The Zhitong Finance App learned that China Financial Services released a research report saying that Ping An Life Insurance, which has already disclosed quarterly reports, achieved positive net profit/operating profit growth under downward pressure on interest rates and stock yields, confirming the previous judgment. The scale growth of high-quality life insurance companies (stock business interest spreads are thick enough) will offset the pressure on the investment side under the current trend of accelerated table expansion. It is expected that the company's subsequent financial reports will continue to confirm this and ease market concerns about the asset side. At the same time, the debt side still has more room to exceed expectations. For example, the bank believes that there is still more room for further lowering pricing rates, etc. Chinese life insurance currently has mid-term investments opportunity.

Recommended: China Taibao (601601.SH), China Ping An (601318.SH), China Life (601628.SH), China Taiping (00966). In terms of financial insurance, the bank expects the profit of China Financial Insurance (02328) in the first quarter to be under pressure and significantly weaker than life insurance. Considering that transactions are relatively crowded, it is recommended to be cautious in the short term.

CICC's views are as follows:

A-share insurance sector: The overall allocation of the sector has been further reduced, and there is a large margin of safety and security.

The 1Q24A share insurance sector rose 0.3%, outperforming the Shanghai and Shenzhen 300 Index 2.8ppt. Individual stocks had mixed ups and downs. People's Insurance, Ping An, and China Life Insurance rose 7.4%/1.3%/0.5%, and Xinhua/Taibao fell 4.2%/3.3%. In terms of public offering positions, the sector's allocation was reduced by 16.57 bps to 0.14%, the low allocation ratio was increased by 16.17 bps to 1.68%, and Pingan/ Taibao was reduced by 7.89/7.47 bps respectively. The allocation reduction was the largest within the sector.

H share insurance: China's financial insurance allocation has been drastically increased, and the overall allocation of life insurance has been reduced.

1Q24 China Financial Insurance/China Life Insurance/AIA Insurance/Prudential stock prices were +11.2%/-6.8%/-22.8%/-16.2% respectively. China Financial Insurance benefited from high dividends and defensive attributes. In terms of holdings, China Financial Insurance was drastically increased by 46.75 bps to 0.93%, the second-highest since 2019; the overall allocation for Chinese life insurance was reduced by 13.14 bps, the low allocation was increased by 6.86 bps to 1.13%, and China Life Insurance was slightly increased by 0.80/0.30 bps, and Pingan/Xinhua/Taiping was reduced by 12.13/2.03/0.07 bps respectively; AIA was reduced by 19.1bps to 0.037%, or against the backdrop of the company's stock price continuing to fall due to foreign capital outflows.

Where are the valuations and dividend rates?

AH China Life Insurance currently trades at 0.46x/0.21x 2024e P/EV (2.9%/1.4% and 0.9%/0.4% quantile in the past 5/10), 8.2x/3.6x 2024e P/E; China Financial Insurance trades at 0.77x 2024e P/B (61.5% in the past 5 years). Based on the dividend declared in 2023, Ping An A/H was 6.0%/7.8%, respectively, Taibao A/H was 4.1%/6.8%, Xinhua A/H was 2.8%/6.5%, China Life Insurance A/H was 1.5%/4.7%, and China Financial Insurance was 5.4%, respectively. Due to the low equity investment base, the bank expects that in 2024, even if there is no return on stock investment, Chinese insurance profits will still increase by quite a few double digits, and the probability of dividend growth is also high.

Life insurance profits may exceed expectations, and Chinese life insurance welcomes medium-term investment opportunities.

Ping An Life Insurance, which has already been disclosed in its quarterly report, has achieved positive net profit/operating profit growth under downward pressure on interest rates and stock yields. The scale growth of high-quality life insurance companies (with sufficiently thick interest spreads on the stock business) will offset some pressure on the investment side. It is expected that the company's subsequent financial reports will continue to confirm this and ease market concerns about the asset side. At the same time, the debt side still has more room to exceed expectations, such as further lowering pricing interest rates. The bank believes that China Life Insurance currently has medium-term investment opportunities.

Risk warning: New premium growth falls short of expectations; drastic changes in long-term interest rates; large capital market fluctuations; natural disasters; policy and regulatory uncertainty; overseas financial risk events.