中国保险业：蒙混过关

1、ChinaEquitiesInsuranceMuddling throughChina InsuranceTHIS CONTENT MAY NOT BE DISTRIBUTED TO MAINLAND CHINALife NBV outlook remains mixed, given differing product strategies, mix changes, agent restructuring, and competitionP&C stable with lower taxes due to lower commission ratios; motor liberalisat

2、ion likely to be phased in across the countryBuy-rated Ping An H/A and PICC P&C remain preferred insurers, while China Life-H/A and NCI-H/A shares may benefit from a strong 1Q20 Jumpstart campaignRemaining cautious: Although the structural attractions remain, we are still cautious on the China Insur

3、ance space, given limited visibility on the life new business outlook as the industry adjustment to a post-Document 134 world takes longer than anticipated with companies varying on value versus volume strategies, leading to some volatile results. The latter is concerning as it creates a dilemma bet

4、ween backing short-term new business growth or long-term earnings quality and growth.Meanwhile, we are marginally more optimistic on motor P&C liberalisation.Life outlook clouded by differing product and agency strategies: We forecast 2020 life NBV growth for China Life of 11.5%, NCI 7.8%, Ping An 5

5、.7% and China Pacific 3.3%, with all, except Ping An, continuing to focus on Jumpstart in 1Q20. However, there is a risk that medium-term volume growth may be lower than the 14% CAGR over the past 10 years as the industry continues to move towards lower case size, higher margin protection business w

6、ith agents taking time to adapt to the environment, ongoing agent restructuring and competition. These efforts should be supportive of higher quality NBV growth, margins and ROE but underlying earnings will improve with a lag, as we discussed in China Insurance: Earnings Mosaic, 24 June 2019. We wil

7、l also watch for further government support for the sector under Chinas next five-year plan.P&C could be a source of stability: We expect the full liberalisation for motor P&C business to be gradually phased in across the country, with 2020 GWP growth of 9-11% and combined ratios of 96.4-98.5% at PI

8、CC, Ping An and China Pacific leading to steady earnings growth, with tax rates at normalised levels with commission ratios below 18%.Ping An H/A and PICC P&C remain our preferred insurers: Ping An and PICC continue to be attractively valued in absolute terms and relative to the market as well as of

9、fering double-digit book value, earnings and DPS growth. China Life-H is a Hold but ranked #3 as we expect it to deliver strongest NBV growth; we still question growth quality and consensus already reflects double-digit NBV growth.Exhibit 1: Summary of rating and target price changes15 January 2020K

10、ailesh Mistry*, CFAHead of Financials Research, Asia PacificThe Hongkong and Shanghai Banking Corporation Limited HYPERLINK mailto:kailesh.mistry.hk kailesh.mistry.hk+852 2822 4321Edwin Liu*, CFA AssociateThe Hongkong and Shanghai Banking Corporation Limited HYPERLINK mailto:edwin.d.liu.hk edwin.d.l

11、iu.hk+852 2822 2895Allen Chen* Associate GuangzhouEmployed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/ qualified pursuant to FINRA regulationsCompanyMarketMkt Cap3M ADVShare Price Rating Target Price Upside /(Currency)TickerUSDmUSDm10 Jan 2020NewOldNewOldDownsideChina

12、Life HHK (HKD)2628 HK126,8538722.5HoldHold24.722.510%China Pacific HHK (HKD)2601 HK46,1114031.5HoldHold34.231.09%China ReHK (HKD)1508 HK7,22011.32HoldHold1.341.502%New China Life HHK (HKD)1336 HK19,7402934.6HoldHold37.333.08%PICC GroupHK (HKD)1339 HK42,584123.26HoldHold3.53.57%PICC P&CHK (HKD)2328 H

13、K26,892269.39BuyBuy12.012.028%Ping An HHK (HKD)2318 HK221,81925493.2BuyBuy132.0130.042%China Life AChina (RMB)601628 CH126,8897235.1ReduceReduce22.020.0-37%China Pacific AChina (RMB)601601 CH46,1239538.5ReduceReduce30.028.0-22%New China Life AChina (RMB)601336 CH19,7459350.3ReduceReduce33.030.0-34%P

