Huaxi Securities: The performance of listed insurance companies in the third quarter is expected to improve significantly

Zhitong Financial APP learned that Huaxi Securities released a research report saying that looking forward to the third quarter of 2024, the net profit and new business value growth of listed insurance companies under the resonance of capital is expected to exceed expectations. On the liability side, the planned interest rate decline and the high-quality transformation of products and channels are expected to continue to increase the NBV growth rate of insurance companies in the first three quarters of 2024 compared with the interim report. On the asset side, a package of policies to stabilize the economy is expected to be introduced one after another, investors' confidence in the equity market is expected to continue to be gradually restored, investment income is expected to improve significantly from a low base in the same period last year, and the constraints on suppressing the profits and stock price valuation of the life insurance sector are expected to be fully opened.

Huaxi Securities maintained the "recommended" rating of the industry, and first recommended New China Insurance (601336.SH) and Chinese Life (601628.SH), which are pure life insurance targets with greater equity flexibility on the asset side; Recommend Chinese insurance (601319.SH) for continuous business optimization; Optimistic about China Pacific Insurance (601601.SH) and Ping An (601318.SH) with stable liabilities.

Life insurance: The growth of new business value in 2024Q3 is expected to accelerate

Listed insurers drove the value of new business in 2024H1 to exceed expectations. In 2024H1, the NBV of all listed insurers continued to grow by double digits, with year-on-year growth rates Chinese Insurance (+91.0%)> New China Insurance (+57.7%)> China Pacific Insurance (+22.8%)> Chinese Life (+18.6%)> Ping An (+11.0%). In terms of volume and price splitting, although the new policy premiums declined, the new policy premiums of Chinese Life were -6.4% year-on-year, the first-year premiums used by Ping An to calculate the value of new business were -19.0% year-on-year, the annualized first-year premiums of China Pacific Insurance were -11.9% year-on-year, the first-year premiums of Chinese Long-term Insurance were -20.4% year-on-year, and the first-year premiums of Xinhua Insurance Long-term Insurance were -45.1% year-on-year. However, the new business value ratio of all insurers ushered in a significant improvement, among which Xinhua Insurance +13.7pt year-on-year, Chinese Insurance +6.9pt year-on-year, Ping An +6.5pt year-on-year, China Pacific Insurance +5.3pt year-on-year, and Chinese Life +4.2pt year-on-year. This is mainly due to the combined impact of factors such as the reduction of scheduled interest rates, the integration of channels and banks, and the optimization of product structure.

Huaxi Securities expects that the value of new business of insurance companies is expected to continue to accelerate in 2024Q3. According to the data disclosed by the State Administration of Financial Supervision and Administration, the overall premium income of the industry from January to August 2024 was 3.21 trillion yuan, a year-on-year increase of +16.1%, an increase of 3.0 percentage points from January to July, mainly due to the short-term centralized sales of new orders promoted by this round of scheduled interest rate cuts, as well as the low base of premiums in the same period last year. In terms of value ratio, as the product structure continues to be optimized and the high-quality transformation of channels continues to deepen, the service quality of insurance companies will continue to improve. Therefore, Huaxi Securities expects that the NBV of insurance companies in the first three quarters will be Chinese insurance +80.0%, > Xinhua insurance +59.1%, > China Pacific Insurance +37.7%, > Chinese life +29.6%, > Ping An of China +25.7%, and the growth rate will continue to increase compared with the interim report. The whole year of 2024 is still expected to maintain a high prosperity, and Huaxi Securities is optimistic about the continuation of the high growth of NBV and its positive catalytic effect on valuation.

Property and casualty insurance: premiums have grown steadily, benefiting from risk reduction COR pressure or easing

Property and casualty insurance premiums have grown steadily overall. According to the data disclosed by the State Administration of Financial Supervision and Administration, the overall premium income of the industry from January to August 2024 was 1.17 trillion yuan, a year-on-year increase of +5.5%, and the growth rate continued to improve from June/July. Among them, the year-on-year premium growth rate of the property insurance business of the three companies was CPIC (+7.7%)> Ping An of China (+5.3%)> Chinese Insurance (+4.3%). In terms of the structure of different types of insurance (2024H1 data), Ping An's auto insurance premiums accounted for the largest proportion, at 65.4%, and non-auto insurance premiums accounted for 34.6%; Chinese insurance non-car accounted for the largest proportion, at 55.3%, and car insurance accounted for 44.7%; CPIC's non-car ratio exceeded that of motor insurance, at 53.8%.

Benefiting from the risk reduction services of various insurance companies, COR pressure may be expected to ease. In 2024Q3, due to the impact of catastrophes such as heavy rains and floods, typhoons and geological disasters, the loss ratios of various insurance companies may be under pressure. At the same time, insurance companies have actively carried out risk reduction services and achieved results. Judging from the performance of the old three companies in 2024H1, in the context of a sharp year-on-year increase in natural disaster losses (according to the website of the Ministry of Emergency Management, the direct economic losses caused by natural disasters in 2024H1 increased by 71.64 billion yuan year-on-year to 93.16 billion yuan), the COR of various insurance companies performed well, among which the COR of Chinese Insurance/CPIC/Ping An of China was 96.2%/97.1%/97.8%, respectively, +0.4pt/-0.8pt/-0.2pt year-on-year. Therefore, Huaxi Securities believes that in the first three quarters of 2024, the upward pressure on the COR of various insurance companies will be alleviated under the release of risk reduction efficiency, and it is expected that the COR of the old three companies will be 96.2% < Chinese respectively; CPIC 97.0% <; Ping An of China 97.6%.

Investment side: The recovery of the equity market is expected to drive a significant improvement in profits

In 2024Q3, the equity market will recover, and investment income will drive the net profit of insurance companies to improve significantly. The CSI 300 Index rose 16.1% in 2024Q3 (up 17.1% in the first three quarters of 2024), while it fell 4.0% in 2023Q3 (down 4.7% in the first three quarters of 2023). At the same time, due to the low performance base of insurance companies in the same period of 2023, the net profit of insurance companies is expected to usher in a substantial growth driven by a low base + recovery of assets.

Pure life insurance companies have outstanding equity elasticity and are expected to benefit from the current round of stock market recovery. With the recovery of the stock market and the gradual recovery of investor confidence, the performance of life insurance companies is expected to benefit first. Huaxi Securities calculated the ratio of trading financial assets/owners' equity in the investment assets of each listed insurance company at the end of 2024H1, which were Xinhua Insurance (528%)> Chinese Life Insurance (369%)> China Pacific Insurance (221%)> Ping An of China (102%)> Chinese Insurance (96%); Huaxi Securities calculated the ratio of equity investment/owner's equity in the investment assets of each listed insurance company at the end of 2024H1, which were New China Insurance (160%)> Chinese Life Insurance (88%)> China Pacific Insurance (75%)> Ping An of China (26%)> Chinese Insurance (13%).