July premium – Slightly moderated growth for both Life and P&C

18 August 2017Life InsuranceChina Insurance SectorBanking / FinanceLife InsuranceIndustry UpdateAsiaChinaHong KongIndustryChina InsuranceSectorDate18 August 2017Deutsche BankMarkets ResearchJuly premium – Slightly moderatedgrowth for both Life and P&CSlightly moderated Life and P&CJuly Life premium growth moderated slightly after a robust 1H17, ranging from-11.1% to 28.1% (vs. -50.8 to 29.7% in Jun). Ping An, Taiping and China Lifemaintained double-digit growth at 28.1%, 16.0% and 14.8% respectively. PingAn recorded slower FYP (ex-Grp) growth into 2H17, at 19.1% yoy in July (vs.+44.2% in 1H). However, we believe life insurers have switched to focus more onvalue growth in 2H17, hence the growth moderation should not be a concern.P&C premium growth also saw slight deceleration, with key players ranging from13.0% to 25.9% (vs. 16.6% to 47.2% in Jun), in-line with the moderated growth inJuly auto sales (-9.2% mom). We maintain our positive view on Chinese insurers.Top picks: Ping An and NCI.Life – moderated momentumPing An led July growth at 28.1% yoy (vs. +29.7% in Jun), followed by Taiping at16.0% (+18.4%), driven by Taiping Life's regular business (individual +15.3% andbancassurance +13.2%, and more than offset weakness in single bancassurance-78.5%), China Life at 14.8% (+12.5%), NCI at 5.7% (+8.6%), CPIC at 4.3%(+23.8%), and PICC Group at -11.1% (-50.8%). In terms of 7M17, Ping An led at36.6% yoy (vs. +37.5% in 1H17), followed by CPIC at 30.4% (+34.4%), Taiping at28.3% (+29.1%), China Life at 18.1% (+18.3%), PICC Group at -3.3% (-3.0%) andNCI at -12.1% (-13.8%).P&C – slight decelerationP&C business recorded slight deceleration in July with underlying yoy growthranging from 13.0% to 25.9%. Taiping led July growth at 25.9% yoy (vs. +47.2% inJun), followed by Ping An at 24.7% (+22.9%), mainly driven by non-auto (+36.8%),Ch Continent at 14.7% (+26.7%), CPIC at 13.4% (+22.5%) and PICC at 13.0%(+16.6%). On a YTD basis (ex-VAT impact), Ping An led at 27.9% (vs. +28.4% in1H17), followed by Taiping at 22.6% (+22.2%), Ch Continent at 22.0% (+23.2%),PICC at 15.0% (+15.3%) and CPIC at 11.5% (+11.3%).Prefer life players with strong protection focusWe reiterate our positive view on the Chinese insurance sector, and we believe thecurrent valuation of 1.1x 2017E P/EV (assuming 4.0% LT inv return) for life insurersis unjustified, given the sector's strong growth outlook. We prefer insurers withstrong protection focus, and thus have Ping An and NCI as our Top Picks.We believe Ping An’s strongest protection focus and superior risk managementcapabilities should justify a premium valuation, while concerns on NCI’s balancesheet risk may be overdone. We also have Buy ratings on CPIC, Ch Taiping, ChinaEsther ChweiResearch Analyst+852-2203 6200Lexie ZhouResearch Analyst+852-2203 6180Top picksPing An (2318.HK),HKD59.35BuyNCI (1336.HK),HKD50.20BuySource: Deutsche BankCompanies featuredChina Life (2628.HK),HKD23.45BuyPing An (2318.HK),HKD59.35BuyCPIC (2601.HK),HKD34.70BuyNCI (1336.HK),HKD50.20BuyCTIH (0966.HK),HKD23.75BuyPICC Group (1339.HK),HKD3.57HoldPICC P & C (2328.HK),HKD14.86BuyChina Re (1508.HK),HKD1.77HoldChina Life (601628.SS),CNY27.45HoldPing An (601318.SS),CNY51.15BuyCPIC (601601.SS),CNY33.62BuyNCI (601336.SS),CNY59.92HoldSource: 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: 18/08/2017 08:36:08 GMT0bed7b6cf11c 18 August 2017Life InsuranceChina Insurance SectorLife-H and PICC P&C. Investment risks include significant investment marketweakness, asset quality risks, a sharp decline in bond yields and China’s macrorisks.Page 2Deutsche Bank AG/Hong Kong 18 August 2017Life InsuranceChina Insurance SectorJuly 2017 premiumsPremium snapshotLife premiums:China Life reported 7M17 life premiums of Rmb369,100m(+18.1% yoy), Ping An reported Rmb261,382m (+36.6%), CPIC reportedRmb123,911m (+30.4%), NCI reported Rmb68,379m (-12.1%), Taiping reportedRmb86,609m (+28.3%) and PICC Life and Health reported Rmb103,674m (-3.3%).In terms of monthly premiums in July, China Life reported Rmb22,931m(+14.8% yoy), Ping An Rmb23,676m (+28.1%), CPIC Rmb13,360m (+4.3%), NCIRmb7,139m (+5.7%), Taiping Rmb4,893m (+16.0% yoy), and PICC Life and HealthRmb3,843m (-11.1%).P&C premiums:PICC reported 7M17 P&C premiums of Rmb205,213m (+15.0%on VAT-adjusted basis), Ping An Rmb120,894m (+27.9%), CPIC Rmb60.732m(+11.5%), Taiping Rmb12,329m (+22.6%) and Ch Continent Rmb21,376m(+22.0%). In July, PICC achieved premiums of Rmb25,896m (+13.0%), PingAn Rmb17,451m (+24.7%), CPIC Rmb8,1