Guosen: The asset side of the listed insurance in the third quarter has been significantly repaired, driving revenue and profit to achieve high growth.

Guosen released a research report stating that in the third quarter of 2024, the capital market rebounded significantly, coupled with the stabilization of long-term interest rates, the asset side of listed insurance companies saw significant improvement, driving revenue and profit to achieve high growth. As of the end of the third quarter of 2024, the cumulative operating income of the five listed insurance companies on A-share market reached 2.0896.6 billion yuan, a substantial increase of 21.7% year-on-year. Considering the diverse demands in the current industry such as old age care, medical care, health maintenance, and savings, combined with the initial effects of channel and product reforms, Guosen predicts that the premium growth rate for the "2025 New Year" will be around 7% to 8%, corresponding to an NBV growth rate of 25%. On the asset side, listed insurance companies seized the opportunity of the market rebound, and investment returns significantly improved. Looking ahead, with the expansion of renewal and new premium scales, the demand for asset allocation by insurance funds is expected to remain high. The allocation trend of long-term bonds and high-dividend assets (assets measured by OCI) may continue, and it is recommended to focus on the leading companies in liabilities such as China Life Insurance (601628.SH), China Pacific Insurance (601601.SH), and PICC P&C (02328). Guosen's main points are as follows: Asset revaluation, profit rebound. In the third quarter of 2024, the capital market rebounded significantly, coupled with the stabilization of long-term interest rates, the asset side of listed insurance companies saw significant improvement, driving revenue and profit to achieve high growth. As of the end of the third quarter of 2024, the cumulative operating income of the five listed insurance companies on the A-share market reached 208.966 billion yuan, a substantial increase of 21.7% year-on-year. Among them, New China Life Insurance, China Life Insurance, China Pacific Insurance, The People's Insurance, and Ping An Insurance saw operating income growth of 72.9%, 54.8%, 21.3%, 12.2%, and 10.0% respectively. Continuous release of reform dividends, optimistic about the continuation of premium growth. Since 2023, regulators have continuously guided the industry to lower the predetermined interest rates, which has driven the rapid growth of savings-type insurance products in the context of structural transformation. In the first three quarters of 2024, the insurance service income of China Life Insurance, The People's Insurance, China Pacific Insurance, Ping An Insurance, and New China Life Insurance increased year-on-year by 15.7%, 6.1%, 2.3%, 2.5%, and -10.2% respectively. As November approaches, the insurance industry has successively started the "2025 New Year," and the industry still has room for adjustment in product structure, human resource transformation, and channel ecology. We continue to be optimistic about the scale increment of the industry's subsequent premium income. Property insurance business demonstrates resilience, premium income stabilizes. As of the end of September, PICC Property & Casualty, Ping An Property & Casualty, and Taiping Property & Casualty achieved a total premium income of 827.52 billion yuan, a year-on-year increase of 5.6%; among them, the premium income from automobile insurance business was 452.09 billion yuan, up 3.4% year-on-year; the premium income from non-automobile insurance business was 375.43 billion yuan, up 8.2% year-on-year. Since 2024, factors such as frequent major disasters such as freezing rain in the north and typhoons in the south have caused differentiated performance in COR year-on-year. As of the end of the third quarter, The People's Insurance's COR was 98.2%, with the impact of major disasters dragging down underwriting profit space, and COR increased by 0.3 percentage points year-on-year. Ping An Insurance was affected by factors such as the rectification of credit insurance business, and COR was optimized by 1.5 percentage points year-on-year to 97.8%. China Pacific Insurance's COR for the first three quarters was 98.7%, unchanged from the same period last year. Optimize the asset allocation structure, investment returns recover year-on-year. Listed insurance companies have continuously optimized the asset allocation structure, increased the allocation of long-term bonds, FVOCI stocks, and other assets, and timely increased positions in the stock market, seizing market investment opportunities and taking profit in phases. In the third quarter, the capital market saw a significant rebound, the fair value of equity assets represented by stocks increased significantly, driving the year-on-year improvement of investment returns for listed insurance companies. As of the end of the third quarter, China Life Insurance, China Pacific Insurance, and New China Life Insurance achieved total investment return rates of 5.38%, 4.70%, and 6.80% respectively, an increase of 2.57 percentage points, 2.30 percentage points, and 4.5 percentage points year-on-year. Investment recommendation: Considering the diverse demands in the current industry such as old age care, medical care, health maintenance, and savings, combined with the initial effects of channel and product reforms, we predict that the premium growth rate for the "2025 New Year" will be around 7% to 8%, corresponding to an NBV growth rate of 25%. On the asset side, listed insurance companies seized the opportunity of the market rebound, and investment returns significantly improved. Looking ahead, with the expansion of renewal and new premium scales, the demand for asset allocation by insurance funds is expected to remain high, and the allocation trend of long-term bonds and high-dividend assets (assets measured by OCI) may continue. It is recommended to focus on the leading companies in liabilities such as China Life Insurance, China Pacific Insurance, and PICC P&C. Risk warning: Premium income below expectations; continued volatility in the capital market; decline in long-term interest rates, etc.