Insurance & Reinsurance 02 (Oct 14 - Dec 25)

[winston]

Pandemic crisis forecast to hit insurers for US$200b

The pandemic will cost the insurance industry over US$200 billion, according to Lloyds of London, who estimated that its own payouts are now on a par with the September 11, 2001 attacks or the combined impact of hurricanes Harvey, Maria and Irma in 2017.

Lloyds, which as an insurance market pays out to insurers affected by disasters, said it expects to pay between US$3 billion and US$4.3 billion to insurance companies to help them cope with the Covid-19 pandemic.

Losses could widen if lockdowns continue into the next quarter, which would push the overall cost to the insurance industry to US$203 billion. Unlike the storms, for example, the pandemic’s impact is global, systemic and long term.

“Lloyd’s believes that once the scale and complexity of the social and economic impact of Covid-19 is fully understood, the overall cost to the global insurance non-life industry is likely to be far in excess of those historical events,” the London-based insurance market said.

The study undertaken by Lloyds assumed social distancing and lockdown measures through 2020, as well as the forecasts for the drop in gross domestic product globally.

“What makes Covid-19 unique is not just the devastating continuing human and social impact, but also the economic shock.” Lloyd’s Chief Executive John Neal said.

“Taking all those factors together will challenge the industry as never before, but we will keep focused on supporting our customers and continuing to pay claims over the weeks and months ahead.”

Source: AP

https://www.thestandard.com.hk/breaking ... or-US$200b

[winston]

Chinese insurers' profit projected to fall to 100b yuan

Profits fell at China's insurance companies in the first quarter, as the new coronavirus pandemic in the mainland hurt businesses and investment returns, but the market remained stable as insurers took a string of efforts to mitigate the impacts of the epidemic.

The combined profits of insurers were predicted at 100.2 billion yuan in the first quarter, down by 14.44 percent year-on-year, Shanghai Securities News reported today, citing industry data.

Premium income grew by 1.78 percent on-year to 1.31 trillion yuan, while that of property insurance companies increased by 4.17 percent to 360.1 billion yuan.

Amid the virus pandemic, the income of health insurance products surged by 21.6 percent on-year to 264.1 billion yuan.

The country's four leading online insurance companies including ZhongAn and Anxin reported strong performance, with income surging by 75.25 percent on-year.

Earlier data from the China Banking and Insurance Regulatory Commission showed the total assets of the insurance industry stood at 21.72 trillion yuan at the end of March, up by 13.66 percent from a year ago.

Source: The Standard

https://www.thestandard.com.hk/breaking ... -100b-yuan

[winston]

Jun 9, 2020

<Research Report>CICC: CN Bond Rate Rebound May Revive CN Insurers' Valuation; Bullish on China Life, NCI

CICC, in its report, retained upbeat view on Chinese insurers with low valuation and high dividend yield.

It recommended CHINA LIFE (02628.HK) and NCI (01336.HK) with ratings of Outperform and target prices at $23 and $38.

The broker also stayed bullish about the growth prospect of AIA (01299.HK), which offered an entry point at share adjustment after short-term challenges this year. AIA was rated Outperform with target price of $95.

In CICC view, the game changer of Chinese insurers' valuation was tweaked by the sturdy rebound of Chinese bond rates.

Market was concerned about the consistent pressure of long-term low rate environment on Chinese insurers' valuation. Yet, the broker found such worry was overdone since the real negative impact on Chinese insurers is only the rapid downturn of long-term rate which lingers for 5-10 years, of which case the likelihood is extremely low.

With Chines economic activities resuming to normal in 2Q20, the consistently long-term low rate will see turnaround, which will revive the gamer changer of Chinese insurers' valuation.

Source: AAStocks Financial News

[winston]

CHINA LIFE 5M20 Premium Income Adds Nearly 15% to RMB369.8B

CHINA LIFE (02628.HK) announced that the accumulated premium income of the Company for the period from 1 January 2020 to 31 May 2020 was about RMB369.8 billion, up 14.99% yearly.

Source: AAStocks Financial News

[winston]

not vested

Chinese Insurers – Revised equity investment limits a booster for sentiment

The CBIRC has announced revised equity investment limits for Chinese insurers ranging from 10% to 45% (versus the previous standard 30% limit), depending on individual firms’ solvency capital positions.

The upper equity investment limit has been raised for well-capitalised insurers to invest up to 45% of their total assets, while smaller and mid-sized firms with weaker solvency capital positions will have to cut their equity exposure, thereby promoting better risk management within the industry.

This latest development is positive for equity market sentiment, but is unlikely to result in a substantial change in the asset mix of major insurers in the near term, given capital consumption considerations and the need to balance the risk-reward proposition with asset-liabilities management.

Following the announcement, the new higher equity investment limits that will apply to Chinese insurers under research coverage are: 35% for China Life (2628 HK), Ping An (2318 HK), CPIC (2601 HK) and PICC Group (1339 HK), and 40% for PICC P&C (2328 HK).

We continue to expect a gradual recovery path for the sector from the impact of Covid-19.

Within the Hong Kong and China insurance sector, our preferred buy-rated sector picks are maintained in AIA (1299 HK-fair value HKD85), Ping An (2318 HK-fair value HKD105) and China Life (2628 HK-fair value HKD21).

Careful accumulation is advised following the equity market’s recent rebound.

Source: OCBC

[winston]

Insurance connect on track for launch this year

by Avery Chen

The first phase of the long-awaited insurance connect scheme is expected to be launched this year, and the cross-border sales could be realized early next year, said Wilson Tang, chief executive of BOC Life Assurance Company.

