CSM

  Contractual service margin reflects the base for future profit release from the in-force policy book

  CSM balance reached RMB 768 billion, and CSM variance turned positive in 2025, indicating relatively robust actuarial assumptions and providing a reference for assessing future profitability release of the life insurance in-force portfolio.

• Capital regulationC-ROSS II Phase 3

  An upgraded solvency regulatory framework could affect solvency adequacy assessment

  The report notes that the new framework is still under discussion and short-term impact is difficult to fully assess, but China Life believes its stronger ALM may support more robust solvency performance.

• Asset-liability managementALM

  Consistency in fair-value management of assets and liabilities

  As the insurance industry fully adopts IFRS 17, the report suggests that using a more consistent fair-value lens in the solvency balance-sheet context can improve the coherence of the ALM framework.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China Life Insurance-H (2628.HK)

  Research subject

  Strengths

  High new-business value growth, CSM normalization, improved liability structure, rising core solvency ratio, and relatively strong bancassurance channel resources.

  Weaknesses

  Part of capital performance is influenced by accounting classification changes, and future regulatory framework changes remain uncertain; equity market volatility can affect returns and bonuses.

  Comparison

  The report notes that most peers completed bond portfolio measurement adjustments in 2025, while China Life implemented this in 1Q26; its long-term bank partnerships and regulatory ratings help secure better access in the bancassurance channel.

  Risks

  A-share market volatility, weaker-than-expected growth of the agency distribution channel, weaker-than-expected new life insurance sales, and capital-measurement uncertainty from policy or regulatory framework changes.

Key data

• 1Q26 new-business value growth75% y/yMainly driven by a shift toward value-oriented product mix, improved cost efficiency, and higher product margins.
• CSM balanceRMB 768 billionAs of Dec 2025, up 3.5% year-on-year.
• CSM variation change2024: -RMB 43.6 billion; 2025: +RMB 18.4 billionIt indicates improved actuarial assumptions and expectations for future profit release.
• Core solvency ratio157%As of Mar 2026, up 28 percentage points month-on-month.
• Best estimate liabilitiesRMB 5.53 trillionAs of Dec 2025.
• Total AUMRMB 7.42 trillionAs of Dec 2025.
• Equity holdingsRMB 1.26 trillion, 17% of AUMStocks and funds combined rose 56% year-on-year.
• FY26E EPSHK$5.24Disclosed in the valuation table.
• Target P/E8xHistorical average/minimum P/E was 16x/4x.
• Dec-26 target priceHK$40Derived from an estimated value of about HK$40.3.

Impact & implications

For investors, the positive implication is that China Life's growth quality may be stronger than shown by premium growth alone: the rising share of long-term payment, participating, and protection products helps reduce rate risk and improve margins; CSM improvement enhances visibility of future profits; higher solvency and bond valuation adjustments make capital framework changes an important variable for future valuation repricing.

Risks

• A-share market volatility could pressure earnings and further weaken payout capacity.
• Development of the agency distribution channel may be slower than expected.
• New life insurance sales supported by expanded individual pension and pre-existing-condition health protection policies may come in below expectations.
• Solvency framework changes such as C-ROSS II Phase 3 are still under discussion, and the precise impact is hard to fully quantify yet.

What to watch

• Whether the share of long-term payment products in first-year level-premium premiums continues to rise.
• Whether new-business value and product margins in the agency channel can keep improving.
• Whether CSM balance and CSM variation continue a positive trend.
• The rollout pace of C-ROSS II Phase 3 and its impact on solvency capital.
• Return and volatility performance after rebalancing the equity book from technology growth to a “dividend + growth” mix.
• Whether core bank cooperation under the bancassurance “6+10+N” framework continues to deliver preferred channel access.