Insurance & Reinsurance 02 (Oct 14 - Dec 25)

[winston]

China: Insurance - Overall

Edging slowly ahead in a tug of war

We initiate on China insurers with an Overweight weighting.

On balance, we see the key positives as winning the tug of war against the main challenges that have driven the sector’s de-rating in recent years.

Key positives: Continued strong agent-driven VNB growth, a stricter regulatory environment, higher EV and VNB under C-ROSS, as well as attractive valuations.

Key challenges: Valuation methodology migration (P/EV vs. P/BV), increased balance sheet risks and sustainability of the recent rise in bond yields.

Preferred pick of the sector is Ping An for its strong management team, the strength of its life insurance and its P&C insurance franchise, and its attractive valuation.

Source: CIMB

https://brokingrfs.cimb.com/XqnB-yylNaL ... 4W-2g2.pdf

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China’s new forex control threatens further blow to Hong Kong’s insurance sector

As of January 1, individuals are required to explain the purpose of their foreign currency purchases at Chinese banks, under new regulations

Specifically, individuals are restricted from using foreign currencies in overseas investments, including property, securities, life insurance products and investment-related insurance purchases.

It could make renewal payment more difficult and lead to surrenders in extreme cases

Source: SCMP

http://www.scmp.com/business/companies/ ... hong-kongs

[winston]

China’s life insurance premiums set to slow amid regulator’s crackdown

The universal life insurance business is seen as the major source of capital for unlisted insurers buying A shares aggressively

According to data from the China Insurance Regulatory Commission (CIRC), mainland premium incomes reached 3.1 trillion yuan in 2016, a year-on-year rise of 27.5 per cent.

Source: SCMP

http://www.scmp.com/business/banking-fi ... regulators

[winston]

<Research Report>JPMorgan: PRC Insurers See 5 Main Catalysts after CNY; Rates Overweight on CHINA LIFE, PING AN

JPMorgan, in its report, said PRC insurers will see five catalysts after the Chinese New Year holiday, being:
(1) earnings consensus revisions,
(2) January monthly premiums,
(3) AIA (01299.HK)'s annual results,
(4) China's ten-year bond yield movement, and
(5) the regulator's stricter guidance on insurers? risk management practices.

JPMorgan believed that the sector's current bearish earnings consensus for FY17-18 does not fairly factor in rising local long-end bond yield trends, higher insurance profit growth, and healthier asset allocation outlook.

Thus, the broker believed upward earnings consensus revisions and sector optimism.

The broker reiterated Overweight on PING AN (02318.HK) and CHINA LIFE (02628.HK).

Source: AAStocks Financial News

[winston]

<Research Report>JPMorgan: PRC Insurers See 5 Main Catalysts after CNY; Rates Overweight on CHINA LIFE, PING AN

JPMorgan, in its report, said PRC insurers will see five catalysts after the Chinese New Year holiday, being:
(1) earnings consensus revisions,
(2) January monthly premiums,
(3) AIA (01299.HK)'s annual results,
(4) China's ten-year bond yield movement, and
(5) the regulator's stricter guidance on insurers? risk management practices.

JPMorgan believed that the sector's current bearish earnings consensus for FY17-18 does not fairly factor in rising local long-end bond yield trends, higher insurance profit growth, and healthier asset allocation outlook.

Thus, the broker believed upward earnings consensus revisions and sector optimism.

The broker reiterated Overweight on PING AN (02318.HK) and CHINA LIFE (02628.HK).

Source: AAStocks Financial News

[winston]

China Insurers Surge in Hong Kong Amid Pension Fund Speculation

by Jeanny Yu

Analysts had a range of reasons for the sudden rally, from speculation Chinese pension funds are about to enter the stock market to bets higher borrowing costs would boost investment yields.

"H shares are rallying as investors are speculating that pension funds will be allowed to invest in stock market soon," said Linus Yip, First Shanghai Securities strategist in Hong Kong.

"It’s a big positive catalyst for insurers, who are managers of most of those funds, as they will be able to diversify their portfolios and investment yields will get boosted."

Source: Bloomberg

https://www.bloomberg.com/news/articles ... uoys-banks

[winston]

Chinese consumers shrug off Beijing’s ban on insurance gimmicks

Some consumers said the offbeat insurance products changed their perspective on financial institutions

A growing number of mainland Chinese consumers embrace internet insurance.

For instance, they are willing to pay 0.70 yuan (82 HK cents) to receive compensation of six yuan to cover delivery fees if their online purchases are refunded.

Source: SCMP

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

[winston]

<Research Report>C Suisse: CN Insurers Valuation Still Below 3-Year Average Level; Upbeat on China Life, Taiping, Ping An

Credit Suisse, in its report, said Chinese insurers saw a sharp rally on Monday (6 February), mostly driven by rising bond yield and clamping down platform insurers.

The broker believed the asset quality of Chinese insurers is steady.

Although bond yield is rising, the risk is still manageable. The broker believed that rising wealth management product (WMP) yield poses limited impact to insurance sales, due to regulatory tightening on banks.

The broker said the valuation of the Chinese insurance sector is still below the three-year average after the share price rally.

The broker preferred CHINA LIFE (02628.HK) as a prime beneficiary of rising yield and improving landscape. The broker also liked CHINA TAIPING (00966.HK) (valuation at a discount, despite strong growth) and PING AN (02318.HK) (a catch-up trade).

Credit Suisse is confident about the VONB growth outlook (expecting up 20% yearly in FY17), given strong ?open-year? sales year-to-date (Ping An +60%, Taiping +50%, and CPIC (02601.HK) +40%) and upgrade in product quality (China Life and CPIC).

Source: AAStocks Financial News

[winston]

<Research Report>G Sachs Predicts CN Life Insurers to Have Valuation Recovery; China Life Expected 31% Upside Potential

Goldman Sachs, in its report, believed that the China life insurance sector is well positioned for valuation recovery, with robust value of new business value (VONB) growth and improving quality, ample capital and still reasonable valuations.

Positive catalysts could be macro (higher interest rates, more positive sentiment on China/A-share market), or micro (quality of products sold, additional disclosure).

Goldman Sachs said CHINA LIFE (02628.HK) looks best positioned to benefit, being the largest pure life insurer and at a reasonable valuation.

The broker reiterated Buy (on Conviction List) with target price of $30.2, implying 31% potential upside.

The broker also expected China Life to report robust VONB growth, which could give investors more confidence in EV reporting.

Source: AAStocks Financial News

[winston]

Insurers warned of 'crocodiles'

The chairman of China's top insurance regulator vowed to impose "stringent" rules and punish short-term speculation by insurers "severely" - the latest sign of tightening controls in the sector.

The watchdog will also curb "aggressive" pricing and the "unreasonably" high returns of some insurance products, Xiang Junbo, chairman of the China Insurance Regulatory Commission, said in Beijing yesterday. And insurers should not attempt to interfere in the management of listed companies.

The commission "will never allow insurance to become a rich man's club, let alone allow financial crocodiles to use insurance as their channel or hideout," he added.

The regulator has since last year tightened curbs on investment-type policies and restricted insurers' acquisitions of listed firms.

The regulator in December suspended Foresea Life Insurance - involved in a control tussle at developer China Vanke - from selling new universal-life policies and froze new stock buys by Evergrande Life Insurance after the top securities official slammed leveraged stock acquirers as "robbers."

Source: BLOOMBERG