Looking forward to 2022 at the current time point, the bottom of the life insurance sector is upward, the property insurance sector is basically well oriented and deterministic, and attaches importance to the long-term allocation value of the life insurance sector and the income opportunities of the property insurance sector.
At present, the life insurance sector is an excellent time point for long-term value allocation: at present, the extremely low valuation of the life insurance sector corresponds to the extremely poor fundamentals of the asset and liability side. However, regardless of the thunderstorm on the asset side or the pressure on the policy sales on the liability side and the sharp loss of agents, the worst stage has passed. At present, the asset side is the catalyst for short-term upward, the institutional position increase is the driving force, and the improvement on the liability side is the excess return. Specifically:
1) the improvement of the asset side is the main driving force for the upward movement of the life insurance sector at present, mainly due to the continuous release of real estate risks and the rise of long-term interest rates: since the fourth quarter, the stability maintenance signals of the central and local governments for real estate have been released frequently, and the social finance continued to release the stability maintenance signals of real estate and the upward trend of long-term interest rates in January.
2) from the perspective of fund position, at present, insurance stocks have been in the low allocation stage for ten years, and institutional position increase will promote the rise of stock price: by the end of 2021, the allocation proportion of insurance sector in the top ten heavy positions of public funds (active + hybrid) was only 0.17%, reaching a new low in recent ten years. When the market allocates insurance stocks for hedging demand, absolute return or relative return, the increase of position proportion and the rise of stock price will be very significant, which makes insurance stocks show high stock price elasticity.
3) at present, the debt side has not seen improvement, but the worst stage has passed: the first low and the later high in 2022 are certain. If the later improvement of the debt side exceeds the expectation, there will be more upward space for the valuation.
The fundamental inflection point of the property insurance sector will continue to be verified, and the valuation is also very attractive: the property insurance sector will usher in a highly deterministic inflection point in 2022 after experiencing the thunderstorm of the credit insurance business in 2020-2021, the intensified competition of the comprehensive reform of automobile insurance and the great disaster of agricultural insurance, and the leading roe of property insurance is expected to gradually rise with prominent competitive advantages:
1) the auto insurance premium resumed growth and the pressure on the comprehensive cost rate decreased: since the comprehensive reform of auto insurance in September 2020, the premium continued to grow negatively and the comprehensive cost rate exceeded 100%. According to the current outlook, the annual growth rate of auto insurance premium in 2022 is expected to be between 6-8%, with high certainty. At the same time, the pressure on comprehensive cost rate will be relieved, and the profitability will be better.
2) the comprehensive cost rate of agricultural insurance will be improved, the spillover effect of automobile insurance competition will be weakened, and the competition of non automobile insurance is expected to be alleviated: with the alleviation of automobile insurance competition, the phenomenon of competition spillover will be significantly weakened, and the non automobile insurance is expected to be improved. Looking forward to 2022, the impact of catastrophe risk is expected to weaken, the exposure of credit insurance business shrinks, the comprehensive cost improves and the recovery continues, and the non vehicle performance is better.
3) roe has been rising for a long time and the valuation is very attractive: the current valuation of property insurance sector is attractive. At present, Hong Kong stock China property insurance is less than 0.8 times Pb, and the company still maintains a range of 1-1.5 times Pb even in the cycle of continuous promotion of vehicle insurance fee reform in 16-20 years. With the continuous improvement of the industry’s profits, roe is expected to continue to rise. The head property insurance company has a stable operation and obvious competitive advantage.
Investment suggestions: at present, the fundamentals of the life insurance sector are upward, and the valuation has a very high safety margin, which is an excellent time point for long-term value allocation. Individual stocks are recommended to pay attention to Ping An Insurance (Group) Company Of China Ltd(601318) with the obvious release of real estate risks and China Pacific Insurance (Group) Co.Ltd(601601) with the continuous promotion of life insurance reform; The current inflection point of the property insurance sector shows that the premium and profit will enter a cycle of continuous improvement and are expected to be verified at the data level, and the valuation is also at a low point in recent years. Individual stocks suggest to pay attention to China Property Insurance h, the head company of property insurance.
Risk warning: equity market fluctuation risk; Long term interest rate decline and real estate thunderstorm risk; Intensified property insurance competition and catastrophe risk.
