Insurance & Reinsurance 02 (Oct 14 - Dec 25)

[winston]

Health insurance stocks surge… Aetna, Humana, and UnitedHealth all touch fresh 52-week highs.

[winston]

<Research Report>Deutsche's Latest Investment Ratings & TPs for CN Insurers (Table)

Deutsche Bank's latest ratings and target prices for Chinese insurance stocks:

Stock/ Rating/ Target Price (HK$)
CHINA LIFE (02628.HK)/ Buy/ 31.4
PING AN (02318.HK)/ Buy/ 55.0
CPIC (02601.HK)/ Buy/ 42.1
NCI (01336.HK)/ Buy/ 36.9
CHINA TAIPING (00966.HK)/ Buy/ 32.1
CHINA RE (01508.HK)/ Hold/ 2.1

Source; AAStocks Financial News

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<Research Report>Citi: CN Insurers Valuation Already at Historic Lows; Predicts Potential Mkt Revaluation on Industry

Citigroup said in its report that Chinese insurers are now valued at historic lows and expected the industry will face potential market revaluation.

Its top picks were PING AN (02318.HK) and CHINA LIFE (02628.HK).

Citigroup also said that once the US raises interest rates, it will not only further support the mainland bond rates, but will also help support Chinese insurers' yield rates of new capital.

Source: AAStocks Financial News

[winston]

A NEW HIGH FOR 'THE WORLD'S GREATEST BUSINESS'

The world's greatest business is continuing its incredible march higher...

Longtime DailyWealth readers know we're big fans of the insurance industry. Insurance companies collect premiums from their customers. If they're good at what they do, the premiums exceed what they pay out in claims. In the meantime, they get to invest all that money (the "float"). That's why we call insurance "the world's greatest business."

A good way to check the industry's pulse is through the iShares Insurance Fund (IAK). Its holdings include industry titans AIG, MetLife, and Prudential Financial. It's an easy "one click" way to invest in these types of stocks.

As you can see in the chart below, IAK is in the midst of a steady, long-term uptrend. The fund just hit its highest level since the financial crisis of 2008/2009. It's no wonder insurance companies are the only investment Porter hopes his kids ever make...

Source: Daily Wealth

[winston]

Mainlanders spend HK$48b on Hong Kong insurance products policies in first three quarters, double the figure a year earlier

Insurance related product sales are expected to slow from November after new UnionPay rules take effect

Mainlanders accounted for 37 per cent of the HK$132.3 billion in new life insurance sales in the first nine months this year

The interest from mainlanders helped lift total new life policies sold in Hong Kong to HK$132.6 billion in the first nine months this year, up 35.8 per cent on year.

Source: SCMP

http://www.scmp.com/business/banking-fi ... e-products

[winston]

Offshore Insurance Transactions of UnionPay Cards Plunge 99%

Economic Information Daily reported that since UnionPay reinstated its stance on not supporting the payment of purchasing insurance products with capital investment nature in Hong Kong, the turnover of mainland clients buying insurance in Hong Kong has declined.

Citing the latest data from an authoritative source, the newspaper said the offshore insurance transactions of UnionPay cards have plunged by over 99% from RMB8.06 billion in October to RMB30 million in November.

Source: AAStocks Financial News

[winston]

UPDATE China Stocks Tumble As Beijing Clamps Down On Insurance Buying

By Shuli Ren

China’s benchmark CSI 300 Index tumbled 2.4% as we head to the noon break. Investors are nervous because Beijing is doubling down its efforts to scale back leveraged stock purchases led by insurance companies.

On late Friday, China Insurance Regulatory Commission said that it has suspended Evergrande Life, the insurance subsidiary China Evergrande Group (3333.Hong Kong), from investing in China’s stock markets.

China Vanke (2202.Hong Kong), subject of Evergrande’s share purchases, tumbled another 5.1% this morning. Evergrande was down 2.6%.

Earlier last week, the insurance regulator suspended Foresea Life from selling “universal” life insurance products, which are insurance policies that offer death benefits with investment elements, asking the insurer to clean up its practices. Foresea has been an active corporate raider and its “universal” products are substantial, accounting for about 90% of Foresea’s premium income.

How does this all begin? For details, see my last week’s blog “China Stocks Tumble After Securities Regulator Warns Of Leveraged Buyouts“.

Credit Suisse‘s China strategist Li Chen is trying to assure us this is not going to stop the mainland China’s bull market:

The universal life investment has limited impact on the stock market. Based on our statistics of the top-10 shareholders’ investments for all A-share stocks, universal life investment only accounts for c.10% of the total insurance stock investment as of 3Q16. Specifically for Foresea Life and Evergrande, their investment only accounts for 3% of total insurance investment as of 3Q16.

Despite the short-term headwinds due to CIRC’s investigation on universal life, we continue to believe that insurance companies will switch part of FX investment to equity in 2017 due to a bond yield hike.

