德银-中国-保险业-11月份保费：储蓄需求减弱之下寿险表现温和，财产与灾害险保持稳定-20171220-25页_1mb

China Insurance Sector Summary - November 2017

Core Content

This document provides an analysis of the performance of the Chinese insurance sector in November 2017, focusing on both life and property & casualty (P&C) insurance segments. It highlights the trends in premium growth, key drivers, and the valuation of major players in the market.

Main Points

Life Insurance

• Overall Performance: Life premiums showed a slight recovery in November 2017 compared to October but remained relatively weak compared to the previous months.
• Top Performers:
  • Ping An: Recorded a strong growth of 25.5% yoy in November, up from 27.0% in October. YTD growth for 11M17 was 34.2%, up from 34.9% in 10M17.
  • China Life: Showed 14.4% yoy growth in November, with YTD growth of 18.8% for 11M17, up from 19.0% in 10M17.
• Key Factors Affecting Growth:
  • Weaker demand for savings policies due to Reg 134.
  • Increased competition from WMP yields.
  • Ping An started adopting Reg 134 in June, maintaining decent growth.
  • China Life delayed 2018 jumpstart sales preparation, leading to steady growth.
• Performance by Sub-Category:
  • Ping An Life: 26.6% yoy growth in November, with YTD growth of 34.9%.
  • Ping An Health: 209.6% yoy growth in November, with YTD growth of 176.1%.
  • Ping An Annuity: 27.0% yoy growth in November, with YTD growth of 16.1%.
  • Taiping Life: 4.4% yoy growth in November, driven by individual and other channels, offsetting weakness in bancassurance.
  • NCI: Recorded a negative growth of -3.4% yoy for 11M17, with a slight improvement in November to +4.7%.
  • PICC Life: Negative growth of -18.7% yoy in November, down from -28.5% in October.

Property & Casualty (P&C) Insurance

• Overall Performance: P&C premiums remained stable in November, with growth ranging from 11.2% to 27.2% yoy.
• Top Performers:
  • Taiping: Led with 27.2% yoy growth in November, up from 25.4% in October. YTD growth for 11M17 was 22.4%.
  • China Continent: Recorded 25.8% yoy growth in November, with YTD growth of 19.5%.
  • Ping An: Showed 17.6% yoy growth in November, with YTD growth of 24.6%.
  • PICC: Grew by 16.5% yoy in November, with YTD growth of 14.9%.
  • CPIC: Grew by 11.2% yoy in November, with YTD growth of 11.7%.
• Performance by Sub-Category:
  • Taiping P&C: 27.2% yoy growth in November, with YTD growth of 22.4%.
  • China Continent P&C: 25.8% yoy growth in November, with YTD growth of 19.5%.
  • Ping An P&C: 17.6% yoy growth in November, with YTD growth of 24.6%.
  • PICC P&C: 16.5% yoy growth in November, with YTD growth of 14.9%.
  • CPIC P&C: 11.2% yoy growth in November, with YTD growth of 11.7%.

Key Information

Valuation and Investment View

• Sector Valuation: The sector's current valuation is 1.2x 2017E P/EV, which is considered attractive given the long-term growth potential.
• Preferred Insurers:
  • Ping An and NCI are highlighted as top picks due to their strong protection focus and risk management capabilities.
  • China Life and CPIC are also recommended as buys.
• Valuation Methodology:
  • China Life and NCI are valued using the appraisal value method.
  • Other insurers are evaluated using the SOTP (Sum of the Parts) method.
• Investment Risks:
  • Significant investment market weakness.
  • Asset quality risks.
  • Sharp decline in bond yields.
  • China's macroeconomic risks.
• Upside Risks:
  • Strong investment market rallies.
  • Favorable regulatory changes.

Market Performance and Trends

• November Premiums:
  • Life Insurance:
    • China Life: Rmb20,701m (+14.4% yoy)
    • Ping An: Rmb23,387m (+25.5% yoy)
    • CPIC: Rmb6,977m (+5.9% yoy)
    • NCI: Rmb5,750m (+4.7% yoy)
    • Taiping: Rmb5,441m (+4.5% yoy)
    • PICC Life and Health: Rmb2,438m and Rmb357m, respectively, with negative growth.
  • P&C Insurance:
    • PICC: Rmb28,933m (+16.5% yoy)
    • Ping An: Rmb19,395m (+17.6% yoy)
    • CPIC: Rmb8,854m (+11.2% yoy)
    • Taiping: Rmb1,959m (+27.2% yoy)
    • China Continent: Rmb3,299m (+25.8% yoy)

Top Picks

• Ping An (2318.HK): HKD81.35, Buy
• NCI (1336.HK): HKD54.10, Buy
• China Life (2628.HK): HKD24.85, Buy
• CPIC (2601.HK): HKD39.35, Buy
• CTIH (0966.HK): HKD29.55, Buy

Conclusion

The Chinese insurance sector showed mixed performance in November 2017, with life insurance slightly improving and P&C insurance remaining stable. Despite weaker demand for savings policies and the impact of regulatory changes, Ping An and China Life maintained strong growth. The report maintains a positive outlook on the sector, favoring life insurance due to its long-term growth potential and recommending Ping An and NCI as top picks for investment.