Guotai Junan released a research report saying that on the investment side, it is expected that there is currently limited room for further decline in long-term interest rates, and the equity market is showing a steady recovery trend, driving marginal improvements on the asset side and maintaining the “increase in holdings” in the insurance industry.
The Zhitong Finance App learned that Guotai Junan released a research report stating that demand for insurance savings from customers in the life insurance industry is still strong. Regulatory measures such as “integration of reporting and banking” are expected to reduce debt costs and increase value rates. New orders and value ratio improvements will jointly drive NBV growth; leading insurers in the financial insurance industry actively optimize their business structures to improve underwriting quality, and underwriting profits are expected to remain steady. On the investment side, it is expected that there is currently limited room for further decline in long-term interest rates. The equity market is showing a steady recovery trend, driving marginal improvements on the asset side and maintaining the “increase” of the industry.
In terms of individual stocks, the risk of “interest loss” will be reduced due to improvements on the investment side and the expectation that regulations guide the industry to reduce debt-side costs. It is recommended to increase holdings of China Life Insurance (02628), Xinhua Insurance (01336), China Taibao (02601), Ping An of China (02318), and China Financial Insurance (02328).
Guotai Junan's main views are as follows:
Under a high base, investment performance is under slight pressure, and 24Q1 profit is expected to increase negatively:
Guotai Junan pointed out that the 24Q1 equity market picked up in February-March after experiencing a correction in January, but the increase was still below the 23Q1 level. It is expected that insurance companies' equity investments included in FVTPL will still be under some pressure. Some companies are expected to have better investment performance than expected due to the theme market that grasps high-dividend assets; on the other hand, the yield on ten-year treasury bonds fell 26.29 to 2.29% in the first quarter of '24. It is expected that bond assets included in FVTPL will receive good returns, partially hedging the impact of the decline in equity market earnings.
Under a high base, the investment side is expected to be under slight pressure. The net profit of 24Q1 listed insurers is expected to be slightly pressured, as follows: China Taibao (-5.8%) > China Financial Insurance (-10.0%) > China Ping An (-10.1%) > Xinhua Insurance (-13.2%) > China Insurance (-14.6%) > China Life Insurance (-16.6%).
Personal insurance and banking insurance two-wheel drive. 24Q1NBV is expected to grow rapidly:
In the first quarter of 2024, supply and demand resonance between individual insurance and banking insurance channels is expected to drive listed insurers NBV to achieve relatively rapid growth. 1) In terms of individual insurance, the individual insurance team is expected to decline slightly, while strong customer demand for savings combined with the continuous increase in per capita production capacity is expected to drive a relatively rapid increase in new orders. At the same time, some insurers are increasing sales of long-term payment products, which is expected to drive an improvement in individual insurance value rates; 2) In terms of banking insurance, new banking insurance channel orders are expected to be pressured in the short term under “integration of reporting and banking,” and a significant improvement in fee rates is conducive to a significant increase in value rates. Listed insurers NBV are predicted to achieve relatively rapid growth in the first quarter of '24, as follows: China Taibao (31.1%) > Xinhua Insurance (29.1%) > China Life Insurance (21.2%) > China Ping An (17.3%).
Financial insurance premium growth is under pressure, and COR is expected to rise slightly:
1) The increase in financial insurance premiums is expected to come under pressure in the first quarter of 2024, mainly due to the strict implementation of “integration of reporting and banking” by leading insurers and the decline in automobile sales. 2) Payout rates are expected to rise due to disasters such as the resumption of automobile travel and freezing rain. The 24Q1 Financial Insurance COR is expected to rise slightly year-on-year, as follows: People's Insurance (96.3%, 0.6pt), Taibao Financial Insurance (98.6%, 0.2pt), and Ping An Financial Insurance (99.0%, 0.3pt).
Risk warning: regulatory policy uncertainty; declining long-term interest rates; equity market fluctuations.