Year-to-date, the Deutsche X-Trackers Harvest CSI 300 China A-Shares ETF (ASHR) has fallen 9.1% and the VanEck Vectors ChinaAMC SME ChiNext ETF (CNXT) has tumbled 24.5%.

Source: Barron's Asia

http://blogs.barrons.com/asiastocks/201 ... ce-buying/

[winston]

Insurance Stocks Lead Hang Seng Tumble As Beijing Lowers Investment Limit

By Shuli Ren

Adding fuel to the fire, Chinese insurance companies, heavyweights on the index, tumbled the most after the insurance regulator said insurance companies can invest at most 30% of their portfolios in stocks.

This month, China Insurance Regulatory Commission has been cracking down on “universal” insurance policies, a kind of life insurance that also guarantees handsome returns.

To reach this kind of returns, insurance companies have been leveraging up big time to buy blue-chip publicly-listed companies.

The regulator has already suspended Evergrande Life, the insurance subsidiary China Evergrande Group (3333.Hong Kong), from investing in China’s stock markets and Foresea Life from selling “universal” life insurance products.

To be sure, insurance companies are nowhere close to the 30% limit yet. By the end of October, equity investment by insurers reached only 14.4% of the sector’s total portfolio, according to data from the insurance regulator.

CIRC only just raised the ceiling to 40 from 30 per cent in July last year, in an effort to encourage insurers to buy A-shares to shore up the tumbling stock market.

Mainland China’s government bond market is sold off today, after the Fed raised its 2017 rate hike forecast to 3 times. Normally, this would be good news for insurance stocks. But today, the regulatory cloud is too heavy!

Source: Barron's Asia

http://blogs.barrons.com/asiastocks/201 ... ent-limit/

[winston]

Chinese Buying Insurance in Hong Kong Said to Face Further Curbs

Mainlanders’ use of MasterCard, Visa cards said to be limited
Insurance purchases are tool for getting money out of China

Source: Bloomberg

https://www.bloomberg.com/news/articles ... ther-curbs

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China May Be Losing Its Cat-and-Mouse Game With Hong Kong Insurance Buyers

by Alfred Liu

Residents keep finding new channels to get money out of China
People will get around curbs ‘no matter what,’ analyst says

It’s a game of cat-and-mouse that has gone on for most of this year, with Beijing showing no signs of winning yet. Each time China tightens up on money flowing out of the country for purchases of Hong Kong insurance, new routes seem to emerge.

In the latest clampdown, which started on Saturday, MasterCard Inc. and Visa Inc. added restrictions on purchasing all but the cheapest insurance policies using credit cards issued in China, according to people with knowledge of the matter.

Chinese have been spending billions of Hong Kong dollars on insurance products that are linked to investments, as a way of channeling money out of China.

Chinese residents will “actively seek ways to get around the curbs no matter what,” said Bloomberg Intelligence analyst Steven Lam. Mainland purchases of Hong Kong insurance may rise to fresh records after reaching a high of HK$18.9 billion ($2.4 billion) in the third quarter, he said.

Tenacious mainland buyers have bypassed restrictions by channeling money through online payment services or by using Hong Kong money changers, who allow money to be received in Hong Kong based on domestic transfers to accounts within China.

They’ve also swiped their credit or debit cards again and again -- in one case, as many as 800 times -- so that each transaction remained below the limit. The latest Visa and MasterCard rules restrict multiple swiping.

Weakness in the yuan is encouraging Chinese residents to put their money into products denominated in either Hong Kong or U.S. dollars. That’s adding to the headaches for Chinese officials concerned that capital flight could further contribute to yuan depreciation. Outflows are estimated to have totaled more than $1.5 trillion since the beginning of 2015.

Here’s how the game unfolded this year, based on information obtained by Bloomberg, as the government worked with credit and debit card companies to control the amount of money seeping out:

February

Purchases of insurance products using China UnionPay Co. debit and credit cards were capped at $5,000 per transaction. Shares of insurer AIA Group Ltd. slumped as much as 9.4 percent on the first trading day after the news, while Prudential Plc declined as much as 7.5 percent.

March

Mainland buyers were banned from using electronic third-party payment services for life insurance and investment-related products.

Insurance purchases by mainland residents rose to a record in the first quarter, showing the limited effect of restrictions.

October

A UnionPay ban on using cards for purchases of life insurance and investment-related products was imposed after third-quarter insurance sales rose to a record. AIA shares plunged as much as 7.2 percent on the first trading day after the news.

December

In the latest restriction, mainland residents’ purchases using MasterCard and Visa credit cards issued in China were capped at $5,000 per Hong Kong insurance product. Fourth-quarter data on purchases is due to be released in March.

Source: Bloomberg

https://www.bloomberg.com/news/articles ... -hong-kong