Source: Mapworm Creative
On the first trading day after the National Day holiday, the A-share market showed a rare rise led by the insurance sector.
In most cases this year, the collective performance of insurance stocks has been poor, making insurance an undervalued sector. There are reasons for capital preference, short-term growth pressure on the insurance liability side, and the market’s concerns about asset-side risks. It remains to be seen whether the current rise will be the start of the weighting sector market in the fourth quarter or a supplementary rise.
Insurance stocks led the gains
As of the close, the insurance sector as a whole rose by more than 6%, of which China Pacific Insurance and Ping An of China rose by more than 7%, and China Life Insurance _span17 insurance rose more than 7% 5%, PICC rose close to 3%.
Looking at the present moment, after the continuous decline in the early part of this year, insurance stocks have “fallen out of value”. In the first September of this year, the insurance sector has fallen by 30%, and individual insurance stocks have fallen below the embedded value of .
For example, Ping An’s stock price fell from about 90 yuan at the beginning of the year to 49 yuan at the end of September, a 45% drop, and its total market value fell to 850 billion yuan, which was only its embedded value at the end of the first half of the year (1.38 trillion yuan). ) Of 60%. In addition, the market value of China Life, China Pacific Insurance, and Xinhua Insurance is also lower than its own embedded value.
The slight growth in business was sluggish
For the insurance industry entering the fourth quarter, the number of performance tasks for this quarter will be multiple. On the one hand, we must complete a good year ending, and on the other hand, we must prepare for a good start in the first quarter of the coming year.Judging from the situation this year, many insurance companies may focus on the first task. As the development model has become more extensive and refined, the insurance industry is also consolidating its fundamentals.
Data for the first three quarters of the insurance industry has not yet been released, but from the previous August situation, most of the top five A-share listed insurers, which accounted for more than half of the industry’s market share, only maintained slight growth.
The insurance premium data released by various insurance companies show that from January to August, China Life Insurance's premiums increased by 2.33%, Ping An of China fell by 5.33%, PICC increased by 0.33%, China Pacific Insurance increased by 1.53%, and Xinhua Insurance increased by 2.0% .
Although there is still growth, the life insurance and property insurance businesses of various insurance companies are currently under significant pressure. The growth in the first eight months was mainly due to the bottom in the first half of the year, especially the first quarter. Since the second half of the year, the monthly premiums of listed life insurance companies and property insurance companies in July and August have shown negative growth compared to the same period last year.
The pressure of new orders in the life insurance business is particularly high, and it is already facing negative growth. Guotai Junan Non-Banking Research Report analyzed that this pressure, on the one hand, has not alleviated the pressure of new order sales under the background of the concentration of manpower and the new model of critical illness sales. On the other hand, some companies have three-year short-term strategic products. Expiry has an impact on the renewal business.
The negative growth of property insurance was mainly due to the negative growth of auto insurance. The above research report judged that there are two main reasons for the negative growth of auto insurance: First, the local China Banking and Insurance Regulatory Bureau has not relaxed the speed limit requirements of large insurance companies, which has caused the growth of auto insurance to slow down; second, the leading insurance companies actively control the comprehensive cost rate. The growth rate of inferior business has a negative impact on premium growth. As the comprehensive reform of auto insurance is about to expire one year in September, the pressure of subsequent auto insurance premium growth will be significantly eased, and the comprehensive cost ratio will become the core concern.
After entering the fourth quarter, in accordance with the business rhythm of previous years, insurance companies must first achieve full-year business tasks. Judging from the business situation throughout the year, the current pressure is not small.
China Merchants Securities The non-banking group's insurance industry research report in the first half of the year analyzed the current development of the insurance industry’s liability side.Judging from the current status of the industry, there are problems such as the decline in the quality of new business, the shrinking number of agents but the obvious differentiation of the capacity structure, and the increasing pressure on the surrender of existing businesses. The reasons for these phenomena include the disappearance of long-term demographic dividends and mid-term market competition. Intensified, short-term impact of the epidemic and other factors, the core of solving these problems is the need to upgrade channels, products, services, and operations in all aspects. This is a process of "slow work and meticulous work", and its liabilities are judged. The end of the downturn may continue until next year, after which it will usher in healthy growth.
Cathay Pacific Junan Non-Bank recently reported that the life insurance reform will take time, and the annual new business value (NBV) expectations are lowered: the current major listed insurance companies are still experiencing the first step of high-quality development of agents. Taking into account that it generally takes about 12 months for high-quality newcomers to enter the company, it is expected that the high-quality newcomers recruited in 2021 can become the main capacity contribution group by 2022. In order to achieve long-term reform success, it is expected that mainstream listed insurance companies will lower their annual performance targets in the short term.
The importance of a good start is reduced
In addition to focusing on the full-year business, in the fourth quarter, insurance companies will also start preparations for a good start in the coming year to lay a solid foundation for the new year's business. This year, due to the heavier task of achieving full-year performance, the preparations for the start of next year may not be as good as in previous years, and the start-up time will be delayed.
The recent research report of Guotai Junan Non-Banking predicts that the importance of a good start for listed insurance companies in 2022 will decrease. It analyzed two main reasons: on the one hand, the current performance of each company in 2021 is significantly lower than the assessment requirements, and the task of sprinting the full-year performance in the fourth quarter is still heavy and unable to start a good start; on the other hand, the supervision has been since the end of 2020. Beginning to propose "annual business development", it is expected that supervision will clearly limit the practice of opening the door too early. Based on this, it is expected that major insurance companies will postpone the start-up time of the good start from 2021, and the growth of the good start performance will slow down.
As a common practice in the insurance industry, especially the life insurance industry, which has developed for more than 20 years, it has laid the foundation for the industry’s annual business growth in the past and has been valued by insurance companies.The good start period is generally the first quarter of each year. During this period, the business premiums sold by insurance companies may account for 30% or even higher of the entire year. There are specific reasons for the good start. On the one hand, it coincides with the end of the year and the Spring Festival, and Chinese people have a saving habit, which provides opportunities for the sale of savings products such as annuities; on the other hand, insurance companies have a desire to quickly increase the scale of premiums at the beginning of the year. However, this sales-oriented activity has brought about some problems. In recent years, disputes have increased, and mainstream insurance companies have swayed and diverged in their attitudes towards a good start.
At the same time, some analysts believe that the current Chinese insurance companies still need a good start. On the one hand, it is very important for a good start to lay a good foundation throughout the year and a good growth momentum. This is very helpful to boost the morale of the whole system staff and can also stabilize the agent team; on the other hand, the residents objectively start at the beginning of the year. There is a demand for savings, which is also a marketing arrangement that caters to market demand.
Source: China Fund News
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