14、ing An AChina (RMB)601318 CH221,86459484.8BuyBuy118.0117.039%Source: Bloomberg, Refinitiv Datastream, HSBC estimates. Note: China refers to mainland China.Disclosures & DisclaimerThis report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Dis

15、claimer, which forms part of it.Issuer of report: The Hongkong and Shanghai Banking Corporation LimitedView HSBC Global Research at:https: HYPERLINK / /China insurance H-share stock preference rankingsStockRating rationaleCompany-specificcatalystsCompany-specific risks ValuationPing An-H/-ABuy: Ping

16、 An has best-in-class life and P&C businesses with an innovative and value- Stronger-than-expected Key managementStock trades at#1 (was #1)oriented management team. We expect it to deliver 7% new business value growthlife NBVdeparturesa 1.4x 2019eover the next three years, while it has also built on

17、 its life residual margin disclosure to Disclosure Worse-than-expected PEV, which isimprove earnings visibility. In P&C, it is reassuring that sector-leading GWP growth has been achieved with combined ratios below peers. Ping An Banks turnaround isenhancements Fintech & Healthtech metrics,life sales

18、 and bank resultsbelow our 1.9x target price-progressing well, while Ping Ans Fintech & Healthtech leadership could lead toand management Asset quality issues in implied fairsuperior growth, profitability, and options to crystallise value. Overseas ambitions currently appear to be tied to exporting

19、its technologies overseas.Ping An H/A: Buy/Buyincentives Crystallising value from undervalued assetsbanking insurance, trust and securitiesPEV multiplePICC P&CBuy: PICC P&C is a well-managed pure play on Chinas high-growth potential P&C Better-than-expected Better-than-expectedStock trades at#2 (was

20、 #2)China Life-H #3 (was #3)market with a broad nationwide distribution network. Although motor rate liberalisation has caused uncertainty, loss ratios have actually been better than expected due to a lower claims frequency, but higher commissions have pushed up expense ratios and tax rates. Documen

21、t 57 should ease pressure on commissions and tax rates. Meanwhile, non-motor is growing faster than motor and its underwriting profitability is improving. Our estimates suggest a c13% ROE over the next five years, which is below its historical average due to lower asset leverage.PICC P&C: BuyHold: C

22、hina Life is the largest Chinese life insurer with a 20% market share, offering exposure to Chinas growing life insurance market. Our estimates suggestcombined ratios Stronger-than-expected premium growth from both motor and non- motor lines Stronger-than-expected life NBVcombined ratios Stronger-th

23、an- expected premium growth from both motor and non-motor lines Life sales and NBV underperforman 8.2x 2020e PE, or at a 1.1x 2019e PBV,which is below our 1.4x target price-implied fair PBV multipleStock trades at a 0.7x 2019e13% life new business value growth over the next three years due to a slow

24、down in SOE reform accelerates Rural areas beingPEV, which isChina Pacific-H #4 (was #4)agency growth and gradually shifting towards higher quality development. In addition, its c44% stake in China Guangfa Bank has created some uncertainty about its bancassurance strategy and exposes shareholders to

25、 rising bank NPLs, while its Tier-1 SOE status may require it to perform social duties. Nevertheless, China Life continues to enjoy a relatively healthy C-ROSS solvency ratio.China Life H/A: Hold/ReduceHold: China Pacific has a relatively strong balance sheet with C-ROSS solvency ratios of core 290%

26、/comprehensive 296% and low debt leverage. We expect it to deliver a 1% pa new business value decline over 2018-21e, while there is an Disclosure enhancements earnings and management incentives Stronger-than-expected life NBV Stable P&C resultsencroached upon National service risks Poorly trained ag

27、ents Weaker-than- expected life sales and P&C resultsbelow our 0.8x target price- implied fair PEV multipleStock trades at a 0.7x 2019e PEV, which isopportunity to develop its residual margin disclosure to improve earnings visibility,despite auto reform Worse-than-expected below our 0.8xgiven life a

