Although the risk of interest rate differential losses in the medium and long term is difficult to resolve in the short term and is affected by the base effect and seasonal effects, the growth rate of premium income and New Business Value (NBV) in the second quarter may slow down compared to the same period last year. However, looking solely at the year 2024, insurance remains the most obvious sector among the major sub-sectors of the financial industry in terms of improving performance margins.

In the first quarter of 2024, under regulatory guidance, the insurance industry continued to reduce the cost of liabilities. Coupled with the implementation of new accounting standards, the core value indicators of insurance business grew steadily, while the performance of net profit attributable to the parent company faced short-term pressure. In terms of operating income, the performance of listed insurance companies showed relative differentiation.

In the first quarter of 2024, the five listed insurance companies on the A-share market achieved a total operating income of 657.55 billion yuan, a year-on-year increase of 1.4%. Among them, China Life, the leader in life insurance, showed a significant advantage, with a year-on-year revenue growth of 14.4% in the first quarter. China Pacific, China People's Insurance, Ping An Insurance, and New China Life Insurance respectively changed by 1.1%, 0.7%, -2%, and -8.7% year-on-year.

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In terms of net profit attributable to the parent company, affected by the implementation of new accounting standards, the fluctuation of investment income on the asset side increased the fluctuation of the profit and loss statement. The net profit attributable to the parent company of the listed insurance companies in the first quarter was 83.09 billion yuan, a year-on-year decrease of 9.1%. Among them, only China Pacific achieved positive growth, with a year-on-year increase of 1.1% in net profit attributable to the parent company. Ping An Insurance, China Life, China People's Insurance, and New China Life Insurance respectively declined by 4.3%, 9%, 23.5%, and 28.6% year-on-year.

In terms of business quality, during the "New Year's Red" period in 2024, listed insurance companies continued their channel transformation strategies under regulatory guidance, with continuous improvement in the per capita product and value contribution of individual insurance channels and bank insurance channels. The new business value maintained a high growth rate in the first quarter; among them, China People's Insurance, New China Life Insurance, China Pacific, China Life, and Ping An Insurance respectively achieved NBV growth rates of 82%, 51%, 31%, 26%, and 21%.

In April 2024, as the "New Year's Red" came to an end, the five listed insurance companies on the A-share market achieved a total of 1,250.6 billion yuan in original insurance premium income from January to April 2024, a year-on-year increase of 1.5%, achieving positive growth. Among them, China Life benefited from its leading position and the effectiveness of channel reform, with premium income showing strong resilience, with a cumulative premium income year-on-year increase of 3.9%, ranking first among the five listed insurance companies on the A-share market; Ping An Insurance's cumulative premium income in 2024 increased by 2.4% year-on-year, ranking second.

Except for New China Life Insurance, the other four companies achieved year-on-year positive growth in premium income in the first four months. China Pacific and China People's Insurance respectively achieved premium incomes of 181.7 billion yuan and 300.1 billion yuan, with corresponding growth rates of 1% and 1.3%. New China Life Insurance was mainly affected by the rectification of the bank insurance channel and the decline in lump-sum premium income, with a year-on-year decrease of 11.7% in premium income in the first four months.

Life insurance value continues to optimize

In the first quarter of 2024, the life insurance business of listed insurance companies achieved a premium income of 793.45 billion yuan, a year-on-year decrease of 0.1%, basically the same as the same period in 2023.

In the first quarter of 2024, under the trend of increasingly strict regulation, the sales rhythm of channels was adjusted, causing the growth rate of new single premiums to be short-term pressure. The five listed insurance companies on the A-share market achieved a new single premium of 234.68 billion yuan, a decrease of 8.2% compared to the same period in 2023; among them, the new single premium income of China People's Insurance, Pacific Life Insurance, China Life, Ping An Life Insurance, and New China Life Insurance respectively changed by 8.9%, 0.4%, -4.4%, -13.6%, and -41% year-on-year.From the performance across various channels, driven by the demand for market savings insurance, the individual insurance channel contributed to the main premium growth rate in the first quarter. As of the end of the first quarter, Taiping Life Insurance's individual insurance channel achieved new single premiums of 16.12 billion yuan, a year-on-year increase of 31.3%. In addition, in terms of the individual insurance sales team, it is expected that the industry's agent scale may have basically reached the bottom, with the decline in the agent scale continuing to narrow.

