UBS raises China Life's target price to 42 yuan, optimistic about the growth of the bancassurance channel and the trend of deposit migration

UBS published a report stating that it has significantly raised the target price for China Life (02628.HK) from HKD 29 to HKD 42, maintaining a "Buy" rating. This adjustment is primarily based on three reasons: improved growth prospects for new business value, favorable macro conditions leading to an upward revision of embedded value forecasts (raising the price-to-embedded value forecast for its life insurance business from 0.45 times to 0.6 times), and an updated valuation benchmark to 2026. The bank noted that China Life's current valuation is equivalent to a future price-to-embedded value of 0.5 times and a price-to-book ratio of 1.22 times, making the valuation attractive, and reaffirmed it as a major beneficiary of the trend of "moving deposits" and rising stock markets in mainland China.

The bank analyzed that China Life's new business value is expected to grow by 35% in 2025, but compared to the 42% growth rate in the first nine months, the growth momentum in the fourth quarter of last year has weakened. This is mainly due to some demand being released ahead of the interest rate cut at the end of August, while some provincial branches, after achieving their annual targets, are prioritizing preparations for the 2026 New Year sales. UBS believes that these preparations will drive the company to achieve strong new business growth in January, especially in the bank insurance channel, which is expected to perform well.

UBS emphasized that the bank insurance channel will be in a favorable position in 2026, effectively seizing opportunities from market deposit migration. In a strict commission-limiting environment, large insurance companies are expected to outperform their peers due to their bargaining power and brand value with banks. China Life particularly has a strong banking partnership network, with 170,000 bank insurance outlets nationwide, of which 70,000 are active outlets, and has established partnerships with 105 banks.

UBS expects China Life's net profit attributable to shareholders to grow significantly by 45% in 2025, mainly benefiting from investment income driven by rising stock markets. The report also anticipates that, under favorable macro conditions, the company's embedded value will record a 9% growth on a half-year basis in the second half of the year