28、ccounts for c70% of group PBT. Although we expect the P&C combined Disclosurefinancial marketstarget price-ratio to remain close to 99%, given pressure from motor reform, non-life accounts for only c30% of PBT. China Pacific offers the highest dividend pay-out and yield among China life insurers.Chi

29、na Pacific H/A: Hold/ReduceNew China Life-H Hold: New China Life is the purest life play in our coverage universe, offeringenhancements earnings and management incentives SOE reform Stronger-than-expected National service risks Life sales and NBVimplied fair PEV multipleStock trades at#5 (was #5)PIC

30、C Group #6 (was #6)China Re #7 (was #7)Source: HSBC estimatesexposure to Chinas growing life insurance market. It has delivered impressive progress in executing its transformation plan to cut the proportion of lower margin single premium investment products sold through the bancassurance channel. Ho

31、wever, agency growth has lagged peers in the past three years and productivity improvements will take time. Whether NCI will continue to focus on value is unclear under the new management team. We expect it to deliver 14% embedded value and 1% life new business value growth over 2018-21e.New China L

32、ife H/A: Hold/ReduceHold: PICC Group has one of Chinas leading insurance franchises, but its life business has delivered relatively low life new business value growth since listing, due to a higher dependence on lower margin bancassurance sales. PICC Group derives most of its value from PICC P&C, wh

33、ich accounts for c80% of our PICC Group SOTP. In our view, the management team needs to provide greater clarity on its life, pensions, health and reinsurance strategy. We apply a 10% conglomerate discount and a further 10% discount for poor disclosure.PICC Group: HoldHold: China Re provides the most

34、 concentrated exposure to Chinas reinsurance market. We see earnings pressures from lower volumes due to higher retention among primary players, intensifying competition from a number of new players, and a lack of diversification compared with global reinsurance peers as China accounts for c96% of i

35、ts GPW. China Re also has a primary P&C business, Continent P&C, accounting for c20% of group PBT, which faces pressure from the governments latest motor rate liberalisation efforts.China Re: Holdlife NBV Improving agency productivity Disclosure enhancements earnings and management incentives SOE re

36、form Disclosure enhancements Better-than-expected PICC P&C results Recovery in industry volumes and pricing Sells more non- proportional reinsurance Better-than-expected P&C combined ratiounderperform Slower-than-peers agency recruitment Non-standard asset quality deterioration National service risk

37、s Focus on low margin single premiums Trust exposure from China Credit Trust Large health insurance exposure Recovery in industry volumes and pricing Sells more non- proportional reinsurance Better-than-expected P&C combined ratioa 0.5x 2019e PEV, which is in line with our 0.5x target price-implied

38、fair PEV multipleStock trades at an 0.7x 2019e PBV, which is below our 0.8x target price- implied fair PBV multipleStock trades at a 0.6x 2019e PBV, which is in line with our 0.6x target price-implied fair PBV multipleExhibit 2: China Insurance valuation comparisonShareAvgEPSDivDivMarket Mkt CapPric

39、e HSBC TargetUpside/ PEV PEVROEVPBVPBV Avg ROEPEPEGrowthYldYldCompany(Currency) USDm 10 Jan Rating Price Downside 2019e 2020e 2020-24e 2019e 2020e 2020-24e 2019e 2020e 2018-21e 2019e2020eChina Life HHK (HKD)126,85322.5Hold24.710%0.7x0.6x12.1%1.5x1.4x12.2%8.4x13.4x64%4.2%2.6%China Pacific HHK (HKD)46

40、,11131.5Hold34.29%0.7x0.6x13.4%1.4x1.3x13.4%8.5x10.2x15%5.9%4.9%China ReHK (HKD)7,2201.32Hold1.342%0.5x0.5x9.8%0.6x0.5x8.0%8.7x7.7x23%4.6%5.2%New China Life HHK (HKD)19,74034.6Hold37.38%0.5x0.4x11.8%1.1x1.0 x12.6%6.3x8.4x16%4.8%3.6%PICC GroupHK (HKD)42,5843.26Hold3.57%NANANA0.7x0.6x10.3%6.1x6.6x17%3

