Jun premium – Robust growth for both Life and P&C

21 July 2017Life InsuranceChina Insurance SectorBanking / FinanceLife InsuranceIndustry UpdateAsiaChinaHong KongIndustryChina InsuranceSectorDate21 July 2017Deutsche BankMarkets ResearchJun premium – Robust growth for bothLife and P&CSteady Life and P&C growth to conclude 1H17Most life insurers (except PICC Group) saw steady growth momentum in Jun,ranging from -50.8 to 29.7% yoy (vs. -0.2to 128.9% in May), with most insurersrecording positive growth, including NCI. Ping An Life recorded decent 1H17 FYPgrowth of 39% and CPIC disclosed robust agency FYP growth of ~42%. P&Cpremium growth also remained steady, with key players ranging from 16.6-47.2%(vs. 13.3-34.2% in May) along with pickup in Jun auto sales (+4.5% yoy). Wemaintain our positive view on Ch insurers. Top picks: Ping An and NCI.Life – a robust 1H17Ping An led Jun growth at 29.7% (+29.0%), followed by CPIC at 23.8% (+16.9%),Taiping at 18.4% (+18.3%) driven by individual regular business (+23.9% yoy),China Life at 12.5% (+13.1%), NCI at 8.6% (-0.2%), and PICC Group at -50.8%(vs. +128.9% in May). PICC Group recorded negative Jun health premium, due toreclassification of certain health products. In terms of 1H17, Ping An led at 37.5%yoy (vs. +38.5% in 5M17), followed by CPIC at 34.4% (+36.5%), Taiping at 29.8%(+31.6%), China Life at 18.3% (+19.3%), PICC Group at -3.0% (+0.7%) and NCIat -13.8% (-17.5%).P&C – steady growthP&C business recorded steady growth in Jun with yoy growth (VAT-adjusted)ranging from 16.6% to 47.2%. Taiping led Jun growth at 47.2% yoy (vs. +34.2% inMay), followed by Ch Continent at 26.8% (+25.3%), Ping An at 22.9% (+27.7%) inline with auto (+22.6%) and non-auto (+22.3%), CPIC at 22.5% (+14.0%) and PICCat 16.6% (+13.3%). On a YTD basis, Ping An led at 28.4% (vs. +29.6% in 5M17),followed by Ch Continent at 23.2% (+22.5%), Ch Taiping at 22.2% (+16.9%), PICCat 15.3% (+15.0%) and CPIC at 11.3% (+9.1%) driven by non-auto (+13.9% yoy).Prefer life players with strong protection focusWe reiterate our Positive view on Chinese life insurance sector, and we believethe current valuation of 1.1x 2017E P/EV for life insurers remains attractive. Weprefer insurers with strong protection focus, and thus have Ping An and NCI asour Top Picks. We believe Ping An’s strongest protection focus and superior riskmanagement capabilities should justify a premium valuation, while NCI’s balancesheet risk may be overdone. We also have Buy ratings on CPIC, Ch Taiping, ChinaLife-H. Investment risks include significant investment market weakness, assetquality risks, a sharp decline in bond yields and China’s macro risks.Esther ChweiResearch Analyst+852-2203 6200Lexie ZhouResearch Analyst+852-2203 6180Top picksPing An (2318.HK),HKD58.80BuyNCI (1336.HK),HKD48.65BuySource: Deutsche BankCompanies featuredChina Life (2628.HK),HKD25.75BuyPing An (2318.HK),HKD58.80BuyCPIC (2601.HK),HKD34.45BuyNCI (1336.HK),HKD48.65BuyCTIH (0966.HK),HKD23.60BuyPICC Group (1339.HK),HKD3.69HoldPICC P & C (2328.HK),HKD14.92BuyChina Re (1508.HK),HKD1.87HoldChina Life (601628.SS),CNY29.38HoldPing An (601318.SS),CNY53.82BuyCPIC (601601.SS),CNY35.59BuyNCI (601336.SS),CNY60.98HoldSource: Deutsche BankDeutsche Bank AG/Hong KongDeutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should beaware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should considerthis report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONSARE LOCATED IN APPENDIX 1. MCI (P) 083/04/2017.Distributed on: 20/07/2017 16:12:09 GMT0bed7b6cf11c 21 July 2017Life InsuranceChina Insurance SectorJun 2017 premiumsPremium snapshotLife premiums:China Life reported 6M17 life premium of Rmb346,200m(+18.3% yoy), Ping An reported Rmb237,706m (+37.5%), CPIC reportedRmb110,551m (+34.4%), NCI reported Rmb61,239m (-13.8%), Taiping Lifereported Rmb78,935m (+29.8%) and PICC Life and Health reported Rmb99,831m(-3.0%). In terms of monthly premium in Jun, China Life had Rmb47,700m(+12.5% yoy), Ping An had Rmb26,534m (+29.7%), CPIC Rmb16,805m (+23.8%),NCI Rmb11,085m (+8.6%), Taiping Rmb9,754m (+18.4% yoy), and PICC Life andHealth Rmb3,650m (-50.8%).P&C premiums:PICC reported 6M17 P&C premium of Rmb179,317m (+15.3%on VAT-adjusted basis), Ping An Rmb103,443m (+28.4%), CPIC Rmb52,556m(+11.3%), Ch Taiping Rmb10,684m (+22.2%) and Ch Continent Rmb18,602m(+23.2%). In Jun, PICC achieved premium of Rmb34,431m (+16.6%), Ping An atRmb17,002m (+22.9%), CPIC at Rmb9,415m (+22.5%), Ch Taiping at Rmb2,245m(+47.2%) and Ch Continent at Rmb3,327m (+26.8%).Figure 1: Jun-2017 premiums summaryLife (Rmb m)YTDyoyMonthlyyoyChina Life346,20018.3%47,70012.5%Ping An237,70637.5%26,53429.7% Ping An Life226,51638.7%24,76829.6% Ping An Health982213.1%162273.7% Ping An Annuity10,20810.5%1,60423.0%CPIC110,55134.4%16,80523.8%NCI61,239-13.8%11,0858.6%Taiping78,93529.8%9,75