[20081119] Insurance : China Life "October Premium Income under PRC GAA
Events:
China Life published its October premium income under PRC GAAP. October premium income grew 41.6% YoY to Rmb16.206bn, down from September’s 52.9%.
Our Comments:
This indicates the continuation of the monthly premium income growth slowdown since July, impacted by the persistently weak bancassurance distribution. China Life booked Rmb264.8bn premium income over January~October 2008, with YoY growth declining to 55.7% from 56.7% seen in January~September. In October particularly, the company’s premium income was less than Rmb20bn for the first time this year, far below the 3Q08 monthly average of Rmb22.179bn. In fact, the monthly premium income has declined QoQ YTD as the 1Q figure surged (Table 1). Monthly premium income was Rmb34.05bn in 1Q, but dropped 22% to Rmb26.634bn in 2Q and 17% further to Rmb22.179bn in 3Q.
Looking forward, China Life’s premium income growth outlook is not promising, and there may be even more challenges ahead in 2009. China Life will face a tough choice when it has to announce the policy dividend in January 2009, as it can maintain high dividend payout only at the expense of reducing net profit and significantly lowering dividend payout, and sacrificing future premium income growth. Considering the high premium income base in 1H08, we believe China Life is very likely to report negative premium income growth in 1H09.
We maintain our HOLD rating on China Life-A and REDUCE rating on China Life-H, to factor in the foreseeable premium income growth slowdown, consistently heavy funding costs and potential lower investment yield.
 china life2628_081118be_oct premiums(us).rar (82.48 KB)
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发表于 2008-11-19 10:24
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