20180904-广发证券_香港_-A-Share_Insurance_Sector__Deepening_reform,_significant_margin_improvements_3页_366kb

A-Share Insurance Sector Summary

Core Content

The document provides an analysis of the performance and outlook for the A-Share Insurance Sector in the first half of 2018. It outlines key financial metrics, product structure changes, investment trends, and market ratings for major listed insurance companies in Hong Kong.

Main Points

• Financial Performance:

  • The four key listed insurers experienced intrinsic value growth of 4.8% to 12.4% during 1H18.
  • Net profit increased for all four companies, primarily due to residual margin and amortization, with New China Life Insurance (1336 HK) seeing a 79.1% rise.
  • Annual yields for the sector dropped to 3.7% to 4.8%, indicating a downward trend.

• Product Structure:

  • The proportion of wealth management products decreased, while the share of insurance products, especially health insurance, increased.
  • Health insurance premiums as a percentage of total premiums rose for all four companies, with New China Life Insurance reaching 32.75%.
  • First-year health insurance premiums for New China Life Insurance increased to 55.5%, up 19 percentage points from the previous year.
  • Traditional insurance products also showed an upward trend, with China Pacific Insurance Group (2601 HK) leading at 31.46%.

• Residual Margins:

  • Residual margin and amortization have become a key profit driver, especially for Ping An Insurance Group (2318 HK), contributing 61.9% to its pre-tax operating profit.
  • These margins are stable and not affected by external investment environments, making them a reliable source of profit.

• Asset Structure:

  • The scale of non-standard assets decreased, with New China Life Insurance seeing a 3.2pp reduction.
  • The proportion of equity assets dropped, while cash deposits increased.
  • Government bond yields declined, affecting investment income.

• Agent Channel:

  • The number of insurance agents at the four companies declined.
  • China Life Insurance (601628 CH) actively reduced its team size by removing inefficient agents.
  • Improving agent productivity (output per agent, orders per agent, premiums per agent) is crucial for long-term transformation.

• Investment Highlights:

  • Interim results were in line with expectations.
  • Protection-oriented products are expected to continue rising, thereby boosting residual margins and future earnings.
  • The sector's 2018 P/EV ratio is at a low of 0.91x.
  • Recommended companies include Ping An Insurance Group (2318 HK), PICC Property & Casualty (2328 HK), New China Life Insurance (1336 HK), and China Pacific Insurance Group (2601 HK).

Key Risks

• Agent Growth: New agent growth may not meet expectations.
• Agent Productivity: Output per agent may not grow as anticipated.
• Interest Rates: Short-term interest rate fluctuations could exceed expectations.
• Systemic Risks: Investment-related systemic risks may arise.

Ratings

Company Ratings

• Buy: Stock expected to outperform benchmark by more than 15%
• Accumulate: Stock expected to outperform benchmark by more than 5% but not more than 15%
• Hold: Expected stock relative performance ranges between -5% and 5%
• Underperform: Stock expected to underperform benchmark by more than 5%

Sector Ratings

• Positive: Sector expected to outperform benchmark by more than 10%
• Neutral: Expected sector relative performance ranges between -10% and 10%
• Cautious: Sector expected to underperform benchmark by more than 10%

Analyst Certification

The research analyst certifies that all views expressed in the report accurately reflect their personal opinions and that no part of their remuneration is tied to specific recommendations.

Disclosure of Interests

• GF Securities (Hong Kong) does not hold shares in the mentioned securities.
• No investment banking relationship with the companies in the past 12 months.
• Analysts and their associates do not serve as officers of the companies and have no financial interests in the securities.

Disclaimer

• This report is for informational purposes only and does not constitute an offer to buy or sell securities.
• It is intended solely for clients of GF Securities (Hong Kong).
• The information may be subject to change without notice.
• Recipients should not rely solely on this report and should seek professional advice before making investment decisions.
• The views expressed are those of the analysts and not of GF Securities (Hong Kong) or its affiliates.