According to the Securities Times APP, Huaxi Securities released a research report stating that looking ahead to the third quarter of 2024, the net income and new business value growth of listed insurance companies under the resonance of assets and liabilities are expected to exceed expectations. On the liability side, the scheduled interest rate decline, combined with high-quality product and channel transformation, is expected to continue to boost the growth rate of NBV of various insurance companies in the first three quarters of 2024 compared to the interim report. On the asset side, a package of stable economic policies is expected to be introduced successively, investors' confidence in the equity market is expected to continue to gradually recover, investment income is expected to improve significantly compared to the low base in the same period last year, and the constraints on the profits and stock price valuation of the life insurance sector are expected to be fully lifted.

huaxi Securities maintains a 'recommended' rating for the industry, first recommending the pure life insurance symbols with greater equity elasticity on the asset side, New China Life Insurance (601336.SH) and China Life Insurance (601628.SH); recommending the continuous optimization of business by the People's Insurance (601319.SH); bullish on the stable liability side of China Pacific Insurance (601601.SH) and Ping An Insurance (601318.SH).

Life insurance: It is expected that the new business value will accelerate in 2024Q3.

Listed insurance companies promoted the growth of new business value beyond expectations in 2024H1 through price supplementation. In 2024H1, the NBV of listed insurance companies continued to grow at double-digit rates, with year-on-year growth rates of the People's Insurance (+91.0%) > New China Life Insurance (+57.7%) > China Pacific Insurance (+22.8%) > China Life Insurance (+18.6%) > Ping An Insurance (+11.0%). In terms of quantity and price separation, although new single premiums have declined, among them, China Life Insurance's new single premiums decreased by -6.4% year-on-year, Ping An Insurance's first-year premiums used to calculate new business value decreased by -19.0% year-on-year, China Pacific Insurance's first-year annualized premiums decreased by -11.9% year-on-year, the People's Insurance's long-term first-year premiums decreased by -20.4% year-on-year, and New China Life Insurance's long-term first-year premiums decreased by -45.1% year-on-year. However, the new business value rates of each insurance company have significantly improved, with New China Life Insurance increasing by +13.7 percentage points year-on-year, the People's Insurance increasing by +6.9 percentage points year-on-year, Ping An Insurance increasing by +6.5 percentage points year-on-year, China Pacific Insurance increasing by +5.3 percentage points year-on-year, and China Life Insurance increasing by +4.2 percentage points year-on-year. This is mainly due to the downward adjustment of scheduled interest rates, the integration of channels and reports, and the overall optimization of product structure.

Huaxi Securities predicts that the new business value of various insurance companies in 2024Q3 is expected to continue to accelerate. In terms of new single premiums, the demand for new policies in August has been released following the suspension of sales. According to data disclosed by the China Banking and Insurance Regulatory Commission, the total premium income of the industry from January to August 2024 was 3.21 trillion yuan, a year-on-year increase of +16.1%. The growth rate increased by 3.0 percentage points from January to July, mainly due to the concentration of new policy sales in the short term driven by the latest scheduled interest rate reduction and the impact of the low premium base in the same period last year. In terms of value rate, as the product structure continues to be optimized and the high-quality transformation of channels deepens, the business quality of each insurance company will continue to improve. Therefore, Huaxi Securities predicts that the NBV of each insurance company in the first three quarters will be the People's Insurance +80.0% > New China Life Insurance +59.1% > China Pacific Insurance +37.7% > China Life Insurance +29.6% > Ping An Insurance +25.7%, with the growth rate continuing to rise compared to the interim report. The overall economic prosperity is expected to be maintained in 2024, and Huaxi Securities is optimistic about the continuity of high NBV growth and its positive catalytic effect on valuation.

Property insurance: Premiums are growing steadily, benefiting from the reduction of risk amount and the potential easing of COR pressure.

Property insurance premiums grew steadily overall. According to data disclosed by the China Banking and Insurance Regulatory Commission, the industry's total premium income in January-August 2024 was 1.17 trillion yuan, up by +5.5% year-on-year, with a continued improvement in growth rate from June to July. Among them, the year-on-year premium growth rates of the top three property insurance companies were China Pacific Insurance (+7.7%) > Ping An Insurance (+5.3%) > The People's Insurance (+4.3%). Looking at the distribution of insurance types (2024 H1 data), Ping An Insurance has the largest share of auto insurance premiums at 65.4%, with non-auto insurance accounting for 34.6%; The People's Insurance has the largest share of non-auto insurance at 55.3%, with auto insurance at 44.7%; China Pacific Insurance's non-auto insurance share exceeds auto insurance, at 53.8%.

Benefiting from risk reduction services provided by various insurance companies, the pressure on COR may be relieved. In the third quarter of 2024, due to the impact of major disasters such as heavy rain, floods, typhoons, and geological disasters, the claims ratio of various insurance companies may be under pressure. Meanwhile, various insurance companies have actively carried out risk reduction services and achieved results. From the performance of the top three companies' COR in 2024 H1, despite a sharp increase in natural disaster losses (according to data from the Ministry of Emergency Management, direct economic losses from natural disasters nationwide in 2024 H1 increased by 71.64 billion yuan to 93.16 billion yuan year-on-year), the COR performances of various insurance companies were good. The COR figures for The People's Insurance/China Pacific Insurance/Ping An Insurance were 96.2%/97.1%/97.8% respectively, with year-on-year changes of +0.4pt/-0.8pt/-0.2pt. Therefore, Huaxi Securities believes that the upward pressure on COR of various insurance companies in the first three quarters of 2024 will be somewhat relieved under the effectiveness of risk reduction measures. It is expected that the COR for the top three companies will be The People's Insurance at 96.2% <; China Pacific Insurance at 97.0% <; Ping An Insurance at 97.6%.

On the investment side: With the recovery of the equity market, there is hope for a significant improvement in profits.

The recovery of the equity market in the third quarter of 2024 is expected to drive a significant improvement in investment income, which will in turn improve the net income of various insurance companies. The CSI 300 Index rose by 16.1% in the third quarter of 2024 (accumulating a 17.1% increase in the first three quarters of 2024), while it fell by 4.0% in the third quarter of 2023 (accumulating a 4.7% decrease in the first three quarters of 2023). With the stock market recovering, the investment income of various insurance companies is expected to significantly increase year-on-year. At the same time, due to the low performance base of various insurance companies in the same period of 2023, the net income of various insurance companies is expected to see a substantial increase driven by the combination of a low base and the recovery of the investment side.

Pure life insurance companies demonstrate outstanding equity flexibility and are expected to benefit first from the current stock market recovery. With the current recovery of the stock market and the gradual restoration of investor confidence, life insurance company performance is expected to benefit first. Huaxi Securities calculated the ratio of trading financial assets to owner's equity in the investment assets at the end of the first half of 2024 for various listed insurance companies, with New China Life Insurance (528%) > China Life Insurance (369%) > China Pacific Insurance (221%) > Ping An Insurance (102%) > The People's Insurance (96%); Huaxi Securities also calculated the ratio of stock investments to owner's equity in the investment assets at the end of the first half of 2024 for various listed insurance companies, with New China Life Insurance (160%) > China Life Insurance (88%) > China Pacific Insurance (75%) > Ping An Insurance (26%) > The People's Insurance (13%).