2012 premiums mixed, more positive
on 2013
Mixed premium growth; hoping for better 2013
________________________________________________________________________________________________________________
Deutsche Bank AG/Hong Kong
Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should
be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should
consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST
CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 072/04/2012.
Esther Chwei
Research Analyst
(+852) 2203 6200
esther.chwei@db.com
Top picks
China Life (2628.HK),HKD26.05 Buy
Ping An (2318.HK),HKD68.50 Buy
CPIC (2601.HK),HKD31.20 Buy
NCI (1336.HK),HKD31.40 Buy
Companies Featured
China Life (2628.HK),HKD26.05 Buy
Ping An (2318.HK),HKD68.50 Buy
CPIC (2601.HK),HKD31.20 Buy
NCI (1336.HK),HKD31.40 Buy
CTIH (0966.HK),HKD16.02 Hold
PICC Group (1339.HK),HKD4.68 Hold
PICC P & C (2328.HK),HKD11.76 Hold
2012 premium growth was mixed: life growth ranged from -4.4% to 15.9% and
P&C ranged from 11.3% to 33.9%. Dec life premium was also mixed, with
growth ranging from -17.4% to 40.4% yoy. China Life rebounded at 40.4% yoy,
we believe at the expense of margin, while PICC was the weakest at -17.4%
yoy. P&C growth slowed in Dec, with growth ranging from 9.7% to 41.0% yoy.
With most insurers guiding for better growth in 2013 and the sector trading at
the low end of its historical range, we see more upside despite the recent rally.
We prefer Ping An and NCI for their leverage to equity markets and relatively
inexpensive valuations. We also have Buy ratings on CPIC and China Life.
Mixed life growth for December
Listed life insurers reported mixed premium growth for Dec. China Life saw
growth rebound to 40.4% yoy (from -0.96% yoy in Nov) and the company has
shifted back to a focus on volume to ease pressure on sizable maturity
payments expected in 1H13. It was followed by Taiping Life with 35.3% yoy
(vs. 39.3% yoy in Nov), Ping An at 8.4% yoy (11.5% yoy), CPIC at 0.2% yoy
(0.4% yoy), NCI at -8.8% yoy (-5.7% yoy) and PICC at -17.4% yoy (1.8% yoy). In
terms of 2012 premiums, China Life rebounded to 1.4% yoy (from -0.8% in
11M12), Taiping accelerated to 15.9% (vs. 14.2%), Ping An and CPIC saw
growth remain at 8.7% and 0.3% respectively, NCI slowed to 3.1% (from 3.9%)
and PICC worsened to -4.4% (from -3.3%).
P&C premium growth slowing or flat
For the month of Dec, growth generally slowed: PICC to 9.7% yoy (from 15.5%
yoy in Nov), Ping An to 9.9% yoy (from 18.6%) and Taiping to 41.0% yoy (from
48.6% yoy), while CPIC was relatively stable at 19.6% (from 19.4%). In terms
of 2012 premiums, growth was fairly flat vs. the previous period, with Taiping
leading at 33.9% (vs. 33.1% in 11M12), Ping An at 18.5% (19.5%), CPIC at
13.0% (12.3%), and PICC at 11.3% (11.5%).
We prefer Ping An and NCI on improved market outlook
We prefer Ping An and NCI for their relatively inexpensive valuations at 1.3x
2013E P/EV and 1.1x 2013 P/EV, respectively, and their relatively high leverage
to the A-share markets. In addition, we are more comfortable with Ping An’s
growth outlook given its quality agency force and we believe the company’s
drive to increase market share in Tier-2 and Tier-3 cities should bear fruit. We
continue to prefer NCI given its attractive valuation at 1.1x 2013E P/EV, and we
believe a likely improvement in 2013 growth could result in a valuation rerating.
We also have Buy ratings on CPIC and China Life, while we maintain
our Hold ratings on China Taiping, PICC Group and PICC P&C. Investment risks
to our bullish view on the sector include a major correction in A-share markets,
unfavorable regulatory changes, China-related risks and a weaker-thanexpected
growth recovery.