Insurance & Reinsurance 02 (Oct 14 - Dec 25)

[winston]

<Research>JPM Won't Chase ST Rebound in Life Insurers, Favors PICC P&C

2025/01/24

JPMorgan opined in its research report that China's insurance industry should actively develop investment-linked products to solidify policy sustainability.

As a result, the broker will not chase the short-term rebound in life insurers, and it expressed its preference for PICC P&C (02328.HK).

China's State Council announced encouragement for state-owned insurers to allocate 30% of total premiums to the A-share market, according to the report.

Considering the current low bond yield environment, the broker viewed adding asset allocation to stocks as understandable but it emphasized three points: the scope of asset allocation, existing stock market allocation and private insurers.

Even though private insurers, including foreign joint ventures, may gradually increase stock allocation and trigger a deviation in their conservative asset-liability management perspective, the broker did not expect AIA (01299.HK) or PING AN (02318.HK) to quickly adopt this approach.

Despite potential benefits, it still had concerns about risks, such as the growing correlation between balance sheets and A-share market volatility, and the increasing mismatch between assets (market risk) and liabilities (interest rate risk).

Source: AAStocks Financial News

http://www.aastocks.com/en/stocks/analy ... stock-news

[winston]

China/Hong Kong Insurers – Leveraging on longer-term demographic tailwinds

China’s insurance sector recorded accelerated insurance premium income growth in 2024, as this rose 11.2% in 2024 to CNY5,696b, versus growth of 9.1% and 4.6% to CNY5,125b in 2023 and CNY4,696b in 2022, respectively, based on data from National Financial Regulatory Administration (NFRA).

2025 has started in slow fashion, as overall insurance premium income registered a mild decline of 1.2% year-on-year (YoY) to CNY1,515b in 2M25. The drag came from personal insurance (-2.2% YoY), which offset the 4.4% YoY increase from the property and casualty (P&C) segment, as premium income from personal insurance accounted for a large portion of the overall pie.

Within the personal insurance space, life insurance saw a 3.5% dip in premium income, while accident and health premium incomes were up 5.4% and 3.6% respectively.

We believe the weaker life insurance premium income was driven by slower jumpstart sales as some of the demand was brought forward to 2024 prior to guaranteed rate cuts on some traditional insurance products, coupled with a product transition period as insurers are shifting focus to more participating product sales, which are more difficult to sell and require additional training.

We expect this softness to be temporary as the industry transitions towards higher quality development with better asset-liability management.

Meanwhile, if we look at claims and payments data for the entire industry, this jumped 21.8% to CNY2,301b in 2024, and increased by another 13.1% YoY to CNY600b in 2M25. Most of the increases in claims and payments came from personal insurance.

There are currently headwinds from a lower interest rate environment in China, as low yields typically raise concerns over insurer’s asset-liability matching, since the guaranteed rates to policyholders for some products could exceed investment yields in a low interest rate environment.

However, major insurers do have a sizeable buffer in comparison to the minimum required solvency levels.

Longer term, we continue to view the insurance sector as a beneficiary of rising wealth and demographic tailwinds as an ageing population and higher life expectancy rates would translate to increased demand for protection products as well as healthcare and eldercare related services.

Based on the latest data, China’s proportion of population aged 65 and above increased further from 15.4% in 2023 to 15.6% in 2024.

The use of artificial intelligence (AI) has also been highlighted by the insurers as a means to boost efficiencies, improve service quality and reduce risks.

Although Chinese insurers are unlikely to be directly impacted by potential tariffs from the Trump administration, we believe there will be second order effects from weaker economic growth and volatile financial market conditions.

Coupled with the continued low interest rate environment, we recommend investors to position more defensively. In this regard, we continue to recommend Ping An-H [2318 HK; FV: HKD62.70] as our preferred sector pick.

Source: OCBC

[winston]

NAFR: CHINA Q Insurance Sector Premium Income Hikes 0.9% YoY

The original premium income of the insurance industry in China for 1Q25 amounted to RMB2.17 trillion, up 0.93% YoY, the National Administration of Financial Regulation (NAFR) released the operating situation of the insurance industry in March 2025 saying.

Of which, property insurance premium income amounted to RMB386.7 billion, while life insurance premium income was RMB1.79 trillion.

Source: AAStocks Financial News

http://www.aastocks.com/en/stocks/news/ ... -news/AAFN

[winston]

China: <News alerts> New regulations on public funds and insurance sector boost China financial sector (+ve)


CSRC released new regulations on public funds, aligning fund performance and fund managers’ compensation with the fee structure of public funds. The regulations also introduce penalties for funds that underperform relative to their benchmark indices

NAFR relaxed capital requirements for insurance funds investing in equities, reducing the risk factor by 10%.

This is expected to encourage insurers to allocate more capital to the stock market, particularly in high-dividend stocks

Financial sectors, which are currently underweighted by public funds, are likely to benefit from portfolio rebalancing.

Insurers will also benefit from sustained stock market re-ratings, especially given the resilience of bank share prices

We believe the re-rating of the financial sector will continue, driven by sustained inflows from public funds.

Insurers' strong fundamentals, including robust VNB growth and improving ROE, further support this view.

Our top pick remains Ping An (2318 HK, BUY), and we also like CPIC (2601 HK, BUY)

Source: DBS

https://www.dbs.com/insightsdirect/indu ... ecid=25514

[winston]

<News Alert> China insurance: Stricter supervision on participating policies to accelerate COL decline (+ve)

NFRA tightens dividend rules for participating life insurance to strengthen sector’s asset-liability management (ALM), reduce pricing competition, and ensure sustainability

Mandatory management approval required if dividend rate exceed 3Y avg. returns, insurance reserves turn negative, or insurer rating and dividend rate mismatch; regulator will penalize violators

Positive for leading insurers as tighter controls limit aggressive pricing, accelerate cost of liability (COL) decline, and support market consolidation

Top pick: Ping An (2318 HK, BUY) benefits from strong ALM, low COL, growing high-dividend equity allocation, and expected ROE recovery in FY25F

Source: DBS

https://www.dbs.com/insightsdirect/indu ... ecid=26117

[winston]

CHINA: <Research>UBS: AIA China, PING AN, CHINA LIFE, Excel in Transition to PAR Products

The Insurance Association of China (IAC) recently lowered the pricing interest rate (PIR) benchmark by 14 bps to 1.99%, which is 51 bps below the current traditional product PIR of 2.5%, UBS said in a report.

This adjustment aligned with market expectations, primarily reflecting the downtrend in market interest rates in 2Q25 (such as government bond yields, deposit rates, and loan market quoted rates).

This adjustment in PIRs may signify the end of the golden era for traditional assured whole life plan (IWLP).

Although these products are favored by consumers, they pose higher interest rate risks for insurance companies.

In contrast, the attractiveness of participating (PAR) products is increasing, benefiting both the Hong Kong market (illustration rate of return of 6-6.5%) and the mainland market.

In the transition to PAR products, AIA China holds an advantage due to its strong investment capabilities, performance rates, and agent capabilities.

Additionally, PING AN (02318.HK) and CHINA LIFE (02628.HK) also outperformed their peers in the transition to PAR products.

Source: AASTOCKS Financial News

http://www.aastocks.com/en/stocks/news/ ... -news/AAFN