As of the end of the first quarter, the scale of China Life's agent team was 622,000 people, a decrease of 12,000 people compared to the end of 2023. The bank insurance channel was affected by the "unification of reporting and practice" and short-term rhythm adjustment factors, resulting in weak new single premium growth. It is expected that the recent relaxation of policies related to the bank insurance channel will help the channel's market-oriented operation. After the standardization of handling fees, strict supervision is conducive to the transformation of the bank insurance channel to "whose products are better sold", thus benefiting insurance companies with differentiated advantages in product creation and other aspects.

Looking at the monthly premium income performance, except for New China Insurance, the other four have all achieved significant year-on-year improvement. Among them, People's Insurance Life and China Life achieved double-digit growth rates, increasing by 22.3% and 11.6% respectively compared to the same period in 2023. Taiping Life Insurance, Ping An Life Insurance, and New China Insurance achieved monthly premium year-on-year growth rates of 8.1%, 5.4%, and -11.6% respectively.

With the implementation of the agent grading system and the deepening of channel reforms by various insurance companies, the insurance industry is gradually transforming towards a direction that de-emphasizes the "New Year's Red", and the continuity of premium income has been improved to a certain extent. In April 2024, the five listed insurance companies on the A-share market achieved a monthly premium income of 194.2 billion yuan, achieving a relatively high year-on-year growth rate of 10.3%.

In addition, the National Financial Regulatory Administration issued the "Notice on Matters Related to Commercial Banks' Agency Insurance Business (Jin Gui [2024] No. 8)", lifting the upper limit on the number of insurance companies that can cooperate in bank insurance business, and canceling the previous "one-to-three" restriction. Currently, the regulatory authorities emphasize standardized and normalized operations for various sales channels in the insurance industry, helping the industry to create a differentiated competitive pattern and return to "insurance is insurance". The notice will be conducive to further implementing the "unification of reporting and practice" in bank insurance, effectively reducing liability costs, achieving a virtuous cycle of premium growth and long-term value, and the relaxation of bank insurance is conducive to the market-oriented operation of the channel.

Property insurance income continues to grow

With the continuous recovery of the economic situation in 2024, the demand for property insurance has increased compared to the same period last year. In the first quarter of 2024, People's Insurance, Ping An Insurance, and Taiping Insurance achieved a total premium income of 315.54 billion yuan, a year-on-year increase of 4.4%; among them, the above three car insurance business premium income was 147.52 billion yuan, a year-on-year increase of 2.5%, accounting for 46.7% of the total property insurance premium income; non-car insurance business premium income was 168.03 billion yuan, a year-on-year increase of 6.2%, accounting for 53.3% of the total property insurance premium income.

The increase in the ownership of new energy vehicles and the increase in vehicle usage frequency have driven the steady increase in the hard demand for car insurance. In the first quarter, the car insurance premium income of People's Insurance, Ping An Insurance, and Taiping Insurance grew steadily year-on-year. According to the data published by the Passenger Car Association, in the first quarter of 2024, the retail sales volume of narrow passenger cars in China was 4.83 million vehicles, a year-on-year increase of 13.2%.

Against this backdrop, in the first quarter of 2024, the year-on-year growth rates of car insurance premiums for Ping An Insurance, Taiping Insurance, and People's Insurance were 3.5%, 2.2%, and 1.9%, respectively; among them, the slowdown in the growth rate of People's car insurance was mainly affected by factors such as business structure adjustment. In terms of non-car insurance performance, China Taiping continued to take the lead, with premiums increasing by 13.8% compared to the same period in 2023; the growth rates of non-car insurance premiums for People's Insurance and Ping An Insurance were 5.1% and 1.3%, respectively.

