We remain positive on PRC life insurers, as we expect the strong
outlook for VNB growth for the next two to three years to support the
continuation of positive share price momentum. We have lifted VNB
growth estimates in our valuations by 2-5%, leading to increases of
between 12% and 28% in our target prices for the life insurers.
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The solid VNB growth credentials of the PRC life insurers are expected
to be plainly obvious in 1H09 results. Despite a relatively mixed set of
premium growth numbers reported by the listed players in 1H09, we
forecast VNB growth to range from 16.5% to 35% YoY, due to sustained
strength in the agent channel and business mix restructuring.
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We expect the VNB growth to be a long-term catalyst for the insurers.
Besides the supportive economic and demographic backdrop,
regulatory reforms and new product development can provide upside
risks to growth forecasts over the next two to three years.
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Within a positive view of the entire life insurance sector, it is difficult to
separate the insurers who we estimate to trade at roughly similar P/EV
multiples. However, we believe the strength of Ping An’s VNB growth
in 2009 and the prospect of further expansion of the agent network in
the coming years underpins a slightly stronger value progression story.