41、.3%3.8%PICC P&CHK (HKD)26,8929.39Buy12.028%NANA17.8%1.1x1.0 x13.2%7.6x8.2x17%5.3%4.9%Ping An HHK (HKD)221,81993.2Buy132.042%1.4x1.2x17.8%2.3x2.0 x21.2%10.3x9.7x16%2.5%2.9%China Life AChina (RMB)126,88935.1Reduce22.0-37%1.2x1.1x12.1%2.6x2.4x12.2%14.7x23.4x64%2.4%1.5%China Pacific AChina (RMB)46,12338

42、.5Reduce30.0-22%1.0 x0.9x13.4%1.9x1.8x13.4%11.7x14.1x15%4.3%3.6%New China Life AChina (RMB)19,74550.3Reduce33.0-34%0.8x0.7x11.8%1.8x1.6x12.6%10.4x13.8x16%2.9%2.2%Ping An AChina (RMB)221,86484.8Buy118.039%1.4x1.2x17.8%2.4x2.0 x21.2%10.5x9.9x16%2.5%2.8%- China HAll (USD)203,31831%1.0 x0.9x15.8%1.9x1.7

43、x18.0%9.5x10.1x24%3.3%3.2%- China AAll (USD)287,9010%1.2x1.1x14.9%2.3x2.1x16.5%12.2x15.6x34%2.7%2.4%ChinaAll (USD)491,21910%1.2x1.0 x15.2%2.2x2.0 x17.0%11.3x13.8x30%2.9%2.7%Asia sector*All (USD)723,7958%1.6x0.8x15.4%3.0 x2.7x16.1%17.0 x17.9x20%2.5%2.4%AIAHK (HKD)133,86286.0Buy95.010%2.2x1.9x15.5%2.5

44、x2.3x13.7%18.7x18.0 x47%1.5%1.5%PrudentialUK (GBp)50,2791,480Buy1,80022%1.1x1.0 x16.6%2.5x2.1x19.4%10.9x10.6x41%1.9%2.0%Note: *Asia sector includes AIA, Bangkok Life (BLA TB, THB19.90, Hold), Chinese Insurers, Indian Insurers and Taiwanese Insurers. China refers to mainland China. Source: Refinitiv

45、Datastream, HSBC estimates for covered companiesExhibit 3: Share price performance of Chinese insurers and selected indices in absolute terms Since Company1M3M12MYTD1/1/20191/1/20181/1/20171/1/20161/1/20141/1/2012China Life H8.0%20.2%30.9%0.2%30.4%-11.6%7.4%-13.4%-10.5%13.0%China Pacific H10.9%7.5%2

46、5.6%0.8%22.1%-17.6%14.4%-3.0%1.8%40.0%China Reinsurance6.6%4.0%-18.8%1.6%-18.8%-27.0%-29.3%-45.1%NANANew China Life H10.1%9.2%22.5%0.9%8.7%-36.7%-5.1%3.8%30.0%31.5%PICC Group3.8%4.2%8.0%0.3%3.2%-15.6%6.2%-14.5%-13.3%NAPICC P&C1.5%1.4%15.4%-1.0%16.1%-7.1%15.5%-9.5%26.1%44.5%Ping An H3.0%1.8%38.9%0.4%

47、33.7%13.6%138.3%115.0%166.2%261.1%Chinese insurance H shares6.3%6.9%17.5%0.5%13.6%-14.6%21.1%4.8%33.4%78.0%HSCEI index6.5%8.6%9.3%-0.8%9.4%-5.4%17.9%14.7%2.4%11.5%China Life A3.3%23.4%70.7%-2.1%67.4%12.1%41.7%20.6%125.6%93.5%China Pacific A10.6%8.3%37.9%1.7%35.4%-7.0%38.6%33.4%107.8%100.4%New China

