The performance of the insurance sector in the first half of the year has exceeded expectations, and the improvement of the risk stage of interest rate spreads and the better-than-expected performance of some institutions in the third quarter are positive catalysts for the valuation of the insurance sector.
Futu Securities has learned from the financial news that swhy has released a research report stating that the performance of the insurance sector in the first half of the year has exceeded expectations, and is bullish on the improvement of the risk stage of interest rate spreads and the better-than-expected performance of some institutions in the third quarter as positive catalysts for the valuation of the insurance sector. The decline in new liability costs is expected to alleviate the risk of interest rate spreads and drive the increase of NBV; at the same time, it is recommended to pay attention to the full-channel implementation of "the integration of banking and insurance" to boost NBV and the positive impact on the liability side, as well as the expected better-than-expected performance of some insurers in the third quarter under the significant pressure on profits in Q3 last year. New China Life Insurance (601336.SH), China Life Insurance (601628.SH), PICC P&C (02328), Ping An Insurance (601318.SH), and Sun Life Insurance (06963) are recommended.
The investment performance is impressive, driving a much better-than-expected profit for the first half of 2024.
A high increase in fair value change gains and losses, the combined net profit attributable to the parent company of the listed A-share insurance companies has increased by 12.5% year-on-year to 171.799 billion yuan, far exceeding expectations (expected year-on-year increase of 1.0%). The NBV growth rate exceeds expectations, and deviations in investment and operation experience both make positive contributions. The EV growth rate in the first half of 2024 is impressive; actively responding to the call of the new "Nine Articles," the dividend payout ratio of listed insurance companies is in the range of 12.3%-25.0% for the mid-term period.
Life Insurance: New business is under pressure, and the significant improvement in NBV drives the better-than-expected growth in NBV
Exceeding NBV expectations: The combined NBV of the listed A-share insurance companies has increased by 24.1% year-on-year to 74.481 billion yuan (New China did not restate 1H23); New business is under pressure: The combination of banking and insurance, coupled with the impact of a high base, has led to a year-on-year decrease in the new business of the listed A-share insurance companies by 13.7% to 385.4 billion yuan; High growth in NBVM: Under the impact of the combination of banking and insurance, planned interest rate adjustments, and improved channel structure, the average NBVM of the listed A-share insurance companies has increased by 9.1 percentage points to 16.0% year-on-year.
P&C Insurance: The Combined Ratio exceeds expectations, driving outstanding underwriting profit performance
COR surpasses expectations: Top companies actively optimize costs and product structure, effectively implementing cost control and risk control strategies. Under the challenge of major disasters, PICC P&C, China Pacific Insurance, and Ping An Insurance achieved comprehensive expense ratios of 96.2%, 97.1%, and 97.8% respectively, with year-on-year changes of +0.4pct, -0.8pct, and -0.2pct, all exceeding expectations. Underwriting profit: The underwriting profit of the top three companies increased by 6.1% year-on-year to 15.243 billion yuan; among them, PICC P&C decreased by 5% year-on-year, China Pacific Insurance increased by 47.6% year-on-year, and Ping An Insurance increased by 15.7% year-on-year.
Investment performance surpasses expectations, mainly due to the increase in bond market value under the influence of declining long-term interest rates and the contribution of rising stock prices of high dividend yield stocks. The average annualized net/total investment return rate of A-share listed insurance companies in 1H24 was 3.4%/4.3%, with year-on-year changes of -0.4pct and +0.4pct respectively; all companies increased the proportion of stocks classified as FVOCI to further smooth profit fluctuations.
Risk warning: Increased market volatility, declining long-term interest rates, frequent major disasters, and stricter regulatory policies.