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China life insurance sector - Comment on 3Q life insurance premiums

作者: Felix LUO
時間: 2018年10月18日
重要性: 一般報告
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摘要: Report title:China life insurance sector - Comment on 3Q life insurance premiums
Analyst:Felix LUO
Report type:Industry
Date:20181018
[Summary]

Comment on 3Q life insurance premiums
■ Ping An (2318 HK)’s individual life FYP grew by 9.7% YoY in 3Q
■ Stable growth of accumulated life GWP in 3Q across the sector
■ Expect improving NBV growth in 4Q for life sector
Overall growth of accumulated life GWP stabilized in 3Q
Ping An announced its September premiums today, our views are: 1) Ping An reported continuing growth in individual life FYP. Its individual FYP increased by 9.7% YoY in 3Q, vs. 7.9% YoY in 2Q. We expect further recovery in Ping An’s NBV growth in 3Q18; 2) As the high-base effect gradually declined since 2Q, we see stabilized accumulated GWP growth in 3Q for life sector. For example, such growth is 4.1% YoY and 11.3% YoY in 3Q18 for China Life (2628 HK) and NCI (1336 HK), respective, vs. 4.1% and 10.8% in 1H18; 3) Health insurance maintained fast growth recently. Accumulated health GWP across the sector (excluding Hexie Health) increased by 34% YoY in 8M18. In summary, while life GWP is driven by renewal premiums, new business growth also stabilized which is positive to the sector.
Expect improving NBV growth in 4Q for life sector
We expect improving NBV growth in 4Q: 1) As a result of Circular No.134, distribution of 2017 life NBV across the sector was skewed towards 1H17. For example, 1H17 NBV contributed to 74% of total 2017 NBV for CPIC (2601 HK). As the life sector is stabilizing, it is likely to see improving NBV growth in 4Q18E due to low-based effect of 4Q17; 2) Recent data have shown enhanced performance in the sector. In particular, Ping An recorded 9.7% YoY growth in individual FYP in 3Q; 3) the fast growth in health insurance indicates there is strong demand on protection-type products, positive for long-term growth of the sector.
Sector recommendation
Life insurance sector is trading at ~1.4x 18E P/B. We recommend all life insurance companies in our coverage: 1) China Life, CPIC and NCI are currently trading at ~0.5x, ~0.6x, and ~0.5x 18E P/EV, respectively, close to their historical low valuation. We think those stocks are showing attractive valuation in long-term view; 2) Our top pick is Ping An. We expect continuing recovery of life NBV growth in 2H18 for Ping An, and we think Ping An possesses competitive advantage given its cross-selling capability and its high-productivity agent team. Maintain OVERWEIGHT on China life insurance sector. Key catalyst: better-than-expected NBV growth. Key downside risks: adverse capital market, and lower-than-expected agency channel performance.

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