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《摩根大通中国保险行业市场研究报告(英文版)》(107页).rar
Underweight China Life and Overweight Ping An: The sector has rerated
on strong NBV growth and enhanced investment performance in
2009. However, these tailwinds are easing up as we see: (1) slower NBV
growth, with a likely decline in margin; (2) valuations providing slight
upside, but a sharp expansion in multiples is unlikely; and (3) headwinds
forming on the investment returns front. We like Ping An (OW) best for
its strong growth prospects and attractive valuation, while the distributor
CNinsure (OW) should continue to benefit from the sector's long-term
secular growth without direct exposure to some of the headwinds.
• Tougher operating outlook: Chinese insurers have broadly outperformed
the big Chinese banks by 25% and the HSI by 26% over the
past year, driven by strong NBV growth due to better margins and
improving investment performance. Going forward, we foresee: (1) NBV
growth softening to 20% Y/Y in 2010 (vs ~35% Y/Y in 2009) on softer
margins; (2) new business multiples (NBMs), while at a slight discount
to historical averages, to be capped by slowing growth prospects; and (3)
the linkage to the A-share market weakening, but lower bond yields and
possible delays in deposit rate increases affecting recurrent income.
• Ping An is our top pick: We prefer insurers with strong growth
prospects, clear re-rating catalysts, attractive valuations, and trading
liquidity. Ping An (OW) stands out as undervalued on implied NBM vs.
NBV growth analysis. It has the most profitable life franchise and the
stock price is assigning little or no value to its other fast-growing
businesses. We believe the well owned China Life-H (UW) is expensive
given weaker growth prospects and a turnaround for PICC (UW) is
already priced in. CPIC (N) offers minimal competitive differentiation.
• Investment risks: Upside risks include: (1) the resumption of strong
premium income growth, which would help offset softer margins; (2)
stronger A share recovery; and (3) the launch of a tax-deferred individual
pension scheme, which could boost insurance sales substantially.
Downside risks are: (1) diminishing scarcity premium of Chinese
insurers as more Asian large-cap insurers get listed; and (2) increased
participation of banks in the insurance space is a long-term challenge.