Core view
Overall performance: profits grew steadily and ev momentum weakened. The investment side drives the profit growth, and the operating profit performance remains stable. The downward discount rate promotes the new provision of reserves, which has a negative impact on the pre tax profit of about 15% – 78%. The downturn of new business drags down the remaining marginal growth. The remaining marginal balance shows a negative growth trend in 2021, which may release or put some pressure on the profit. The growth momentum of EV has weakened, and the growth rate of some insurance companies has fallen to about 5%. Among them, the reduction of NBV contribution, the weakening of EV expected return pulling effect, and the negative deviation between operation experience and investment experience are all the factors affecting the decline. Although the market fluctuates greatly, the dividend rate remains stable as a whole and the return level of shareholders is considerable.
Life insurance: NBV continues to have negative growth and seeks quality increase under the low scale of the team. The growth rate of total premium is differentiated, but the individual insurance channel is still an important contribution point. Some insurance companies are as high as nearly 90%, while the sales of new orders are weak. After the increment brought by the switch of serious diseases at the beginning of the year, it continues to be depressed. However, we see that the proportion of first-year regular payment in new orders has increased to a certain extent, and the optimization of term structure continues to be promoted. The income instability of residents under the multi-point distribution of the epidemic still exists, the continuation rate shows a downward trend, and the surrender rate has also increased slightly. New orders and margin were under pressure simultaneously, which dragged down the performance of NBV. Listed insurance companies showed a decline of 20% + and returned to the level before 2015 in terms of total amount. The scale of the agent team continued to shrink in the second half of the year, and the team size at the end of the year decreased by 30% compared with that at the beginning of the year. However, the major insurance companies have promoted the transformation and upgrading, and the qualitative direction has not changed, and the capacity improvement has shown preliminary results. We believe that the focus in the future is still to balance the customer demand and the agent income, and improve the capacity and retention rate.
Property insurance: the momentum of auto insurance recovered, and non auto insurance maintained strong growth. The growth rate of auto insurance has dropped as a whole, but the marginal improvement has been significant since the fourth quarter, and the performance is better than the industry level. We expect to maintain double-digit scale growth this year; Under the guidance of the comprehensive reform, the cost ratio fell, and the average piece premium fell, driving up the loss ratio. We believe that the cost control advantages of large insurance enterprises in the head appeared, the market Matthew effect was gradually strengthened, and the competition pattern is expected to be further optimized. The growth momentum of non auto insurance is strong, driving the proportion to continue to increase. In terms of subdivided insurance types, Italian health insurance, agricultural insurance and liability insurance have maintained strong growth as the three pillars, while credit guarantee insurance has reduced the volume under the environment of tightening risk control and turned losses into profits.
Investment side: the total return on investment remained stable, and the downward interest rate pushed the net return on investment down. In 2021, the capital market fluctuated violently, and all major insurance companies adjusted their asset allocation flexibly. Except for the impairment of China Fortune Land Development Co.Ltd(600340) project accrued by Ping An, the total return on investment of other insurance companies remained relatively stable. Affected by China’s monetary policy and macro environment, the market interest rate has declined, the yield of ten-year Treasury bonds has declined by about 37bps throughout the year, and the net investment yield of insurance enterprises is under pressure, mostly by about 0.2-0.5pp. There is differentiation in bond allocation strategy.
Investment proposal and investment object
1) the transformation of life insurance liabilities is still advancing. Although the improvement of agent production capacity has achieved initial results, the sharp decline in scale still leads to some pessimistic expectations. We believe that we should continue to pay attention to the production capacity climbing under the stable scale and the demand release after the activation of security awareness; 2) The logic of both quantity and quality of auto insurance is solid, the growth momentum of non auto insurance is strong and the space is broad, and the opportunity of property insurance allocation is reiterated; 3) On the investment side, the outlook of the equity market is optimistic, and the liberalization of the investment ceiling adds upward flexibility. Under the background of market fluctuations, large insurance enterprises will accelerate the extension expansion of pension communities and commercial real estate, so as to alleviate the pessimistic expectation of the market for interest margin loss. At the same time, it is expected to feed back the main business of life insurance, so as to realize the combination of medical care and nursing, and improve customer stickiness and secondary development.
Maintain the optimistic rating of the industry. It is suggested that China Property Insurance (02328, not rated), a leading property insurance company focusing on the consolidation of the Growth Logic of property insurance, the increase of market share and the improvement of cor, should be paid attention to; Ping An Insurance (Group) Company Of China Ltd(601318) ( Ping An Insurance (Group) Company Of China Ltd(601318) , buy) with firm life insurance reform and gradual recovery of investment return; At the same time, it is suggested to pay attention to the China Pacific Insurance (Group) Co.Ltd(601601) 601 ( China Pacific Insurance (Group) Co.Ltd(601601) , not rated) of the “long aviation partner” plan to build a high-quality agent team; In addition, it is suggested to pay attention to AIA (01299, not rated) after the “sub reform” to explore regional expansion and bank insurance cooperation to promote channel sinking.
Risk tips
The sales of new orders are less than expected, the long-term interest rate is down, the equity market fluctuates, the impairment risk of equity investment is accrued, the progress of comprehensive reform of automobile insurance is less than expected, policy risk, and the assumption is not established.
