DBS Vickers cuts stock to Hold from Buy, target price to HK$34.20 (ADR$65.97) vs HK$42.67 due to lower embedded value, new business value growth assumptions; expects new business margin disappointment to continue. Says “China Life is sacrificing market share and showing lower premium growth. Unfortunately, the expected positive impact on the new business margin did not materialize.”

The stock fell below psychological HK$30 to intraday low of HK$29.80 (ADR$57.49) in morning session overnight Friday. UOB KayHian analyst Nan Sheng believes investors’ concerns over China Life’s lower solvency margin key reason for selling; says solvency margin always been strength of China Life, rare for market to be concerned about this ratio; while 217% is “indeed a low number” for China Life, it’s largely due to large dividend payment to policyholders as well as mark-to-market losses on AFS investment portfolio. Sheng says large dividend payment of CNY20 billion likely one-time in nature, heading into 2H10, tips China Life’s solvency will likely recover as expects some reversal of MTM losses sustained over 1H10.