Since the beginning of this year, insurance stocks have reversed the previous slump and ended the downtrend of nearly 4 years.

Among them, in terms of annual increase,$CHINA RE (01508.HK)$rose by over 70%.$CHINA TAIPING (00966.HK)$more than 50%,$PICC GROUP (01339.HK)$,$CPIC (02601.HK)$All rose by more than 30%.

On the news front, in the first half of this year,$PING AN (02318.HK)$,$CHINA LIFE (02628.HK)$,$PICC GROUP (01339.HK)$,$CPIC (02601.HK)$,$NCI (01336.HK)$The five listed insurance companies achieved a total premium income of 1,763.3 billion yuan, a year-on-year increase of 3.0%; and a combined net income of 171.799 billion yuan, a year-on-year increase of approximately 13%.

Looking at the segmentation, in the first half of 2024, the five major listed insurance companies achieved positive growth in revenue and net income. Among them, China Ping An ranked first in net income in the first half of the year among the five listed insurance companies, reaching 74.619 billion yuan, a year-on-year increase of 6.8%. China Pacific Insurance led the net income growth rate, with a net profit of 25.132 billion yuan in the first half of the year, a year-on-year increase of 37.1%. China Life Insurance, the People's Insurance, and New China Life Insurance had net incomes of 38.278 billion yuan, 22.687 billion yuan, and 11.083 billion yuan, respectively, with year-on-year growth rates of 10.6%, 14.1%, and 11.1%.

In addition, according to data from the China Banking and Insurance Regulatory Commission, the original premium of personal insurance from January to July 2024 was 3,087.9 billion yuan, a year-on-year increase of 13%, and the scale premium reached 3,524.3 billion yuan, a year-on-year increase of nearly 11%. Property insurance companies achieved premiums of 1,040 billion yuan from January to July 2024, a year-on-year increase of 5.1%. Auto insurance maintained stable growth, while non-auto insurance increased by 7% year-on-year.

In terms of new business value, the growth momentum of the five life insurance companies is strong, with two companies achieving a new business value growth rate of over 50%. Among them, PICC Life Insurance's new business value in the first half of 2024 was close to doubling, with a year-on-year growth of 91% reaching 3.935 billion yuan; in the first half of the year, New China Life Insurance achieved a year-on-year growth rate of 57% for new business value, totaling 3.902 billion yuan; Taibao Life Insurance closely followed PICC Life Insurance and New China Life Insurance in the first half of the year, achieving a growth rate of 22.8%, totaling 9.073 billion yuan in new business value.

In addition, on August 30, Premier **** presided over the executive meeting of the State Council to discuss several opinions on promoting the high-quality development of the insurance industry.

The meeting pointed out that the insurance industry plays an important role in guaranteeing and improving people's livelihood, disaster prevention and reduction, and serving the real economy. It is necessary to consolidate the institutional foundation for the high-quality development of the insurance industry, firmly establish the concept of prioritizing services, fully leverage the role of market mechanisms such as commercial insurance, and greatly enhance the insurance industry's protection capabilities and service levels. It is necessary to cultivate and strengthen patient capital such as insurance funds, remove institutional barriers, improve assessment and evaluation mechanisms, and provide stable long-term investment for the capital markets and technological innovation.

What is the institutional perspective on this?

For insurance companies, insurance operations are like riding a bicycle, with one wheel being liabilities and the other wheel being assets, and the two wheels drive the performance growth of insurance companies.

Simply put, insurance seeks to match the appreciation of assets with the liabilities in the form of policy funds.

Therefore, insurance funds need to align with the characteristics and requirements of the liability side in terms of asset allocation. When making investments, they differ from other investment institutions in terms of methods and priorities. They first pursue the matching of assets and liabilities, rather than maximizing investment returns at a certain stage.

In addition, in recent years, life insurance companies have relied heavily on agency channels, while the importance of bank-insurance channels has rebounded. Relatively speaking, the commission rate of bank-insurance channels is higher, and insurance companies need to bear higher costs with low value contribution. However, one year after the implementation of the "reporting and banking integration" policy, the new business value of leading insurance companies through bank-insurance channels has significantly improved.

• Dongguan Securities: It is expected that the liability side of insurance stocks will not be a drag on the performance of the whole year of 2024, and the asset side is expected to see improvement.

Dongguan Securities believes that in 2024, the liability side of the insurance sector will not be a drag, and it is expected that under the background of "integrating the report and the line" and lowering the pre-set interest rate, insurance companies will effectively control the channel expense ratio, reduce cost pressure, and optimize product structure and agent capacity improvement will directly drive the continued growth of new business value (NBV). In the low interest rate environment, major life insurance companies' main products may gradually switch from increasing whole life insurance to dividend insurance, which also has positive implications for mitigating the risk of spread loss.

Looking at the asset side, in the bull market of bonds, the floating profit of bonds has boosted the comprehensive investment yield of insurance funds, which has risen from 4.33% in the same period last year to 6.91%, to some extent alleviating the pressure on the investment side of insurance companies. In addition, under the new financial instrument standards, insurance companies tend to allocate assets with smaller volatility, stable dividends, and reasonable valuations. According to the position structure of insurance capital in the first half of 2024, the proportion of bank sectors is as high as 64.71%, a significant increase from the end of last year, and the bank sector has increased by nearly 20% since the beginning of the year.

• Haitong International: Bullish on the improvement of the liability side trend, and the stabilization or upward trend of long-term interest rates in the future will alleviate the pressure on investment yield.

Haitong International believes that the year-on-year marginal improvement of NBV of listed insurance companies is expected to be mainly due to the improvement of product structure, the increase in the proportion of medium- and long-term premium payment, the reduction of pre-set interest rates, and the convergence of bank and insurance channels. In addition, the current demand for resident savings is still strong. In the context of a decline in bank deposit interest rates, insurance products still have relative attractiveness. We are still optimistic about the improving trend on the liability side.

At the same time, the regulatory authorities continue to guide insurance companies to reduce liability costs, and the pressure of interest spread loss is expected to be gradually relieved. The recent 10-year government bond yield has dropped to around 2.17%. It is expected that with the recovery of the domestic economy in the future, if long-term interest rates stabilize or rise, the pressure on insurance companies' newly added fixed-income investment yield will be alleviated to some extent. At the same time, the continuous implementation of favorable policies related to real estate is also conducive to alleviating concerns about the investment asset quality of insurance companies.

• Nanjing Securities: It is expected that the prosperity of the liability side of life insurance in the third quarter may further continue.

Nanjing Securities pointed out that the insurance sector is entering the interim disclosure period. Based on China Pacific Insurance's semi-annual report, it is expected that the prosperity of the liability side of listed insurance companies in the first half of the year will continue, and new business value is expected to maintain growth. The total investment yield and comprehensive investment yield of the asset side are expected to increase year-on-year, and the risk of industry interest spread loss is expected to be temporarily eased. In the third quarter, with the phased conversion of life insurance booked interest rates starting in September, the prosperity of the liability side of life insurance is expected to further continue.

Editor/ping