Guotai Junan forecasts the performance of listed insurance companies in 2024: estimated NBV prosperity, investment-driven profitability exceeds expectations.

Guotai Junan's non-banking team issued a research report looking ahead to the annual performance of listed insurance companies in 2024. The team believes that in the life insurance sector, the strong demand for insurance savings from customers will continue during the interest rate cut cycle. It is expected that the New Business Value (NBV) will continue to grow rapidly in 2024, benefiting from regulatory guidance linking life insurance predetermined interest rates to market interest rate adjustments, as well as measures such as the "integrated sales and underwriting" across all channels to guide the lowering of liability costs, effectively alleviating the pressure of spread and fee losses. In the property insurance sector, it is expected that the Combined Operating Ratio (COR) will be slightly under pressure due to the impact of catastrophic losses. On the investment side, with a strong stock and bond market background in 2024, it is expected that investment services will greatly improve performance and drive significant profit improvement, maintaining a "hold" rating for the industry. The resonating stock and bond markets are expected to lead to better-than-expected profit improvements. In 2024, with a bullish stock and bond market, it is predicted that the upward trend in the equity market will significantly boost the fair value changes of equity assets for listed insurance companies in 2024. On the other hand, the expected decline in the ten-year Treasury bond yield in 2024 is expected to drive the market price of fixed income assets held at fair value through profit or loss (FVTPL) by listed insurance companies, boosting investment income performance. New premiums surpassing expectations, coupled with a rise in value rate, are expected to drive a significant increase in NBV in 2024 which far exceeds the initial expectations for the year. The forecasted growth rates for NBV in 2024 for listed insurance companies will be: New China Life Insurance (137.5%) > Taikang Life Insurance (37.6%) > Ping An Life Insurance (32.3%) > China Life Insurance (20.6%). Property insurance premiums are growing steadily, with expectations of varied COR performance. In 2024, solid growth in car insurance is expected, with improvements in new car sales and stabilization of average premiums per car. Strong non-car demand will continue to optimize business structures for leading insurers with profit orientation. In 2024, the property insurance industry's underwriting profit will be affected by catastrophic loss payments, with improvement in expense ratios. Some insurance companies, such as Ping An Property Insurance, are expected to benefit from actively shrinking historically high loss-making guarantee insurance business, leading to improved COR. Guotai Junan predicts the 2024 COR for listed insurance companies as follows: PICC Property Insurance (98.2%, +0.4pt year-on-year), Taikang Property Insurance (98.4%, +0.7pt year-on-year), Ping An Property Insurance (97.7%, -3.0pt year-on-year). Risk factors: Decline in long-term interest rates; market volatility; limited sustainability of customer demand.