Tang projects at the beginning stage, local insurers will be allowed to set up logistics centers in mainland cities in the Greater Bay Area, where customers could settle renewal premiums, apply insurance claims and enjoy other post-sales services. The second phase of insurance connect could enable cross-border sales of insurance products within the Greater Bay Area.

BOC Life is exploring healthcare investment opportunities in the Greater Bay Area for the first time, involving hospitals and elderly homes, he said. That came as local insurers saw business rebound despite the third wave of Covid-19 in the city.

Tang expects a V-shape recovery in third-quarter insurance sales after BOC Life saw a 37 percent year-on-year drop in second-quarter new office premiums to around HK$2 billion.

The insurer said its first-half new office premiums fell 25 percent year-on-year to HK$5.4 billion, as insurance sales to both local and mainland customers dropped amid the Covid-19 pandemic.

But the first-half new business value rose around 9 percent, and BOC Life's market share increased as the insurer improved product structure, Tang said.

He added the company is mainly focusing on the local consumer market. Sales to mainland customers only accounted for 5 percent of total new office premiums, down from 20 percent in the past. The pandemic's adverse impact on sales to mainland clients is likely to continue for the second half, Tang said.

Alfred Cheung, deputy chief executive and chief sales officer of BOC Life, expects the third-quarter new office premiums could reach more than HK$3 billion, returning to the first-quarter level. The company also increased its sales team to 900 from 700 last year, and it's aiming to expand to 1,000 this year.

Meanwhile, Priscilla Ng, chief customer and marketing officer of Prudential Hong Kong, expects third-quarter sales will improve as clients have gradually resumed in-person meetings with agents.

She said sales to mainland customers slumped significantly in the second quarter, but local demands remain resilient. Around 10 percent of insurance sales came from remote platforms amid the Covid-19 outbreak peak, but Ng projects online sales will fall as infection cases drop.

Source: The Standard

https://www.thestandard.com.hk/section- ... -this-year

[winston]

Hong Kong & China Insurers – Prefer life over non-life players

Hong Kong and China insurers reported unsurprisingly weak 1H20 results due to the pandemic impact as new policy sales decreased due to social restrictions, margins weakened from a product mix shift towards lower-margin products and reserves were strengthened at both life and property and casualty (P&C) insurers, hurting the sector’s bottom line.

However, a positive lining from the pandemic has been the accelerated digital transformation for the industry.

Looking ahead, we favour life insurers over non-life insurers, given the ongoing gradual recovery of life insurance product sales, the sequential margin improvement expected from 1H20 and improved prospects for the sector’s investment portfolio from a more stable investment environment, while non-life insurers should continue to see overhang from upcoming auto insurance reforms.

Our preferred sector picks are maintained in buy-rated leading players such as Ping An (2318 HK-fair value HKD105) and China Life (2628 HK-fair value HKD22).

Following the share price gains in AIA (1299 HK-fair value HKD85), we remain constructive on its longer term China growth prospects and prefer to accumulate new positions on pullback.

Source: OCBC

[winston]

China scraps insurer foreign shareholding cap

Mainland's market watchdog has canceled the restriction on the proportion of foreign shares in insurance companies below 51 percent.

The move by China Insurance and Banking Regulatory Commission is to further expand the opening up of the insurance industry.

Foreign insurers or groups' portion of the shareholdings can reach 100 percent.

CIRBC's new rule also clarifies the access requirements for foreign insurance groups and companies and overseas financial institutions with reference from overseas countries.

Source: The Standard

https://www.thestandard.com.hk/breaking ... olding-cap

[winston]

‘Hong Kong’s insurance industry is entering its darkest time’｜CEO Ching

Non-participating life insurance terms in Hong Kong are highly attractive to mainlanders.

Last year, the total premium of insurance plans taken out by mainlanders was only $6.8 billion, amounting to a sharp drop of 84 percent year-on-year.

Although Hong Kong’s insurance lost a lot of mainland customers last year, the total premium still grew 4.9 percent year-on-year in 2020 to $608.4b.

Mainland customers account for a third of the insurance business of AIA’s Macau branch.

Source: Apple Daily

https://hk.appledaily.com/opinion/20210 ... ESENMCN6M/

[winston]

China Insurers – 1Q results highlights, looking past near-term moderation

Overall listed Chinese insurers under coverage reported fairly decent 1Q earnings growth, helped by investment gains as gross investment yields improved to ~5.6%, while sector book values grew a low to single digit in 1Q.

Segments wise, non-life insurance reported stronger underwriting performance in 1Q results, while life sales recovery was modest amid ongoing agency force recruitment challenges. Solvency ratios remained solid, with meaningful buffer above regulatory minimums.

Despite the decent results, sector share price performance has been lack-lustre, which we believe could be due to concerns over the recent softening of recovery momentum in life policy sales, more conservative management comments on the sector’s growth outlook and cautious investor sentiment on Chinese financials in the wake of market worries over China distressed debt asset management companies.

A gradual recovery path remains the base case: Looking past the near-term sector challenges, we retain a constructive stance on the sector over the medium-term in view of the positive structural growth story driven by improving consumption and room to raise insurance penetration amongst the Chinese population.

Key picks for patient investors looking to add long term positions are maintained in Hong Kong-based insurer AIA Group (1299 HK: Buy, fair value HKD120) which is steadily expanding its China market presence, Ping An Insurance (2318 HK: Buy, fair value HKD113) for its diversified financials sector exposure and PICC P&C (2328 HK: Hold, fair value HKD8.50), which is benefitting from improving non-auto underwriting tailwinds.

Source: OCBC