In 2021, the insurance sector (Shenwan class II) achieved the largest annual decline in nearly 10 years, second only to the education sector, ranking second in the decline list of A-share industries. However, at the time of the sharp decline of insurance stocks, foreign investors not only did not reduce their holdings of insurance stocks across the board, but also increased their positions in some insurance stocks against the market.
According to the data of East Money Information Co.Ltd(300059) chioce, in 2021, foreign capital added The People’S Insurance Company (Group) Of China Limited(601319) , China Pacific Insurance (Group) Co.Ltd(601601) , China Life Insurance Company Limited(601628) and New China Life Insurance Company Ltd(601336) . As of December 31, 2021, the shareholding of foreign capital in The People’S Insurance Company (Group) Of China Limited(601319) and China Pacific Insurance (Group) Co.Ltd(601601) has soared by 91% and 39% respectively compared with that at the beginning of 2021. At the same time, foreign capital’s holdings of Xishui Strong Year Co.Ltd Inner Mongolia(600291) decreased significantly, and the shareholding at the end of the year decreased by 77% compared with that at the beginning of the year.
Although foreign investors significantly increased their positions in some insurance stocks last year, in the view of research institutions and industry insiders, the situation of the insurance industry is not optimistic. Firstly, due to the high premium base in the first quarter of 2021, the premium growth rate in the first quarter of 2022 may still be low. Secondly, on the investment side, we still need to be vigilant against the negative impact of the continued low interest rate shock.
insurance
impacted by many negative factors
In 2021, under the impact of many negative factors, insurance stocks continued to decline. According to chioce data, the insurance sector as a whole fell 39% last year. Among them, Ping An Insurance (Group) Company Of China Ltd(601318) , New China Life Insurance Company Ltd(601336) , The People’S Insurance Company (Group) Of China Limited(601319) , China Pacific Insurance (Group) Co.Ltd(601601) , China Life Insurance Company Limited(601628) , Xishui Strong Year Co.Ltd Inner Mongolia(600291) increased by – 39.23%, – 29.22%, – 24.44%, – 21.74%, – 17.82% and 19.19% respectively.
The general decline in insurance stocks last year was related to many factors: first, the covid-19 pneumonia epidemic affected the purchasing power of residents, and the premium income continued to be depressed; Secondly, the rapid development of Internet insurance has replaced the traditional serious illness insurance; Third, the number of insurance agents has decreased significantly, which has restrained the growth of premium; Fourth, after the comprehensive reform of automobile insurance, the growth of property insurance premium income is under pressure; Fifth, the long-term interest rate fell and the credit risk exposure of the real estate market had a negative impact on the investment side of the insurance industry.
According to the executives of listed insurance companies such as Su hengxuan, Secretary of the Party committee and President of China Life Insurance Company Limited(601628) , after the outbreak, residents’ expectations of future income uncertainty increased, resulting in a decline in consumption willingness. As non essential consumer goods, the market demand for insurance policies has been suppressed.
The rapid development of innovative Internet insurance has also formed a substitution effect on traditional serious illness insurance products. Wu Pingping, an analyst at Galaxy Securities, believes that the rapid development of Internet insurance such as million medical insurance and Huimin insurance has had an impact on the traditional offline sales channels. Internet insurance reduces the net premium and additional premium of products by increasing the predetermined interest rate, saving manual underwriting costs and bank channel expenses, so that customers can obtain tangible benefits and be more favored by consumers.
Insurance marketers have always been the cornerstone of the development of life insurance industry. However, since last year, a large number of insurance agents have fallen off, which has an impact on the premium income. As of June 30, 2021, Ping An Insurance (Group) Company Of China Ltd(601318) , China Life Insurance Company Limited(601628) , China Pacific Insurance (Group) Co.Ltd(601601) , New China Life Insurance Company Ltd(601336) had 877800, 115000, 641000 and 441000 marketers respectively, a decrease of 14.26%, 16.55%, 14.42% and 27.23% compared with the end of 2019. The rapid loss of insurance marketers has inhibited the growth of insurance premiums in the life insurance industry.
