The original premium income of personal insurance companies in February was +17% year-on-year, up 9pct from January; health insurance was +9% year-on-year, and the monthly growth rate of industrial insurance policies turned negative, but we are still optimistic about the long-term development of leading insurers.
The Zhitong Finance App learned that Haitong Securities released a research report saying that in February, personal insurance companies' original premium income was +17% year over year, up 9 pct from January; health insurance was +9% year over year, and the monthly growth rate of production insurance turned negative, but it is still optimistic about the long-term development of leading insurers. The debt side is resilient, the asset side has large space, low valuation, high margin of safety, and maintains a “superior to the market” rating.
Haitong Securities's main views are as follows:
Personal insurance company premiums in February were +17% year-on-year, +9pct compared to January's growth rate
1) From January to February 2024, the original premium for personal insurance was 129.7 billion yuan, +10.4% year on year, and the scale premium was 1520.3 billion yuan, +8.3% year on year; under a comparable scale, the original premium income of personal insurance companies was +10.5%. The original premiums of personal insurance companies in January and February reached 903.1 billion yuan and 324.3 billion yuan respectively, +8.3% and +17.3%, respectively. In February, the growth rate increased by 9.0 pcts compared to January.
2) In January-February, insured investment added fees (mainly universal insurance) -2% year-on-year, and -39% year-on-year ratio for investment and linked insurance. In February, monthly insured investment added -12% year-on-year, and the growth rate changed from positive to negative (+2% in January); the year-on-year ratio for investment and insurance was -39%, the same as in January.
3) Haitong Securities anticipates a significant increase in the premium growth rate in February. The main reasons are: ① Companies stepped up their “good start” business in February, and the market demand for savings insurance products is still strong; ② The improvement in new premiums since 2023 has led to an increase in current renewal premiums in 2024. Haitong Securities predicts that starting at the end of March, the pressure on the high premium base for new policies will gradually become apparent. The premium growth rate for new policies is likely to slow down, but the renewal business will still drive overall premium growth.
Monthly health insurance premiums in February were +9% year-on-year, compared to January's growth rate of -1.4pct
1) Health insurance premiums were +10.1% year-on-year in January-February 2024. Monthly health insurance premiums in January and February were +10.7% and +9.2%, respectively. The growth rate in February decreased by 1.4 pct compared to January, and the growth rate for the same period in 2023 was +14.1%. Health insurance accounted for 17% at the end of February, an increase of 3 pcts over the end of January.
2) Haitong Securities believes that health insurance still has plenty of room for development in the medium to long term. By opening up industrial chains such as insurance, medical examinations, rehabilitation, pharmaceuticals, hospitals, etc., establishing a one-stop health ecosystem of “health management+medical services+insurance” can effectively increase customer stickiness and empower the growth of the insurance business.
In February, the premium growth rate of industrial insurance companies turned negative, and both car insurance and non-car insurance slowed
1) From January to February 2024, the insurance company's premiums reached 305.8 billion yuan, +4.0% year-on-year according to comparable standards. The monthly premiums of production insurance companies in January and February were 195.3 billion yuan and 110.5 billion yuan respectively, +6.8% and -0.5%, respectively. The growth rate changed from positive to negative in February compared to January. Among them, the growth rate of car insurance and non-car insurance declined.
2) The growth rate of car insurance premiums turned negative in February. Auto insurance premiums were -1.4% year-on-year in February, and the growth rate changed from positive to negative (+4.0% in January). Haitong Securities is expected to be mainly due to a short-term decline in automobile production and sales after the Spring Festival. According to the WeChat account data of the Automobile Manufacturers Association, overall automobile production and sales have declined somewhat compared to January since part of the demand for car purchases was released before the Spring Festival. Automobile production and sales in February were -37.5% and -35.1% month-on-month, respectively, and -25.9% and -19.9%, respectively.
The growth rate of non-car insurance premiums was significantly differentiated. Health insurance, agricultural insurance, liability insurance and accident insurance premiums in February were +9%, -10%, -11%, and -12%, respectively. The growth rates were -0.5pct, -21.6pct, -21.2pct, and -23.2pct respectively in January. Haitong Securities believes that the low growth rate of non-auto insurance may be mainly due to some policy business delays.
3) Haitong Securities believes that the overall premiums of leading insurance companies represented by People's Insurance Insurance have maintained relatively rapid growth and good business quality. In the auto insurance business, home-owned vehicles with low payout rates are relatively high, and channel rates are manageable. Therefore, the profit margin of leading industry insurers far exceeds that of small and medium-sized insurers, and their competitive advantage will become more prominent in the second half of the reform.
The debt side is resilient, the asset side has large space, a high margin of safety, and both offense and defense
1) Haitong Securities believes that demand for savings in the market is still strong, and the relative competitiveness of insurance products is still remarkable in the context of declining returns on other assets.
2) On March 29, the yield on ten-year treasury bonds fell to around 2.29%. Haitong Securities predicts that in the future, along with the recovery of the domestic economy, if long-term interest rates recover upward, the pressure on insurance companies' returns on new fixed income investments will ease somewhat. Also, if the equity market rebounds upward, it will also benefit insurers' current investment income and profit performance.
3) On April 1, 2024, the insurance sector was valued at 0.35-0.69 times 2024 EP/EV, at an all-time low, and the industry maintained a “superior to the market” rating.
Risk warning: Long-term interest rates are trending downward; the stock market continues to be sluggish; new premium growth falls short of expectations.