In the first quarter of 2024, affected by factors such as the increase in compensation due to major disasters, the comprehensive cost rate of underwriting for some listed insurance companies increased, with People's Insurance, Ping An Insurance, and Taiping Insurance being 97.9%, 99.6%, and 98.0%, respectively, changing by 2.2 percentage points, 0.9 percentage points, and -0.4 percentage points year-on-year, respectively. The main factors are: 1. Affected by disasters such as low-temperature rain, snow, and freezing, the compensation rate of property insurance business has obviously increased; 2. After the "unification of reporting and practice" in car insurance, the rate has decreased.From January to April 2024, listed insurance companies achieved a premium income of 391.2 billion yuan in property insurance business, with year-on-year growth rates of: Taiping Property Insurance (7.8%), PICC Property Insurance (2.8%), and Ping An Property Insurance (3.1%). Overall, the "old three" property insurance business continued the growth trend of previous years.

In April 2024, against the backdrop of the industry's "opening red" ending and the beginning of the quarter, the growth rate of the "old three" property insurance business slowed down compared to March. Against the background of business rectification, PICC's auto insurance achieved a year-on-year growth rate of 2.3%, which has improved compared to the first quarter. Taiping Property Insurance continued to lead the premium growth rate, achieving a premium income of 77.2 billion yuan from January to April 2023, with a year-on-year increase of 7.8%.

"Connecting the past and the future" highlights the value

In the first quarter of 2024, under the guidance of regulatory policies, the quality of life insurance channels continued to adjust, and the growth rate of short-term new single premiums was under pressure, but the NBV still maintained a high growth rate. Looking at the premium income performance in April, the reform results of insurance companies have been gradually released, and except for New China Insurance, the premium income has achieved a turnaround from loss to profit. Overall, with the recent strong recovery logic of real estate, combined with multi-faceted support from both the asset and liability sides, the insurance stock continues to repair.

Guotai Junan Securities believes that insurance can attack and defend, and when the market style is about to change but has not changed, the "connecting the past and the future" value of the sector is highlighted. Since the third "Nine National Articles", the interval increase and decrease calculated according to the first and last points of the insurance sector have reached 15.59% (from April 15 to May 31). With the improvement and improvement of multiple factors on both the asset and liability sides, as well as the characteristics of low valuation and high dividend attributes of the sector, the "connecting the past and the future" value of the sector is highlighted, mainly manifested in the following two aspects:

Firstly, on the liability side, although the risk of long-term interest rate losses is difficult to resolve in the short term and is affected by the base effect and seasonal effect, the year-on-year growth rate of premium income and NBV in the second quarter may slow down. However, looking at 2024 alone, insurance is still the sector with the most obvious trend of marginal improvement in financial industry performance.

Since 2024, on the one hand, with the increasingly stable and quality-enhancing agent team, the premium income and NBV of the individual insurance channel are expected to increase (even possibly double-digit growth). On the other hand, under the joint action of the "unification of reporting and conduct" of bank insurance and the cancellation of the upper limit of cooperative insurance companies in bank outlets, on the basis of achieving stable premium income in the bank insurance channel under a high base, the NBV is expected to increase.

Secondly, on the asset side, equity, fixed income, and real estate-related assets show different degrees of improvement trends: 1. Equity assets, with the joint support of the stock market recovery and high dividend assets, are expected to significantly improve the return rate; 2. With the stabilization of long-term interest rates, the re-allocation risk of fixed income assets has been alleviated in the short term. Although this cannot change the long-term downward trend of interest rates, it at least gives insurance companies more time to adjust their liability structure; 3. The relaxation of real estate policies is still ongoing. Recently, Shanghai issued the "5.27 Shanghai Nine Articles", fully relaxing the restrictive real estate policies, marking the unexpected evolution of real estate policies is still ongoing, which is expected to increase the valuation level of related assets and significantly alleviate market concerns about the exposure of insurance companies to related assets.

Finally, from the perspective of capital, as of May 31, 2024, the cumulative increase in the banking sector has reached 19.98%, leading the major financial sub-sectors and significantly outperforming the non-bank sector. Considering that most of the funds allocated to banks are for defensive purposes, as the valuation of the banking sector has been significantly repaired and the dividend rate has been passively reduced, its configuration cost-effectiveness is increasingly declining. These funds have a strong demand for "high to low" switching, and the insurance sector, which is both offensive and defensive and is still undervalued (as of May 31, the average PEV of the four life insurance companies is 0.55 times), is a good place for funds to go.