According to the Futu Securities APP, Huaxi Securities released a research report stating that looking ahead to the third quarter of 2024, the net income and new business value growth of listed insurance companies under the resonance of assets and liabilities are expected to exceed expectations. On the liability side, the scheduled interest rate decline combined with high-quality transformation of products and channels, the NBV growth rate of each insurance company in the first three quarters of 2024 is expected to continue to rise compared to the mid-year report. On the asset side, a package of stable economic policies is expected to be introduced one after another, investors' confidence in the equity market is expected to continue to gradually recover, and investment income is expected to improve significantly compared to the low base in the same period last year, alleviating the constraints on the profits and stock price valuations of the life insurance sector.

Huaxi Securities maintains a "recommended" rating for the industry, favoring pure life insurance symbols with greater equity flexibility on the asset side, such as New China Life Insurance (601336.SH) and China Life Insurance (601628.SH); recommending the continuous optimization of business for the People's Insurance (601319.SH); bullish on the stable liability side of China Pacific Insurance (601601.SH) and Ping An Insurance (601318.SH).

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

Listed insurance companies are driving the growth of new business value in H1 2024 through price supplementation. In H1 2024, the NBV of listed insurance companies all continued to grow at double-digit rates, with year-on-year growth rates as follows: the People's Insurance (+91.0%) > New China Life Insurance (+57.7%) > China Pacific Insurance (+22.8%) > China Life Insurance (+18.6%) > Ping An Insurance (+11.0%). In terms of quantity and price separation, although new single premiums have declined, among them, year-on-year new single premiums for China Life Insurance were -6.4%, and first-year premiums used to calculate new business value for Ping An Insurance were -19.0% year-on-year, China Pacific Insurance's first-year annualized premiums were -11.9% year-on-year, the People's Insurance long-term first-year premiums were -20.4% year-on-year, and New China Life Insurance long-term first-year premiums were -45.1% year-on-year. However, the new business value rates of each insurance company have seen a substantial improvement, with New China Life Insurance increasing by +13.7 percentage points year-on-year, the People's Insurance by +6.9 percentage points year-on-year, Ping An Insurance by +6.5 percentage points year-on-year, China Pacific Insurance by +5.3 percentage points year-on-year, and China Life Insurance by +4.2 percentage points year-on-year. This is mainly due to the downward adjustment of scheduled interest rates, the integration of channels and reports, and the comprehensive opening up of constraints that have suppressed the profits and stock price valuations in the life insurance sector.

Huaxi Securities expects that the new business value of various insurance companies in Q3 2024 is likely to continue to accelerate. In terms of new single premiums, the demand for new policies in August has been stimulated by the suspension of sales. According to data disclosed by the China Banking and Insurance Regulatory Commission, the total premium income of the industry from January to August 2024 was 3.21 trillion yuan, a year-on-year increase of +16.1%, with the growth rate rising by 3.0 percentage points from January to July, mainly as a result of the recent down eases the short-term concentrated sales of new policies, as well as the impact of the low premium base in the same period last year. In terms of value rates, as product structures continue to be optimized and channels undergo ongoing high-quality transformation, the business quality of each insurance company will continue to improve. Therefore, Huaxi Securities forecasts that the NBV of each insurance company in the first three quarters is expected to be the People's Insurance +80.0% > New China Life Insurance +59.1% > China Pacific Insurance +37.7% > China Life Insurance +29.6% > Ping An Insurance +25.7%, with growth rates continuing to rise compared to the mid-year report. The year 2024 is still expected to maintain high prosperity, and Huaxi Securities is bullish on the continuity of high NBV growth and its positive catalytic effect on valuations.

Property insurance: Premiums are growing steadily, benefiting from the reduction of risk and the possible easing of COR pressure.

Property insurance premiums overall stable growth. According to data disclosed by the China Banking and Insurance Regulatory Commission, the industry's overall premium income from January to August 2024 was 1.17 trillion yuan, up 5.5% year-on-year, with an improvement in the growth rate from June to July. Among them, the year-on-year growth rates of the property insurance business of the three major insurance companies were China Pacific Insurance (+7.7%)> Ping An Insurance (+5.3%)> The People's Insurance (+4.3%). In terms of the structure of different insurance types (2024 H1 data), Ping An Insurance had the largest proportion of car insurance premiums at 65.4%, non-car insurance at 34.6%; The People's Insurance had the largest proportion of non-car insurance at 55.3%, with car insurance at 44.7%; China Pacific Insurance had a higher proportion of non-car insurance than car insurance at 53.8%.

Benefitting from the risk reduction services of various insurance companies, COR pressure may be expected to ease. In the third quarter of 2024, affected by catastrophic events such as heavy rainfall, floods, typhoons, and geological disasters, the loss ratio of various insurance companies may be under pressure. At the same time, various insurance companies have actively carried out risk reduction services and achieved results. Looking at the performance of the three major insurance companies in the first half of 2024, despite a significant year-on-year increase in natural disaster losses (according to data disclosed by the Ministry of Emergency Management, direct economic losses from natural disasters in the first half of 2024 increased by 71.64 billion yuan to 93.16 billion yuan), the COR performances of various insurers were good, with The People's Insurance/China Pacific Insurance/Ping An Insurance COR at 96.2%/97.1%/97.8%, respectively, with a year-on-year change of +0.4pt/-0.8pt/-0.2pt. Therefore, Huaxi believes that the upward pressure on the COR of various insurance companies in the first three quarters of 2024 will be relieved by the effectiveness of risk reduction services, with the estimated COR of the three major companies being The People's Insurance 96.2% <; China Pacific Insurance 97.0% <; Ping An Insurance 97.6%.

Investment side: The equity market is warming up and is expected to significantly improve profitability.

In the third quarter of 2024, as the equity market recovered, investment income is expected to drive a significant improvement in the net income of various insurance companies. The CSI 300 Index rose by 16.1% in the third quarter of 2024 (cumulatively up 17.1% in the first three quarters of 2024), while it fell by 4.0% in the third quarter of 2023 (cumulatively down 4.7% in the first three quarters of 2023). With the stock market rebounding, the investment income of various insurance companies is expected to increase significantly year-on-year. At the same time, due to the lower performance base of insurance companies in the same period of 2023, the net income of various insurance companies is expected to have a substantial increase driven by the low base + recovery of assets.

Pure life insurance companies have outstanding equity flexibility and are expected to benefit first from the current stock market recovery. With the current stock market recovery and gradual restoration of investor confidence, life insurance companies are expected to benefit first. Huaxi Securities calculated the ratio of trading financial assets/owner's equity in the investment assets at the end of the first half of 2024 for listed insurance companies, with New China Life Insurance (528%) > China Life Insurance (369%) > China Pacific Insurance (221%) > Ping An Insurance (102%) > The People's Insurance (96%); Huaxi Securities calculated the ratio of stock investments/owner's equity in the investment assets at the end of the first half of 2024 for listed insurance companies, with New China Life Insurance (160%) > China Life Insurance (88%) > China Pacific Insurance (75%) > Ping An Insurance (26%) > The People's Insurance (13%).