Futu Securities released a research report stating that the growth rate of personal insurance premiums improved in May, and the growth rate of 2024H1NBV is expected to be good. The prospect of the full year liability side is optimistic. The real estate policy has been relaxed, the central bank's stance on low government bond yields, and the improvement of equity markets are expected to bring asset-side catalysis. The valuation and institutional holdings of the life insurance sector are still at a low level, and the business prosperity and policy end bring excess income support. Asset-end catalysis is expected to drive the continuous rebound of the valuation of the sector. Recommended China Pacific Insurance (601601.SH) and China Life Insurance (601628.SH).

The growth rate of personal insurance premiums improved in May, and the growth rate of 2024H1NBV is expected to be good. The prospect of the full year liability side is optimistic.

(1) In May 2024, the total premium income of personal insurance of 5 listed insurance companies was 126.6 billion yuan, a year-on-year increase of 7.8%, an increase of 0.9 percentage points from April. Among them: PICC Life Insurance +17.0%, Ping An Insurance +10.4%, China Life Insurance +7.7%, CPIC +7.4%, and New China Life Insurance -6.2%. The total premium income growth rate of the 5 listed insurance companies in May improved, which is mainly due to the increase in individual insurance production capacity driving the premium growth rate to rebound. The negative growth of New China Life Insurance is expected to be related to the company's proactive adjustment of the business term structure focusing on value growth. (2) From January to May 2024, the total premium income of the 5 listed insurance companies increased by 1.3% year-on-year, an increase of 0.9 percentage points from April. Among them, China Life Insurance increased by 4.3%, Ping An Insurance increased by 3.3%, PICC decreased by 0.7%, CPIC decreased by 2.1%, and New China Life Insurance decreased by 10.9%. In addition, Sunshine Life Insurance's monthly/accumulated growth rates were +35.5%/+9.8%, which is expected to be related to the differentiated strategy from the 2023 "cessation of sales" period. (3) Outlook: The growth rate of NBV in H1 2024 is expected to perform well, and the full-year NBV is expected to achieve a high-quality growth of a small double-digit percentage. The new policy in the second quarter or the year-on-year pressure of the high base may increase the value rate, and the growth rate of NBV in H1 2024 is expected to be good, and the full-year NBV is expected to achieve a high-quality growth of a small double-digit percentage. The adjustment of settlement and booking interest rates, the combination of reports and products, and the optimization of product structure are expected to reduce the cost of industry stock and incremental product liabilities. The risk of margin loss has been alleviated.

The high increase in personal insurance premiums of PICC in May is related to the base number. Lump sum and renewal premiums continue to increase.

PICC Life achieved a premium income of 9.4 billion yuan in personal insurance in May, a year-on-year increase of 17.0%, a cumulative growth rate of -0.7%, an increase of 1.5 percentage points from April. The long-term insurance new single premium in the month was 3.1 billion yuan, a year-on-year decrease of 7.6%, an increase of 3.5 percentage points from April, and a cumulative growth rate of -14.9%. Among them, the month-on-month single new lump-sum/periodic premium increased by 31.4%/-19.7% year-on-year, and the cumulative growth rate was -21.3%/-5.9% year-on-year, respectively. The renewal premium achieved a premium income of 5.2 billion yuan in May, a year-on-year increase of 47.6%, a decrease of 3.4 percentage points from April, and a cumulative growth rate of 13.5%, an increase of 3.4 percentage points from April. The negative growth of monthly new period premiums in May is expected to be affected by the high base number of bank insurance in the same period, and the high increase in lump-sum premiums is related to the product launch pace. The continued high growth of renewal premiums is expected to be related to factors such as the base number of existing business, payment and term structure, and survival rate.

In May 2024, the insurance premium growth rate of property and casualty insurance improved significantly, and the premium growth rates of PICC car insurance and non-car insurance both rebounded.

(1) In May 2024, the property insurance premium income of 4 listed insurance companies was 81.8 billion yuan, a year-on-year increase of 4.9%, an increase of 3.2 percentage points from April. Among them, China Pacific Property Insurance increased by 6.7% (4.7% in April), Ping An Property Insurance increased by 5.3% (4.1% in April), PICC Property Insurance increased by 4.4% (-1.4% in April), and ZhongAn Online declined by 2.1% (6.3% in April). In addition, Sunshine Insurance increased by 9.1% year-on-year (10.3% in April). The sales of passenger car and automobile in May 2024 increased by 1.2% year-on-year, with a cumulative growth rate of 8.5%. (2) In May, PICC expanded car insurance premiums by 4.4% year-on-year, an increase of 1.0 percentage point from April, and the rebound of passenger car sales led to an improvement in the growth rate of car insurance. Non-car insurance increased by 4.3% year-on-year in May, an increase of 12.1 percentage points from April, and the cumulative increase rate in May was 3.4%, an increase of 0.1 percentage points from April. Among them, single-month premium growth rates for health insurance/agricultural insurance/liability insurance/business insurance/credit guarantee insurance/cargo insurance on a year-on-year basis were +5.5%/-2.7%/+17.1%/-5.2%/-8.9%/+4.9%, and the monthly premium growth rates were +11.6/+9.5/+18.3/+10.1/+16.4/+14.3 percentage points higher than in April, and all non-car insurance businesses have improved.

Industry spread loss risk continues to improve, pay attention to the elasticity of the asset side catalysis, and continue to recommend the life insurance sector.

(1)According to a report from the Shanghai Securities News on June 12, some insurance companies will officially stop selling 3.0% additional lifelong insurance on June 30 and launch additional lifelong insurance with a scheduled interest rate of 2.75% on July 1, and the new product has been successfully recorded. Open source securities believe that this scheduled interest rate adjustment is different from the previous regulatory adjustment, which more reflects the new product strategy of some insurance companies, and it is expected that there will be no collective suspension of the industry. Under the background of continuous decline in long-term interest rates, the scheduled rate adjustment of new traditional insurance products reported by insurance companies also reflects the intention of supervision, and the cost of industry liability is expected to continue to decline. (2)It is expected that the NBV growth rate in the second quarter will be good, and the full-year NBV is expected to achieve high-quality growth in small double digits. The settlement and scheduled rate adjustment, the unification of reporting and the optimization of product structure are expected to reduce the cost of industry stock and incremental product liabilities, and the risk of interest spread and loss is expected to be alleviated. (3)The relaxation of real estate policies, the statement of the central bank on the low yield of national bonds, and the improvement of equity market on a year-on-year basis are expected to bring about catalysis on the asset side. The sector's valuation and institutional positions are still low, and the excess returns brought by the business climate and the policy end support are expected to drive the continuous recovery of the sector's valuation driven by the catalysis of the asset side. We remain bullish on the life insurance sector and recommend China Pacific Insurance and China Life Insurance.