20180319-广发证券_香港_-China_Insurance_Sector__Industry_focus_shifting_from_scale_to_quality_14页_589kb

China Insurance Sector Summary

Core Content

The Chinese insurance sector is undergoing a significant transformation, shifting its focus from quantity to quality in agent teams and product offerings. This evolution is driven by regulatory changes, technological advancements, and a growing demand for protection-oriented insurance products. The industry remains dominated by listed insurance companies, which have established strong channel networks and are actively adapting to new market conditions.

Main Points

• Channel Evolution: The insurance industry in China began with direct marketing (1982-1992), then adopted the agent system (1992-2000), and later explored bancassurance (2000-2013). The agent channel continues to be the primary driver of insurance sales, with a notable increase in both the number of agents and their productivity (NBV per agent).

• Agent Channel Growth: As of end-1H17, the four A-share listed insurance companies had 1.3255m, 1.937m, 0.87m, and 0.33m agents respectively. China Ping An and China Life led in agent numbers, while China Ping An and China Pacific showed the highest growth in NBV per agent.

• Agent Productivity: The NBV per agent has been rising steadily for all listed companies, with China Ping An leading in productivity. The company achieved a monthly per capita productivity of Rmb12,438 in 1H17, significantly higher than its peers.

• Agent Quality Focus: With the cancellation of insurance sales tests in 2015, the number of agents increased rapidly, but this trend is expected to slow as the proportion of agents in the urban population approaches that of mature markets. Insurers are now emphasizing the development of high-quality, efficient agent teams.

• Role of Insurance Brokers: Independent insurance brokers are expected to play an increasingly important role in the promotion of insurance products. They offer greater flexibility and client orientation compared to traditional agents, and are particularly suited for meeting the needs of high-net-worth individuals (HNWIs).

• Internet Channel Growth: Online insurance sales are growing rapidly due to lower costs, better data accumulation, and the emergence of a C2B model. Online sales accounted for 7.6% of total premiums in 2016, with life insurance making up over 80% of online premiums.

• Investment Outlook: Listed insurance companies will continue to dominate the industry due to their early establishment of sales channels. The report recommends China Ping An, China Pacific, New China Life Insurance, and China Life Insurance for investment. The focus will shift from agent numbers to agent quality and product optimization in the long term.

Key Figures and Trends

• Agent Growth: China Ping An's agent number grew at a CAGR of 21.3% (2012-2016), while China Life grew at 16.9% (2011-2016).
• NBV Growth: NBV per agent grew at CAGRs of 2.3%–8.1% (2011–2016), with China Ping An leading at 15.04%.
• Internet Users: As of end-2017, China had 772m internet users, with a penetration rate of 55.8%, higher than the global and Asian averages.
• Online Premiums: China's online insurance premiums increased from Rmb3.2bn in 2011 to Rmb234.7bn in 2016, showing a CAGR of 136%.
• HNW Individuals: The number of HNW individuals in China rose to 1.34m by end-May 2016, indicating a growing market for customized insurance solutions.

Risks

• Slower-than-expected agent growth.
• Inadequate adjustments in product offerings.
• Failure to improve agent quality.
• Interest rate volatility and investment uncertainty.

Investment Recommendations

• Recommended Companies: China Ping An, China Pacific, New China Life Insurance, and China Life Insurance.
• Valuation Metrics: The report provides detailed financial data including EV, 1YrVNB, P/EV, P/B, and other key metrics for the listed companies.

Sector Outlook

• The insurance sector is expected to outperform the benchmark (Hong Kong Hang Seng Index) over the next 12 months, with a Positive rating.
• The focus will shift to building high-quality agent teams and promoting protection-oriented products.
• Online and broker channels are set to become more important in the future.

Conclusion

The Chinese insurance sector is evolving from a focus on agent numbers to a more sustainable model emphasizing agent quality and product innovation. Listed companies are well-positioned to lead this transition, while new technologies and independent brokers are expected to play a growing role in the industry's future growth.