Currently, the insurance industry has formed an investment strategy with fixed income assets as the main component and equity and other types of assets as supplementary. In 2024 H1, the insurance industry's allocation ratios for bank deposits, bonds, stocks, and securities investments were 9.3%, 47.5%, 12.7% respectively.
Zhongtong Finance and Economics APP learned that Guolian Securities released research reports stating that with the continuous enhancement of bullish policies stabilizing the real estate market and the recovery of capital markets, the investment income level of insurance companies is expected to marginally improve. This could further support a good growth trend in net income for the full year of 2024. The valuation of the insurance sector is still relatively low historically, with potential for recovery in the future. Policies are one of the main factors influencing the investment strategies of insurance companies, as regulatory restrictions on insurance companies investing in funds, corporate bonds, overseas assets, stocks, real estate, unlisted equities, and other assets are gradually being lifted, leading to increasing diversification of investable assets by insurance companies.
Guolian Securities' main points are as follows:
Policies are one of the main factors influencing the investment strategies of insurance companies.
Since the resumption of the domestic insurance industry in 1979, regulators have issued a series of policy documents to promote the use of insurance funds. As regulatory restrictions on insurance companies investing in funds, corporate bonds, overseas assets, stocks, real estate, unlisted equities, and other assets are gradually being lifted, the types of investable assets for insurance companies are becoming increasingly diversified. At the same time, as regulators guide insurance back to its protection essence, the requirements for the safety of insurance funds are increasing. Currently, the insurance industry has formed an investment strategy with fixed income assets as the main component and equity and other types of assets as supplementary. In 2024 H1, the insurance industry's allocation ratios for bank deposits, bonds, stocks, and securities investments were 9.3%, 47.5%, 12.7% respectively.
The asset allocation structure of listed insurance companies exhibits a "more or less the same" characteristic.
The asset allocation structure of listed insurance companies reflects regulatory policy guidance and insurance fund preferences. Currently, the asset allocation structures of the four listed insurance companies Ping An, China Life Insurance, China Pacific Insurance, and New China Life Insurance exhibit a "more or less the same" characteristic. The "more or less the same" feature is manifested in their relatively consistent asset allocation structures, with fixed income assets accounting for the main proportion. As of 2024 H1, the allocation ratios of bonds for the four listed insurance companies were around 50%-60%. The "less difference" is reflected in the proportions of specific assets, where New China Life Insurance and China Life Insurance have relatively higher proportions of equity assets. As of 2024 H1, the allocation ratios of equity assets for New China Life Insurance, China Life Insurance, Ping An Insurance, and China Pacific Insurance were 24.7%, 24.1%, 20.8%, 18.6%.
What are the commonalities in the investment strategies of the currently listed insurance companies?
The investment strategies of the four listed insurance companies currently exhibit three main features: 1) After the implementation of the new regulations, the proportion of bond allocation has increased, while credit risks are strictly controlled. From 2023 to 2024 H1, the average allocation proportion of bonds by the four listed insurance companies increased from 53.9% to 55.7%, with the bonds held mainly rated as AA or above. 2) Under low interest rates and the new regulations, stocks with low volatility and high dividends are more favored by insurance funds. From 2023 to 2024 H1, the average proportion of FVOCI stocks held by the four listed insurance companies increased from 19% to 25% of total stocks. 3) There has been a decrease in the allocation proportion of real estate and non-standard assets. From 2023 to 2024 H1, the average allocation proportion of investment properties, other fixed income, and equity assets by the four listed insurance companies decreased from 1.03%, 13.43% to 0.95%, 11.66% respectively.
Investment recommendation: Maintain the insurance industry's 'outperform market' rating.
Key stock recommendations: Ping An Insurance (601318.SH) (benefiting from expected improvement in asset side and resolution of real estate risks), China Life Insurance (601628.SH) (more stable liability side, greater flexibility on the asset side), China Pacific Insurance (601601.SH) (superior fundamentals), New China Life Insurance (601336.SH) (greater flexibility on the asset side, more significant improvement in new business value rate), PICC P&C and The People's Insurance (601319.SH) (expected improvement in performance quarter by quarter, rare business model).
Risk warning: Economic recovery falls short of expectations; decline in long-term interest rates; increased volatility in capital markets.
