Shenwan Hongyuan Group: The growth rate of premiums in October weakens and personal insurance will enter the "opening red" reserve stage.

Shenwan Hongyuan Group released a research report stating that the growth rate of life insurance premiums in October weakened due to the phased overdraft of customer demand for interest rate switching and the double factors of new customers and red envelopes. In terms of new policies, in October, China Life Insurance had a yoy growth rate of +5.6% for new individual life insurance policies and +73.6% for new term life insurance policies, showing an impressive growth rate on a low base (compared to -49.1% / -80.6% yoy for new individual life insurance / new term life insurance policies in October last year). It is expected that the slowdown in premium growth is mainly due to the double factors: the phased overdraft of customer demand for interest rate switching and the high growth in new policies announced in Q3, with China Life Insurance yoy +87.3% (including individual life insurance and health insurance) and Ping An yoy +65.7%; as we enter Q4, insurance companies are ramping up efforts to prepare for the "25-year red envelope" campaign, leading to a natural slowdown in business. Major insurance companies' premium growth rates in October are as follows: For the first ten months, the performance of listed companies in the life insurance sector included China Life Insurance with a yoy growth rate of +15.5%, Ping An Life with a yoy growth rate of +9.0%, China Life Insurance with a yoy growth rate of +5.6%, China Life with a yoy growth rate of +4.9%, Taikang Life with a yoy growth rate of +2.4%, and New China Life with a yoy growth rate of +1.8%. The month-on-month growth rates in October were as follows: Taikang Life (yoy +2.3%), New China Life (yoy -0.2%), Ping An Life (yoy -1.9%), China Life (yoy -2.6%), China Life Insurance (yoy -2.8%), Sunshine Life (yoy -16.4%). It is expected that this round of product adjustments will be a gradual process, with improvements in NBVM driving steady growth in new business value (NBV) for the "25-year red envelope". Shenwan Hongyuan Group believes that this round of product switching is fundamentally different from the previous round. In the previous round, the switch from critical illness insurance to increasing lifelong insurance was a customer-driven product structure adjustment. However, in this round, the switch from increasing lifelong insurance to long-term dividend insurance is a liability structure adjustment driven by the insurance companies themselves. Despite facing challenges such as interest rate adjustments, stricter cost controls, and optimization of product structures, NBVM is expected to continue to improve, with NBV growth expected to remain steady in 2025. Property insurance growth remains steady, with non-auto insurance premiums for PICC P&C growing by double digits in October For the first ten months, the cumulative premium growth rates of listed property insurance companies were as follows: ZA ONLINE (yoy +13.0%), Sun Insurance (yoy +9.2%), Taikang Property (yoy +7.4%), Ping An Property (yoy +6.5%), and PICC Property (yoy +4.8%). The month-on-month growth rates in October were as follows: ZA ONLINE (yoy +36.1%), Ping An Property (yoy +12.2%), Sun Insurance (yoy +12.2%), PICC Property (yoy +7.8%), and Taikang Property (yoy +3.9%). 1) Auto insurance: With improved growth in new car production and sales in October, according to China Association of Automobile Manufacturers data, the year-on-year growth rates for car production/sales in October were +3.6% / +7.0%, compared to +5.5% / +8.7% in the previous period. For the first 10 months and in October, the monthly car insurance premium growth rates for PICC Property & Casualty were +3.6% / +6.4%, compared to +0.3% / +1.1% in the previous period; 2) Non-auto insurance: For the first ten months and in October, the year-on-year growth rates for non-auto insurance premiums for PICC Property & Casualty were +6.2% / +12.3%; among which, the premiums for health insurance/other insurance/freight insurance in October were +25.6% / +24.7% / +22.2%. Investment recommendations: There is no need to overly worry about the sustainability of the growth on the liability side, as policy remains the key factor affecting short-term valuations in the insurance sector On one hand, it is recommended to continue monitoring solvency, reserves, overseas asset allocation, insurance fund participation in swaps, and the optimization policy of "long money, long investment" as catalysts for sector valuations; on the other hand, the recent implementation of the "Listed Company Regulatory Guidance No. 10 - Market Value Management" will make dividends a key focus for insurance companies' market value management in the next phase. It is recommended to pay attention to the potential logic switch in valuations for some companies under the trend of increasing dividends, and recommend Ping An Insurance (601318.SH), New China Life Insurance (601336.SH), China Life Insurance (601628.SH), China Pacific Insurance (601601.SH), and PICC P&C (02328). Risk factors: Decline in long-term interest rates, significant market volatility, unexpected effects of major disasters, and unexpected impacts of regulatory policies.