Insurance stocks whose share price performance remained depressed in the past year rebounded against the market at the beginning of 2022. In the first four trading days of this year, the insurance sector (Shenwan secondary classification) rose by 4.44%, significantly outperforming the three major indexes of the A-share market, ranking seventh in all sectors of the A-share market.
Behind the contrarian rise of the insurance sector, there is no lack of some “smart” funds increasing their positions sharply. According to China stock market news chioce, in the first four trading days of this year, foreign investors increased their positions in all five A-share listed insurance stocks through the Shanghai Stock connect. As of January 9, the holdings of foreign capital in The People’S Insurance Company (Group) Of China Limited(601319) , New China Life Insurance Company Ltd(601336) , China Pacific Insurance (Group) Co.Ltd(601601) , Ping An Insurance (Group) Company Of China Ltd(601318) , China Life Insurance Company Limited(601628) have increased by 25%, 8%, 6%, 2% and 2% respectively compared with the holdings at the closing on December 31, 2021, and there are obvious signs of “scavenging”.
Is the anti market rebound at the beginning of the year caused by the oversold rebound caused by the switching of market style, or the reverse market caused by the change of fundamentals of the insurance industry? Insiders and financial institutions generally believe that there is no sign of reversal in the fundamentals of the insurance industry, and the premium growth rate in the first quarter of this year may continue to be under pressure. The contrarian rise of insurance stocks at the beginning of the year came more from the rebound after oversold last year.
insurance fundamentals have not reversed
The “good start” is one of the most important indicators to measure the fundamentals of the insurance industry. The first quarter of the calendar year is an important exhibition stage of the insurance industry. During the “good start” period, the premium income of some insurance enterprises can even account for about half of the annual premium. Therefore, by observing the main products and exhibition of listed insurance companies during the “good start” period, we can basically predict the growth rate of premium, new business value and other indicators in the first quarter.
The “good start” of insurance enterprises this year is quite low-key. Over the years, many insurance companies will announce the “war papers” (the scale of insurance premiums, growth rates, and the business of high value business) on official account of the WeChat public and other channels on the day of the new year’s day or the previous few days.
Insurance companies\’ low-key response to the “good start” has something to do with the current regulatory environment and exhibition environment. The relevant person in charge of the marketing department of a large life insurance company Beijing Branch told reporters that it was difficult to make a good start this year. First, it is difficult to develop the industry; Second, it is difficult to increase staff; Third, strict supervision; Fourth, product homogenization is serious. In her opinion, at present, the demand of ordinary consumers for insurance is very weak, but the policy sales of high net worth people are better.
The person in charge of insurance consignment business of a state-owned bank told the Securities Daily that this year, affected by the notice of the general office of the China Banking and Insurance Regulatory Commission on matters related to further standardizing the personal insurance business of insurance institutions on the Internet and other relevant policies, most of the bancassurance channels moved the traditional “three-day centralized” promotion mode to December last year, Through the two strategies of booking insurance and delaying income entry, we can effectively deal with the adverse exhibition environment. In the first eight days of this year, the year-on-year growth rate of premium income of bank consignment channels was relatively stable. However, there are still many uncertain factors in insurance regulatory policies and epidemic prevention and control in the future, and the “good start” premium growth remains to be further observed.
Since last year, the regulatory authorities have encouraged insurance enterprises to develop their business smoothly, reducing the preparation time for this year’s “good start”. In 2019, the China Banking and Insurance Regulatory Commission issued the notice on strengthening standardized management and promoting the stable development of annual business of life insurance companies, criticizing some insurance companies with radical sales rhythm during the “good start” period, and guiding insurance companies to gradually weaken the “good start”. In addition, due to the loss of marketers in 2021, the downturn of consumer demand and the sudden increase of year-end assessment pressure caused by the pressure of premium growth of insurance enterprises, the task of performance sprint of insurance enterprises in the fourth quarter of last year was aggravated, which also led to the late start of “a good start” in 2022.
Cui Xiaoyan, an analyst at Huajin securities, believes that the “good start” is very important to the business contribution of insurance enterprises. In recent years, the premium income during the “good start” period basically accounts for 40% to 50% of the annual premium. In addition, the end of the year and the beginning of the year are the peak financial season. Residents have abundant funds and strong terminal demand, which will also stimulate premium growth and form a positive contribution. With the end of the transition period of the new regulations on asset management at the end of 2021, after the income of the “good start” product is thickened by the additional universal account, it is more advantageous and attractive than the expected income of bank financial products. However, the premium growth during the “good start” period is still affected by the epidemic situation, the loss of agents, stricter supervision and so on.
In addition, the premium base during the “good start” period in 2021 is high, which also suppresses the premium growth of listed insurance companies this year. Guotai Junan Securities Co.Ltd(601211) Liu Xinqi’s team of non bank finance said that due to the high base and sharp decline in the number of marketers brought by the “good start” promotion of new and old serious illness insurance in 2021, the joint impact of Huimin insurance and Internet insurance products, and the weakening of residents\’ demand for serious illness, it is expected that the sales of guarantee products will still face great pressure during the “good start” period in 2022.
Wu Pingping, an analyst at Galaxy Securities, also believes that during the “good start” period in 2022, the sales of new insurance policies are under pressure, and the improvement of life insurance still needs time.
Executives of some listed insurance companies, including New China Life Insurance Company Ltd(601336) party secretary and President Li Quan and Ping An Group Co CEO Chen Xinying, also believe that the insurance industry will need a few years of hardship, and the transformation effect will not appear in a short time, but at least a few years.
insurance stocks show the advantage of undervaluation
Although the fundamentals of the insurance industry have not yet ushered in the day of reversal, with the continuous decline of share prices, the valuation of insurance stocks has shown advantages, attracting some institutions to start adding positions.
Recently, several securities companies such as Ping An Securities, Zheshang Securities Co.Ltd(601878) and Huajin securities have pointed out that the valuation of insurance stocks has been at a historically low level, with a certain margin of safety and allocation value.
After foreign investors increased their positions in some insurance stocks against the market in 2021, they have continued to increase their positions in insurance stocks since this year. Among them, the foreign capital increased the positions of The People’S Insurance Company (Group) Of China Limited(601319) , New China Life Insurance Company Ltd(601336) , China Pacific Insurance (Group) Co.Ltd(601601) greatly. The Shareholding on January 9 increased by 25%, 8% and 6% respectively compared with the closing on December 31, 2021.
It is worth noting that although many institutions are optimistic about the undervalued advantages of insurance stocks, and some top insurance enterprise executives publicly expressed their optimism about the long-term development prospects of the insurance industry, at present, the fundamentals of the insurance industry have not yet ushered in a reversal, the future operation is still facing great uncertainty, and there is great suspense about whether it can support the continuous rebound of stock prices. Therefore, it is still necessary to guard against the risk of market fluctuations when investing.
(source: Securities Daily)
