China Life (ADR: LFC, Hong Kong stock code 2628) is up 3% at HK$23.65 (ADR $45.74) and is the best percentage gainer among blue chips, getting a fillip from the 12% on-year rise in January premium to CNY49.1 billion. The current share-price is very close to the stock’s 250-day moving average of HK$23.86, and a clean breakthrough would be taken as a long-term positive signal technically. Fundamentally, DBS Vickers says China life insurers generally fared better (vs P&C) in their premium growth in January, as they are usually aggressive in pushing for higher sales in January in order to secure a good start to the year; it thinks the double-digit growth rate was also due to the low base in January 2011. “Given seasonality and no change to life insurers’ products and distribution positioning, we do not think there is enough evidence to support a more bullish outlook at this stage.”

UBS says: “We believe the recent outperformance of China Life mainly reflects the market’s optimism on China’s economy and expectations of an overall equity rebound. We remain cautious on China Life’s solvency, which benefits the least from the corporate bond recovery in Q411, as corporate bonds only account for 16% of its investment asset mix (vs. >40% of major peers). We view the upcoming announcement on 2011 policyholder dividend as a potential negative catalyst for sales growth in 2012, and we have doubts about the recovery of the bancassurance channel. Gross written premium (GWP) in 2011 was 11% below our previous conservative forecast. GWP of China Life was flat YoY in 2011, the worst among major insurers (vs. +28% at Ping An Life and +6% at CPIC Life). In 2012, we expect the reform of the bancassurance channel will continue to be a challenge, especially as the fixed deposit rate is unlikely to come down significantly. To mainly reflect the slower-than-expected GWP growth, we cut our NPAT forecasts for 2011/12/13 by 11%/5%/3%. We believe there is still significant earnings downgrade risk by consensus: our 2011E NPAT is 19% below consensus. China Life will announce its 2011 annual results in late March. Our DCF-based price target of HK$24.51 (was HK$22.26) implies 1.76x 2012E P/EV and 12.8x NBV multiple. We retain our Neutral rating.”