Goldman Sachs: China Life (02628) management is optimistic about next year's sales momentum and hopes to provide more stable shareholder returns

The Zhitong Finance App learned that Goldman Sachs released a research report saying that China Life Insurance (02628, 601628.SH) management reiterated its intention to provide more stable shareholder returns over time and is optimistic about sales momentum in 2027; the bank maintains “neutral” ratings for H shares and A shares, with target prices of HK$28.5 and RMB 42, respectively.

Goldman Sachs pointed out that China Life Insurance's investor relations team and actuarial, finance and investment department management held a group meeting. Investor issues focused on sales and profit margin prospects, investment strategy updates (especially stock asset allocation), and dividends for the 2026 fiscal year with large fluctuations in net profit. Management believes that agents and banking insurance channels are still showing positive momentum in 2027, and pointed out that fluctuations in the stock market have not affected dividend product policyholders' dividends and sales.

On the sales side, management attributed the weak banking guarantee in the third quarter of 2026 mainly to the implementation of refined cost control measures, which significantly reduced the real income of sales staff and was exacerbated by the high base in July and August last year. Looking ahead, management believes that insurance products are still attractive and continues to be optimistic about sales momentum in 2027.

The agency channel also saw positive momentum. The number of agents resumed growth in the third quarter of 2026, and agent quality and retention improved. The company expects dividend products to remain the main driving force for growth in 2027, and the new business value margin is expected to remain stable compared to the 2026 fiscal year.

In terms of investment, dividend funds have high allocation flexibility between profit and loss (FVTPL) and other comprehensive income (FVOCI) assets measured at fair value, while traditional portfolios allocate more FVOCI stock assets. As stock market fluctuations intensify, the company emphasized that it will balance the long-term investment period of life insurance companies with the short-term profit impact. China Life believes that technology stocks have attractive long-term returns, will actively optimize FVTPL exposure and attract positions at valuation levels.

In terms of fixed income, the yield on new capital is currently about 2.2%, which is higher than the cost of new business debt of about 1.7%; management expects the yield on 10-year treasury bonds to fluctuate in the short term, and to continue to increase holdings of ultra-long-term bonds of 15 years or more to better match the length of debt.

Overseas investment accounts for about 1% of total assets (excluding Hong Kong Stock Connect holdings). The company is actively paying attention to Bond Connect and ETF Connect opportunities, but due to current limited suitable assets, progress is expected to be gradual.

In terms of dividends, China Life knows investors are concerned about dividends for the 2026 fiscal year due to large fluctuations in net profit. Regarding the newly disclosed adjusted profit after excluding short-term stock fluctuations, management believes that the increase in dividends per share over time may be closer to the adjusted profit growth, but the process is expected to be gradual.