CPIC (601601): No fear of marginal improvement in short-term new pressured investment end
Reserves are released, the expense ratio is stable, the investment side is improved, and profit growth is promoted.
In Q1 2019, the company achieved a net profit of 5.5 billion (YoY + 46%).
Mainly due to: 1) Total premiums increased steadily and the expense ratio was stable: 19Q1 company’s life insurance premium income was 92.9 billion (YoY + 3%), and property insurance premium income was 35.4 billion (YoY + 13%).
Fee and commission expenses decreased by 9% (the same as the decrease in new orders). The fee and commission expenses rate was YoY-2pct, and the management expense rate was YoY + 2pct. The expense rate was basically flat.
2) 750-day moving average online migration, negative growth of new orders, resulting in release of reserves and increased profits: the insurance liability reserve drawn by the company in 19Q1 decreased by 7%, accounting for 47% of premium income (YoY-6pct).
Relatively speaking, the new life insurance in 19Q1 saw a negative growth of 9%, which was the primary reason for the decline in insurance liability reserves.
At the same time, it is estimated that as of the end of 19Q1, the 750-day movement of the ten-year government bond maturity yield is relatively 3.
38%, which was 8bps higher at the end of 18Q1. Generally speaking, insurance companies will raise the assumption of discount rates for traditional insurance reserves and reduce the provision for insurance contract reserves.
Assuming that the company has not adjusted its reserve discount rate assumption, the change in the proportion of 19Q1 reserve withdrawals in premium income should be the same as the decline in new orders.
However, the change in the actual withdrawal rate is lower than the decrease in new orders. Therefore, we can rule out that the company’s actuarial assumptions or adjustments are more cautious.
3) The elasticity of equity assets is prominent, and the return on investment has picked up.
1Q1 total investment yield 4.
6% (+ 4pct year-on-year), with a net investment return of 4.
4% (year-on-year + 2pct), comprehensive investment return rate (estimated) 7.
4% (+ 3pct year-on-year).
Mainly related to investment income, gains and losses from changes in fair value, and other comprehensive income increased by RMB 2,918,680 million, respectively, to RMB 1,55,117,200 million.
Life insurance: New orders have a slight negative growth. It is expected that the improvement of the structure will help the NBV decline more narrowly.
1) 19Q1 life insurance premiums were 929 trillion (YoY + 3%), total new orders were 20.8 billion yuan (YoY-9%), new individual and group insurance orders were 17.4 billion (YoY-13%), and 34 trillion (year-on-year growth19%).
Among them, the proportion 北京夜网 of a long-term insurance business is likely to increase.
The improvement of the “open door” business structure directly promotes the improvement of NBVM. It is expected that the decline in NBV will gradually be lower than that of new orders, and the pressure on new orders will be eased from Q2.
2) Renewal premiums of 687 million (YoY + 11%). The growth rate has fallen or the overall premium growth rate may have fallen this year due to the decline in the premiums paid in 2018.
Property insurance: Car insurance increased steadily, and non-vehicles increased rapidly, helping the insurance premiums continue to grow.
19Q1 property insurance premiums were 35.4 billion (YoY + 13%), a growth rate of 6 pct lower than the same period last year, mainly due to the increase in auto insurance premiums.
1) Commercial 深圳桑拿网 vehicle fares have been deepened and new car sales have increased. In 19Q1, auto insurance premium income was only 23.7 billion yuan (YoY + 6%), which is expected to achieve a steady growth in auto insurance.
The fee reform was deepened, and the integration of newspapers and banks continued to advance. Under the pressure of expense ratios, leading insurance companies have a broad stock of businesses, and have outstanding channels, pricing and fixed loss advantages.
2) Non-auto insurance premiums of 117 million (+ 28% year-on-year) maintained a high increase, mainly due to the assistance of guarantee insurance, liability insurance and agricultural insurance, which is expected to become a new growth point for property insurance premiums.
The margin of investment has improved significantly, and the style of asset allocation is stable without changing the elasticity of equity assets.
1Q1 CPIC’s income from investment assets accounted for 82.
6% (from the end of last year-0.
5pct); stocks and equity funds account for 6.
7% (+1 from the end of the previous year.
1pct), which is still at the level of listed peers. It is expected that the increase in the proportion will be mainly due to the increase in market value, rather than actively adding positions.
Under the neutral assumption, the bond yield is 4.
5%, non-standard rate of return 7.
1%, CPIC 19Q1 stock + equity fund income increased negative.
Combined with the stock market’s 30% increase in 19Q1 and other comprehensive income increasing by $ 6.8 billion, we assume that the stock + equity fund yield of 5% will gradually increase CPIC’s total investment yield to 5 in 2019.
Investment suggestion: Life insurance new order pressure will be eased from Q2, and the decline will gradually narrow; business structure continues to be optimized, NBVM is improved, and NBV is expected to turn positive in 19H1.Auto insurance has increased steadily, while non-vehicle insurance has increased steadily, helping to increase the property insurance premiums steadily; leading insurance companies have outstanding pricing and fixed loss advantages, which is expected to achieve excess underwriting profit compared to the industry.
The stock market bottomed out and the 10-year Treasury yield steadily rose. The investment side will show a definitive marginal improvement.
At present the company meets the corresponding P / EV of 2019-2021 is 0.
7 times, maintaining the highly recommended level.
Risk warning: interest rates continue to fall, market volatility, investment income growth; premium growth is less than expected.