The conflict between Russia and Ukraine continues to escalate, which has an impact on global energy and food supply. The data released by the U.S. Department of labor on May 11 showed that in April, CPI was + 0.3% (previous value + 1.2%) and core CPI was + 0.6% (previous value + 0.3%); Year on year + 8.3% (previous value + 8.5%). The year-on-year increase of CPI narrowed slightly compared with March, but it is still at a high level; Core CPI rose month on month, reflecting strong demand and tight supply and demand in the labor market. Most former Fed officials put pressure on the current Fed’s handling of inflation to some extent, and the rate increase in the future may exceed expectations. In China, M1 increased by 5.1% year-on-year in April (the previous value was 4.7%); M2 increased by 10.5% year-on-year (the previous value was 9.7%), and the year-on-year growth rate rebounded, mainly supported by fiscal and tax policies. In April, RMB loans increased by 645.4 billion yuan (the former value was 312.4 billion yuan, compared with 1470 billion yuan in the same period last year), and the increment of social financing scale was 910.2 billion yuan (the former value was 4.65 trillion yuan, compared with 1.86 trillion yuan in the same period last year). It is far lower than market expectations, and the epidemic has seriously restrained demand. The interest rate spread between China and the United States has continued to hang upside down since last month, and the pressure of capital outflow from emerging markets has increased.
Recently, the central bank lowered the lower limit of the loan interest rate for the first house by 20bp, which has a certain boosting effect on the demand for commercial housing, and its signal significance is worthy of attention.
In terms of life insurance: benefiting from the strength of Bancassurance channels, the premium growth of PICC, CPIC and Xinhua has accelerated. With the help of long-term insurance single payment (with a growth rate of 125.4%), PICC Life Insurance‘s cumulative premium income in April increased by 17.18% year-on-year, continuing to be the industry leader The growth rate of accumulated premium income in China Pacific Insurance (Group) Co.Ltd(601601) , New China Life Insurance Company Ltd(601336) april increased to 3.96% and 3.83% respectively from -0.26pct, + 1.46pct last month, achieving positive growth and + 5.09pct and + 0.25pct respectively from the beginning of the year China Life Insurance Company Limited(601628) , China Taiping insurance premiums increased by – 2.69% and – 2.30% respectively, compared with -0.05pct and + 0.85pct respectively last month; The growth rate of Ping An Life insurance premium was under pressure, from -0.14pct to -2.42% last month.
Property insurance: in April, affected by the epidemic situation in some regions and relevant epidemic prevention policies, the growth rate of auto insurance premiums fell, and non auto freight insurance and enterprise property insurance were also negatively affected. Affected by the epidemic, the monthly premium of PICC Property Insurance in April increased from -7.48pct to 2.67% compared with the previous month, of which the year-on-year premium of auto insurance was -1.92%, -6.47pct compared with the previous month, and the year-on-year premium of non auto insurance was + 9.56%, and -4.14pct compared with the previous month; The premium income of CPIC property insurance in April was -0.67% year-on-year, up from -11.52pct last month; The monthly growth rates of premium income of Ping An Property Insurance and Taiping property insurance in April were + 2.21% and + 4.67% respectively, which were -6.98pct and – 10PCT respectively compared with the previous month.
The market value of shares held by the insurance sector decreased, but the allocation proportion increased slightly. In 2022q1, the market value of the insurance sector was 26.669 billion yuan, a year-on-year change of -5.06 PCT, and the sector allocation ratio was 0.83%, an increase of 0.07 PCT over the previous period From the perspective of the internal configuration of the non bank financial industry, the insurance sector 2022q1 accounted for 19.11%, up 3.14pct compared with the previous period.
Policy: on April 25, the State Information Office held a regular briefing on the policy of “opinions on promoting the development of individual pensions”. The CBRC is studying and formulating relevant supporting policies, clarifying the capital account rules and relevant product management requirements, and ensuring the launch of more bancassurance products with safe operation, maturity and stability, standardized subject matter and focusing on long-term hedging; Actively promote banking and insurance institutions to prepare for personal pension related businesses.
On May 13, the CBRC revised and issued the notice on investment of insurance funds in financial products (hereinafter referred to as the notice). After the revision, the scope of investable financial products has been widened. Financial products of wealth management companies, single asset management plans and debt to equity investment plans will be included in the scope of investable financial products to further improve the allocation structure of insurance assets.
At present, the insurance industry is facing many development tests. Life insurance is in a period of deep transformation. Due to the continuous impact of the epidemic and the sales pressure of new orders, the premium growth rate is stabilizing. The market actively launched “increased life insurance” products to better meet financial needs and enhance the attractiveness of products.
The retention dilemma of agents has not been eliminated. After experiencing a sharp decline in scale, there are initial signs of stabilization. The agent’s production capacity is expected to increase steadily with the improvement of access threshold, strengthened training and resource support. The development of individual insurance channels has been blocked, and the construction of Bancassurance channels has made great efforts. With the deepening of “product + channel” supply of insurance enterprises, the liability side is expected to usher in marginal improvement. NBV decline is expected to narrow further in the second quarter.
In terms of property insurance, in April, affected by the epidemic situation in some regions and relevant epidemic prevention policies, the growth rate of auto insurance premiums fell, and non auto freight insurance and enterprise property insurance were also negatively affected. It is expected that the impact of the epidemic on property insurance is only temporary. With the improvement of the follow-up epidemic situation, the new car premium will increase restoratively, and it is still expected to achieve double-digit premium growth throughout the year; The non auto insurance business is pro cyclical and will “grow steadily” in 2022
It is expected to achieve steady growth. At present, all insurance enterprises actively layout non auto insurance business, optimize business quality, and the industry prosperity trend remains unchanged.
The asset side faces downward pressure and will benefit from the gradual release of risks in the real estate sector; From the transaction level, the insurance sector has basically shown an undervalued value, and the P / EV of the main listed insurance companies is between 0.31-0.53 times. With the economic recovery and the gradual emergence of the results of channel reform, the insurance enterprises that take the lead in carrying out and adhere to the reform for a long time will get a higher valuation premium.
At present, the yield to maturity of 10-year medium-term bonds has rebounded to around 2.82%, and it is expected to fluctuate around 2.8% for some time in the future. Compared with China’s long-term stable economic fundamentals, the risk-free interest rate expectation reflected by the current stock price is pessimistic, and the high dividend strategy of insurance stocks superimposes the undervalued value, highlighting its allocation value. At present, the market may be dormant horizontally. It is conservatively estimated that Q3 will have some opportunities. In the medium and long term, we are optimistic about the valuation and repair, and we still need to pay attention to the allocation value. At the same time, we also need to pay close attention to the development of the epidemic in overseas areas, the action of the Federal Reserve’s interest rate and the trend of China US relations. In the context of market style switching, the insurance sector is in line with the strategic choice of exchanging time for space.
From the perspective of individual stocks, focus on recommending Ping An Insurance (Group) Company Of China Ltd(601318) , China Life Insurance Company Limited(601628) , and pay attention to China Pacific Insurance (Group) Co.Ltd(601601) , New China Life Insurance Company Ltd(601336) .
Risk tip: Sino US friction intensifies the risk; The risk of continuous upside down of interest rate spread between China and the United States; SEC suspends the risk of IPO registration of Chinese companies; Geopolitical risks; Macroeconomic downside risk; Evergrande’s handling of events is not as good as expected; The systematic decline risk of stock market; Risk of stricter supervision; Risk of continued spread of pneumonia.
