Deutsche Bank Markets Research Asia China Banking / Finance Insurance Industry China Insurance Sector Date 4 January 2018 Recommendation Change 2018 outlook - rising competition, protection focus is key Trimmed VNB growth forecasts, downgrading China Life to Hold _ Deutsche Bank AG/Hong Kong Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 083/04/2017. The content may not be distributed in the Peoples Republic of China (The PRC) (except in compliance with the applicable laws and regulations of PRC), excluding special administrative regions of Hong Kong and Macau. Esther Chwei Research Analyst (+852 ) 2203 6200 esther.chwei Lexie Zhou Research Analyst (+852 ) 2203 6180 lexie.zhou Key Changes Company Target Price Rating 2628.HK 33.20 to 28.50(HKD) Buy to Hold 2318.HK 106.10 to 104.10(HKD) - 2601.HK 48.90 to 51.00(HKD) - 1336.HK 71.20 to 74.60(HKD) - 0966.HK 38.70 to 41.60(HKD) - 2328.HK 18.00 to 16.60(HKD) - 601628.SS 29.40 to 25.90(CNY) - 601318.SS 96.60 to 94.70(CNY) - 601601.SS 43.30 to 46.40(CNY) - 601336.SS 62.90 to 67.90(CNY) - Source: Deutsche Bank Top picks Ping An (2318.HK),HKD83.80 Buy NCI (1336.HK),HKD55.10 Buy Source: Deutsche Bank Companies Featured China Life (2628.HK),HKD25.20 Hold Ping An (2318.HK),HKD83.80 Buy CPIC (2601.HK),HKD38.80 Buy NCI (1336.HK),HKD55.10 Buy CTIH (0966.HK),HKD31.00 Buy PICC Group (1339.HK),HKD4.04 Hold PICC P PICC P PICC P target price of HK$104.1/share) Ping An A (Buy; target price of Rmb94.7/share) Figure 28: Ping An EV, VNB and net profit forecasts Figure 29: Ping An valuation summary Rmb mn 2015 2016 2017E 2018E 2019E Group EV 551,514 637,703 811,755 973,934 1,177,993 - YoY growth 20.2% 15.6% 27.3% 20.0% 21.0% Life EV 325,474 360,312 496,985 609,856 747,619 - YoY growth 23.2% 10.7% 37.9% 22.7% 22.6% VNB 38,420 50,805 68,676 82,456 99,348 - Underlying YoY growth 35.6% 49.1% 35.2% 20.1% 20.5% Net profits 54,203 62,394 76,048 93,320 111,254 - YoY growth 38.0% 15.1% 21.9% 22.7% 19.2% Rmb bn HK$ Rmb 2018E Total Per share Per share Note Life 1,307 78.5 71.5 2.6x P/EV (Life); 12.0x NBM P target price of HK$74.6/share) NCI A (Hold; target price of Rmb67.9/share) Figure 32: NCI EV, VNB and net profit forecasts Figure 33: NCI valuation summary Rmb mn 2015 2016 2017E 2018E 2019E EV 110,650 129,450 151,465 178,935 212,217 - YoY growth 29.8% 17.0% 17.0% 18.1% 18.6% VNB 7,663 10,449 13,154 16,413 19,677 - Underlying YoY growth 34.8% 36.4% 25.9% 24.8% 19.9% Net profits 8,601 4,942 6,231 8,514 10,718 - YoY growth 34.3% -42.5% 26.1% 36.6% 25.9% Rmb bn HK$ Rmb 2018E Total Per share Per share Adj. EV - (i) 149.1 52.5 47.8 Adj. VNB 10.5 3.7 3.4 NB multiple (x) 6.0 6.0 6.0 Value of future NB - (ii) 62.7 22.1 20.1 Appraisal Value: (i) + (ii)Appraisal Value: (i) + (ii) 211.9211.9 74.674.6 67.967.9 - - Implied P/EV (x)Implied P/EV (x) 1.41.4 1.41.4 Source: Company data, Deutsche Bank estimates Source: Deutsche Bank estimates Figure 34: NCI H: historical P/EV Figure 35: NCI A: historical P/EV 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 P/EVAverage at 0.9x+1SD-1SD 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 P/EVAverage at 1.2x+1SD-1SD Source: Bloomberg Finance LP, Deutsche Bank Source: Bloomberg Finance LP, Deutsche Bank China Insurance Sector Insurance 4 January 2018 Deutsche Bank AG/Hong Kong Page 17 Ch Taiping Ch Taiping (Buy; target price of HK$41.6/share) Figure 36: Ch Taiping EV, VNB and net profit forecasts Figure 37: Ch Taiping valuation summary Rmb mn 2015 2016 2017E 2018E 2019E Group EV 97,980 102,474 121,558 145,383 175,182 - YoY growth 56.9% 4.6% 18.6% 19.6% 20.5% Life EV 87,422 92,049 115,952 145,950 183,269 - YoY growth 33.4% 5.3% 26.0% 25.9% 25.6% VNB 7,075 9,115 13,227 16,445 19,909 - Underlying YoY growth 47.7% 60.1% 45.1% 24.3% 21.1% Net profits 6,341 4,774 4,587 6,622 9,001 - YoY growth 56.9% -24.7% -3.9% 44.4% 35.9% 2018E Total Per share Note Life 128,818 35.8 1.1x P/EV, 1.2x Life P/EV Reinsurance 8,119 2.26 1.0x P/B P target price of HK$51.0/share) CPIC A (Buy; target price of Rmb46.4/share) Figure 40: CPIC EV, VNB and net profit forecasts Figure 41: CPIC valuation summary Rmb mn 2015 2016 2017E 2018E 2019E Group EV 205,624 245,939 29