48、Life A7.5%0.9%26.1%0.9%17.4%-29.3%13.3%-5.0%116.8%78.0%Ping An A0.3%-3.4%52.3%-0.5%51.5%21.5%139.9%136.1%307.5%393.6%CSI 3005.4%7.2%34.9%0.4%36.6%2.0%24.2%10.2%76.5%75.3%Shanghai Comp5.3%5.3%21.4%0.5%23.0%-7.3%-1.2%-13.3%44.9%39.4%FTSE Asia ex Japan Fins2.5%3.4%5.2%-0.8%6.5%-8.9%11.8%14.1%2.1%32.7%F

49、TSE Asia ex Japan3.9%7.7%13.8%-1.0%14.1%-3.3%23.1%31.2%9.5%32.5%Source: Refinitiv Datastream, HSBC. Note: NA Not applicable.Exhibit 4: Summary of key estimate changes (per share data in HKD)China LifeChina PacificChina ReNew ChinaPing AnPICCGroupPICCP&C2019e EPS0%1%-6%1%-14%1%1%2020e EPS1%1%-6%1%9%-

50、3%1%2021e EPS1%1%-6%1%10%-1%1%2019e BVPS4%6%1%7%-2%4%5%2020e BVPS4%6%1%7%0%3%4%2021e BVPS4%6%1%6%2%3%4%2019e EVPS4%4%1%4%3%NANA2020e EVPS4%4%1%4%3%NANA2021e EVPS4%3%1%4%3%NANA2019e NBVPS1%1%-1%1%1%NANA2020e NBVPS2%3%-1%3%1%NANA2021e NBVPS2%2%-1%5%1%NANASource: Company data, HSBC estimates. Note: Per

51、centage changes based on HKD per share estimates, which is a function of changes in the RMB:HKD exchange rate and RMB estimates. Changes in the latter can be found in the Valuation, rating & risks section of this report. EVPS and NBVPS are on an HSBC basis. NA Not applicableInvestment summaryLife NB

52、V outlook remains mixed, given differing product strategies, mix changes, agent restructuring, and intense competitionP&C more stable with lower taxes due to lower commission ratios; full liberalisation of the motor business likely to be phased in across mainland ChinaBuy-rated Ping An H/A and PICC

53、P&C remain preferred insurers, while China Life H/A and NCI H/A shares may benefit from a strong 1Q20 Jumpstart campaignStock performanceChinese insurers marginally underperformed the market over the past three months, in line with our more cautious stance on the space since November 2019 (see China

54、 Insurance: Mixed life outlook; more stable P&C, 4 November 2019). That said, Chinese insurers rose c18% over the past year, outperforming the HSCEI by 8ppts over this period. Nevertheless, valuation levels are still 6-35% below five-year averages on a PE basis, 2-26% on a PBV basis (except China Li

55、fe- A), and 2-39% on a PEV basis (except Ping An-A).Among the stocks, China Life-A has been the best performer (71%), followed by Ping An H/A (39%/52%), China Pacific-A (38%) and China Life-H (31%). Both H- and A-share classes outperformed local market indices, with the exception of China Re, PICC G

56、roup and New China Life H/A.In our view, stock outperformance during 2019 was driven by:A strong equity market, given the historical correlation with markets and the resulting positive impact on investment incomeA rise in the 750-day moving average yield to 3.51% at end-2019, up from 3.40% at end- 2

57、018, which is used in life reservingA change in the commission tax deductibility leading to one-off tax write-backs and recurring benefits from lower effective tax rates, resulting in positive earnings revision as well as supporting the ongoing shift towards protection in the life spaceGrowing, but

58、not exceptionally strong, NBV performance in 2019 and expected for 2020, but the highest growth rates have not translated into the best stock performanceEnd-2018 share prices were around five-year trough levels, except Ping An H/AMuddling throughHowever, we remain cautious on the outlook for the ind

59、ustry in the coming year. On one hand, the structural attractions remain broadly unchanged. The Chinese insurance market remains underpenetrated, the protection gap remains sizeable and some provinces have higher insurance penetration than others, leaving scope for insurers to grow faster in certain

60、 areas. Moreover, government policies continue to support further, sustainable and higher quality development of the insurance industry, with companies investing to grow distribution, develop services that are complementary to traditional insurance products and deliver operational efficiency improve