JP Morgan: Chinese insurance stocks lag behind the broader market, preferring Ping An Insurance (02318) and China Life Insurance (02628).

JPMorgan released a research report stating that after the end of the Chinese lunar New Year holiday, the performance of H-share insurance companies in China lagged behind the broader market. The market seems to be concerned about: (1) short-term profit risks, as major insurance companies have not yet announced positive profit forecasts; (2) lack of data points, as monthly premium income has not been disclosed; and (3) macro trends after the lunar New Year holiday. The bank expects that as the earnings disclosure period approaches, the sector will regain momentum. The five key catalysts include: (1) discussion on strengthening total shareholder returns; (2) optimistic guidance from management on the outlook for life insurance sales in fiscal year 2026; (3) robust solvency capital status in the fourth quarter of 2025; (4) decreasing cost of funds; and (5) increased confidence in the recovery of the margin on the Life insurance contract services (CSM). The bank prefers Ping An Insurance (02318) for its recovery in life insurance sales and attractive valuation; as well as China Life Insurance (02628), which not only offers strong growth prospects in life insurance sales but also discusses strengthening shareholder returns. JP Morgan rates Ping An Insurance and China Life H shares as "overweight" with target prices of HK$100 and HK$40 respectively. JP Morgan believes that unless there is a change in annual net profit exceeding 50%, insurance companies do not need to announce profit forecasts. The bank predicts that in fiscal year 2025, the net profits of China Life, Ping An Insurance, and China Pacific Insurance (02601) will increase by 47%, 19%, and 10% respectively year-on-year. Due to the increased focus on sustainable growth in earnings per share brought about by core profits, and the increased volatility in net profits under the new accounting standards, insurance companies are more cautious about voluntarily announcing profit forecasts. The bank does not consider the lack of positive profit forecasts to be a profit risk for this quarter. It is noteworthy that the market consensus for net profit forecasts in fiscal year 2026 has already shown a year-on-year decline of 9%, therefore the bank believes that there is limited risk of further downward revision in market consensus at this stage.