On October 16, Caixin reported (Reporter: Zou Juntao) that benefiting from the recovery of the capital markets, listed insurance companies have once again set a record high for the forecast increase in net profit for the third quarter.

On the evening of October 16, China Life Insurance issued an announcement, estimating that under the Chinese Enterprise Accounting Standards, the company's net income attributable to the shareholders of the parent company for the first three quarters of 2024 is expected to be approximately 101.135 billion yuan to 108.767 billion yuan. Compared to the same period in 2023, it will increase by about 62.971 billion yuan to 70.603 billion yuan, representing a year-on-year growth of about 165% to 185%.

Of note, China Life Insurance disclosed in the announcement that starting from January 1, 2024, the company will adopt the "Enterprise Accounting Standard No. 25 - Insurance Contracts" (Finance [2020] No. 20) ("New Insurance Contract Standard") and the "Enterprise Accounting Standard No. 22 - Recognition and Measurement of Financial Instruments" (Finance [2017] No. 7) ("New Financial Instrument Standard") Thereafter, the insurance contract-related information for the comparative period will be restated based on the New Insurance Contract Standard, while the financial instrument-related information for the comparative period will not be restated based on the New Financial Instrument Standard.

Under the Chinese Enterprise Accounting Standards, China Life Insurance's performance for the same period in 2023 has been adjusted. The net income attributable to the parent company's shareholders in the third quarter of 2023 was 38.164 billion yuan; after deducting non-recurring gains and losses, the net income attributable to the parent company was 38.308 billion yuan. Before the adjustments, they were 16.209 billion yuan and 163.53 billion yuan, respectively.

It is understood that China Life Insurance is the only one among the four listed insurance companies that have already disclosed performance forecast increase announcements, which is related to the changes in the above-mentioned standards.

In addition, it is worth noting that behind the performance forecast increase disclosures of many listed insurance companies recently point to the performance on the investment side. Industry experts point out that the "policy combination" is driving the resonance of the balance between assets and liabilities of insurance companies, leading to positive catalysts for sector valuations. However, it is necessary to carefully manage the potential volatility that may arise from the rapid release of recent sentiment.

China Life Insurance's net income is expected to increase by more than 165%, once again hitting a new high in the performance of listed insurance companies.

Before China Life Insurance, New China Life Insurance, People's Insurance Company of China, China Pacific Insurance and other listed insurance companies have successively disclosed third quarter performance forecast announcements, with the largest performance increase seen in New China Life Insurance.

On October 8th, New China Life Insurance took the lead in announcing an expected increase in performance, disclosing that the company's net profit attributable to shareholders in the first three quarters is expected to be between 18.607 billion yuan and 20.515 billion yuan. Compared with the same period in 2023, it is expected to increase by 9.065 billion yuan to 10.973 billion yuan, a year-on-year increase of 95% to 115%.

Yesterday evening, People's Insurance Company of China and China Pacific Insurance simultaneously announced performance forecast disclosures. People's Insurance Company of China disclosed that the group is expected to achieve a net profit attributable to shareholders of the parent company of 33.83 billion yuan to 37.931 billion yuan for the first three quarters of 2024, an increase of 13.327 billion yuan to 17.428 billion yuan compared to the same period last year, a year-on-year increase of 65% to 85%. China Pacific Insurance disclosed that the net profit attributable to shareholders of the parent company for the first three quarters is about 37 billion yuan to 39.4 billion yuan. Compared with the same period in 2023, it is expected to increase by 13.9 billion yuan to 16.3 billion yuan, a year-on-year increase of approximately 60% to 70%.

Among the four insurance companies mentioned above, New China Life Insurance and China Life Insurance are expected to double their net profit growth in the third quarter of this year. In addition, according to Wind data, this is the first time that China Life Insurance has disclosed an estimated third-quarter net profit exceeding 100 billion yuan, also refreshing the annual net profit scale record since its listing. Data shows that China Life Insurance's previous peak annual net profit was 51 billion yuan in 2021.

The recovery of the capital markets has boosted investment returns, prompting industry insiders to focus on potential market fluctuations.

Behind the substantial performance growth is the investment performance. All four listed insurance companies have stated that the recent recovery in the capital markets has significantly increased investment returns year-on-year, which is further reflected in the profit side.

China Life Insurance, which has the highest profit growth, pointed out in its announcement, 'The company adheres to seizing market opportunities for cross-cycle allocation, continuously promotes the optimization of equity investment structure. In the third quarter of 2024, the stock market significantly recovered, greatly enhancing the company's investment income.'

China Pacific Insurance stated in the announcement, 'Based on the strategic asset allocation plan, the company maintains a certain percentage range of equity assets in the investment portfolio. With the recent rise in the capital markets, the company's investment income in the first three quarters achieved a significant year-on-year increase.'

The People's Insurance stated in the pre-increase announcement that, on one hand, it is to solidify the operational foundation, optimize the business structure, implement effective risk control, and promote cost reduction and efficiency improvement. On the other hand, influenced by the warming of the capital markets, the total investment yield saw a substantial year-on-year increase, with a significant growth in net income compared to the same period last year.

New China Life Insurance also pointed out that in the first three quarters, the company moderately increased investment in equity assets, raised the proportion of equity assets allocation, and strengthened the quality management of insurance liabilities and optimized the business structure. The recent uptrend in the capital markets led to a significant year-on-year increase in the company's investment income for the first three quarters of 2024.

Industry insiders pointed out that the 'policy combo' driving the 'asset-liability resonance' of insurance companies, propelling the positive valuation catalyst of the sector. However, attention needs to be paid to the rapid release of recent sentiments, perhaps requiring a more cautious approach to potential fluctuations.

Sealand's non-banking financial analyst Sun Jiageng pointed out that the unexpected policy combinations from the meetings on September 24 and September 26, as well as the rapid market recovery, have created a resonance effect on the asset and liability sides of listed insurance companies. We continue to maintain a 'recommended' rating for the insurance sector while also recommending internal reallocation, prioritizing investment targets with greater flexibility.

Sealand Securities pointed out that the new 'Ten Rules of the Nation', National New Conference, 'Long-term Money, Long-term Investment', and other supporting policies are about to be implemented, yet they have not been fully reflected in the valuation of the insurance sector. It is recommended to focus on the positive impact of future solvency, reserves, overseas asset allocation, and the optimization policy of 'Long-term Money, Long-term Investment' on industry development and sector valuations.

China International Capital Corporation cautioned in its research report that the recent rapid rise in the insurance sector relies too much on stock returns on the asset side. While there is some rationale to this, it is important to note that stock investment returns fluctuate significantly between different years. It is not advisable to simply extrapolate long-term profit performance based on stock investment returns since the third quarter of this year. China International Capital Corporation believes that the valuation of high-quality life insurance has not yet reached a reasonable level, still has room for repair, and future stock prices may fluctuate upwards. However, due to the rapid release of recent sentiments, a more cautious approach may be needed to deal with potential fluctuations.

According to Wind data, as of the close on October 16, the Wendes Insurance Industry Index has retraced to 6106.43 points, a decline of nearly 10% from the high point on October 8.