Table of Contents
Share price performance .........................................................3
Insurers outperformed banks in 1Q09..........................................................................3
Valuations summary ................................................................5
Upside and downside risks of the insurers ...........................7
Stock picks ...............................................................................7
China Life (2628.HK, Overweight) .............................................................................7
Ping An Insurance (2318.HK, Neutral)........................................................................7
PICC (2328.HK, Underweight) ...................................................................................8
China Life is better-positioned to adopt the change in
premium income definition......................................................8
Definition of insurance contracts is more stringent under HK GAAP and IFRS.........8
Insurance contract versus investment contract.............................................................9
China Life has consistently outperformed Ping An in premium growth under
HK GAAP....................................................................................................................9
PRC GAAP premium growth in 2H09 is likely to
decelerate................................................................................10
China Life is likely growing more ‘insurance’ contracts in 2009..............................11
Ping An is likely driven by a combination of agency business and
bancassurance this year..............................................................................................11
Record sales through bancassurance in 2008 will not
repeat.......................................................................................12
Tighter rules by CIRC on bancassurance sales ..........................................................12
The bancassurance model in China has low value creation .......................................13
Insurers are cautious on equity markets..............................14
Insurance companies are relatively neutral in equities...............................................15
PICC is most leveraged to A-share market ................................................................15
EPS and BV sensitivity to A-share market ................................................................15
Investment yield will start to pick up when rates turn ........16
China Life has lower re-investment risk than Ping An and PICC..............................17
China Life has the most defensive investment portfolio............................................18
Ping An is adding equity investments through its acquisition of Shenzhen
Development Bank ....................................................................................................18
PICC is likely to maintain conservative in investment this year................................19
Investment yield expectations....................................................................................19
Companies
China Life Insurance Co. Ltd.....................................................................................24
Ping An Insurance......................................................................................................30
PICC Property & Casualty Co. Ltd............................................................................36