Guotai Haitong Securities Co., Ltd. has released a research report indicating that the insurance industry saw steady premium growth from January to April. Insurers have accelerated capital replenishment within the year, and trading dynamics are expected to remain a factor causing fluctuations in the insurance sector's decline, with assets and liabilities remaining stable. The firm anticipates that the new business value for life insurance and underwriting profits for property insurance will remain robust. An improvement in capital conditions in the second quarter is expected to drive enhancements on the asset side. It is recommended to watch for valuation recovery opportunities in the insurance sector, although short-term trading dynamics will continue to be a significant factor influencing stock prices. The firm maintains an "Overweight" rating for the industry.
Key Points from Guotai Haitong
Trading dynamics are projected to remain a factor causing fluctuations in the insurance sector's decline. From May 22nd to June 5th, the Shenwan Insurance Index (801194.SI) fell from 1180.12 to 1162.00, a decline of 1.54%. During the same period, the CSI 300 Index fell by 0.58%, the Shanghai Composite Index fell by 2.07%, and the Hang Seng Index fell by 2.52%. The firm expects the fundamentals of insurance companies to show some divergence in the second quarter, with the core factor being equity investments on the asset side. The liability side is anticipated to enter a phase of stable fluctuation. Stock price performance will require further observation of the impact of trading dynamics, which is expected to be a major influence.
From January to April, life insurance premiums continued their positive trend while property insurance growth faced pressure. Within the year, eight insurers have already issued capital replenishment bonds. Firstly, from January to April, the cumulative premium income for the insurance industry was 2,732.9 billion yuan, a year-on-year increase of 5.3%. The cumulative original premium income for the life insurance industry in the first four months was 2,070.0 billion yuan, up 6.3% year-on-year. Life insurance, health insurance, and accident insurance premiums were 1,728.9 billion yuan, 327.5 billion yuan, and 13.5 billion yuan, representing year-on-year changes of +7.6%, +0.6%, and -11.3%, respectively. The cumulative original premium income for the property insurance industry was 662.9 billion yuan, up 2.2% year-on-year. Auto insurance and non-auto insurance original premiums were 295.8 billion yuan and 367.1 billion yuan, with year-on-year changes of -0.3% and +4.3%, respectively.
Secondly, as of May 25th, eight insurers have issued capital replenishment bonds within the year, with a total scale exceeding 18 billion yuan. Institutions involved include CITIC-Prudential Life Insurance, Sino-British Life Insurance, Great Wall Life Insurance, Sunshine Life Insurance, and China Post Life Insurance. Additionally, in May, three institutions—Taikang Pension, Sino-Dutch Life Insurance, and Tongfang Global Life Insurance—received approval to issue capital bonds.
Thirdly, news on May 26th reported that due to rainstorm and flood disasters in seven provinces (autonomous regions, and municipalities) including Hubei, Hunan, Guizhou, Guangdong, Guangxi, Jiangxi, and Chongqing, the insurance industry had received a cumulative 42,000 claims, with an estimated loss amount of 910 million yuan. Payments and advance payments have reached 260 million yuan.
Ping An Life Insurance has continued to increase its stake in China Life Insurance H-shares, and the appointment of the president of China Property & Casualty Insurance has received regulatory approval. Firstly, Ping An Asset Management, entrusted with Ping An Life Insurance's funds, invested in China Life Insurance H-shares, reaching 15% of China Life's H-share capital, triggering a disclosure requirement. Great Wall Life Insurance increased its stake in Green Power Environmental Protection, with the latest shareholding ratio reaching 28.99%.
Secondly, the National Financial Regulatory Administration has approved Mr. Zhang Daoming's qualification to serve as the company's president. Thirdly, Taikang Pension plans to publicly issue perpetual capital bonds not exceeding 2 billion yuan. Dinghe Property & Casualty Insurance increased its registered capital from approximately 4.64 billion yuan to 6 billion yuan. CITIC-Prudential issued 4 billion yuan in perpetual capital bonds (second tranche). Fourthly, New China Life Insurance announced that it will distribute a final dividend of 2.06 yuan per share on August 7th.
Risk warnings include a decline in long-term interest rates, volatility in the equity market, and slower-than-expected improvement in liability costs.