Gao Wuji, general manager of yongdali, told the Securities Daily that the sea of people tactics of insurance marketers have encountered a development bottleneck, especially under the background of weak consumption of insurance products, marketers are facing practical problems such as difficulties in exhibition and personnel loss.
A large number of insurance marketers have been lost, and the premium growth of life insurance industry has fallen into a vicious circle. Life insurance policies mainly rely on the agent’s offline visit to the exhibition industry. Before 2019, the growth of life insurance policy sales is mainly driven by the growth of the number of agents. After the outbreak of the epidemic in 2020, the offline exhibition of agents was blocked, and the traditional marketing mechanism encountered a bottleneck. The agent’s commission income mainly comes from the sales of new orders. The blocked sales of insurance policies leads to the decline of agent’s income, resulting in the loss of agents and the difficulty of increasing staff. All insurance companies have realized that the model of increasing policy sales through crowd tactics is unsustainable, and began to actively seek the transformation and upgrading of the traditional marketing model, improve production capacity through active clearing up, increase the speed of agent shedding, and lead to a continuous impact on the premium income. According to the current reform strategy of listed insurance enterprises, it is expected that the loss of insurance marketers may continue in 2022.
In 2021, the premium growth of property insurance industry is also negatively affected by the comprehensive reform of automobile insurance. In September 2020, the China Banking and Insurance Regulatory Commission implemented the comprehensive reform of auto insurance to benefit consumers through “reducing prices, increasing insurance and improving quality”. Affected by this, the premium income of auto insurance also continued to be depressed. According to the latest data, from January to November 2021, the insurance industry achieved a total property insurance premium income of 1057.6 billion yuan, a year-on-year decrease of 3.3%. Among them, property insurance companies realized a premium income of 695.1 billion yuan, a year-on-year decrease of 7.07%.
In addition to the liability side, the investment side of insurance companies will also continue to be under pressure in 2021. Last year, China Fortune Land Development Co.Ltd(600340) and the default of Evergrande group received widespread attention, causing the market to worry about the investment side of insurance enterprises. Fixed income investment accounted for about 80% of the total scale of insurance capital utilization, and the decline of long-term bond interest rate suppressed the performance of fixed income investment income of insurance enterprises. These factors may continue to have a negative impact on the investment side of insurance enterprises this year.
Overall, many negative factors exert a negative impact on the liability side and investment side of insurance stocks at the same time, resulting in a sharp decline in the share price of insurance stocks. However, when the valuation of insurance stocks continued to decline, foreign institutions did not sell all insurance stocks, but increased their positions in four insurance stocks against the market, which is worthy of market attention.
premium in the first quarter of this year
or continue to bear pressure
For investors, the “bottom reading” of some insurance stocks by foreign investors does not mean that the “boarding” insurance stocks are safe now. Many executives of listed insurance companies represented by Li Quan, President of New China Life Insurance Company Ltd(601336) believe that the life insurance industry needs several difficult years to get out of the trough. The negative impact of the comprehensive reform of auto insurance on the property insurance industry is weakening, but whether there can be a rapid rebound remains to be seen. From the investment side, several negative factors that suppress the investment income of the insurance industry have not been eliminated.
Looking forward to 2022, Wu Pingping believes that considering the comprehensive impact of factors such as the high premium base in the first quarter of last year, the delay in starting the “good start” this year, and the difficulty in showing the transformation effect of the insurance agent team in the short term, it is expected that the number of new policies during the “good start” period in 2022 will still be under pressure. However, as insurance companies actively transform their agent sales model to channel sales model, it is expected that the year-on-year growth rate of policy sales this year will show the characteristics of “low in the front and high in the rear”; After entering the second half of the year, the industry premium income and new business value will gradually improve.
Many insurance investors said that factors such as downward interest rates, intensified fluctuations in the equity market and asset shortage will have a negative impact on the investment side of insurance enterprises, and then affect the secondary market performance of the insurance sector in 2022.
(Securities Daily)
