[ET Net News Agency, 9 April 2020] Morgan Stanley lowered its target price for New
China Life Insurance (NCI)(01336) to HK$22 from HK$35 and downgraded its rating to
"underweight" from "equal-weight".
The research house said NCI has been one of the worst performers year-to-date, down 27%.
VNB (value of new business) growth was disappointing for 2019, down 20% due to material
margin contraction and a flattish sales growth.
The company was waiting for new appointments for both its Chairman and its CEO for most
of 2019. Without clear direction, the business pace slowed and quality deteriorated.
However, the strategy set by new leadership was quite different from its original
trajectory, and now the company plans to have a more balanced approach, leaning toward
growing volume business to lift market rank, a path quite opposite from peers.
Under this plan, NCI will need to grow new sales significantly to outperform peers given
its margin dilution. Year-to-date, it has delivered the highest volume growth amongst
peers, yet Morgan still expects its underlying value growth to be negative due to margin
erosion. (KL)