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Morningstar | CPIC is steadily shifting toward value creation in the life insurance business.

CPIC's trusted brand and extensive distribution network establish a strong foundation for steady long-term growth, thanks to continuing improvements in agent productivity and the company's stronger-than-peer capital position. However, challenges remain in the no-moat firm's near-term prospects. During the previous market downturn, CPIC steadily shifted toward focusing on the agent channel development and sales of longer-term and protection-type insurance. The firm saw industry-beating growth in first-year premiums. Thanks to favorable industry dynamics and the regulator's relaxation of the agent qualification requirement, CPIC agent headcount expanded to 870,000 in mid-2017 from 344,000 in 2014. Despite the fast agent expansion, the company improved agent productivity at a faster pace than peers, which resulted in industry-leading new business value growth for the company. We applaud the company's strategy of increasing cross-sales to existing customers via customer profile delineation and differentiated customer service, but we still need time to prove the effectiveness and successful implementation of such a strategy.Facing increasing competition in the auto insurance market and a sluggish economic environment, CPIC has been focusing on maintaining profitability at the cost of slower growth. The company has shown an improvement in claims cost control, but other expenses remain high as competition intensifies. The struggling nonauto insurance business continues to weigh on overall profitability. We expect the improvement in this business will take longer in light of the weakening economy and the longer duration of insurance products in general.Despite challenges, we believe CPIC is well placed to leverage large growth potential in China's underpenetrated insurance market, given its capital strength, prudent operations, and leading market position. However, regulatory impetus will dictate whether CPIC can fend off commoditized competition in the savings-type insurance market and move further into the provision of sophisticated products requiring the superior expertise of its agent force.