China Insurance Industry: Profit forecast boosts confidence, but the market ultimately votes with dividends, with Ping An H shares (J.P. Morgan) being the first choice
JPMorgan Chase released a research report on China’s insurance industry.
JPMorgan Chase released a research report on China’s insurance industry. Positive profit forecasts from New China Insurance and others will support industry sentiment and EPS increases, but the core contradiction is: under the IFRS-17/9 standards, investors pay more attention to interim dividends, CSM quality and life insurance sales momentum, rather than simple net profit exceeding expectations. H shares are undervalued and have attractive dividend yields. Recommendation ranking: Ping An H shares are the first choice in the industry, and life insurance companies are overall better than property and casualty insurance companies. PICC Property and Casualty Insurance and PICC Group H shares were rated as the least promising targets in the industry. The market only focuses on PE, but in the insurance industry in the IFRS17 era, "earnings quality" and "dividend willingness" are more important valuation anchors than net profit itself. The current market is under pricing life insurance CSM growth. One-sentence conclusion: When investing in Chinese insurance stocks, who can pay more dividends this year and whose policies are of better quality are more important than who can overstate net profits - Ping An H shares have obvious advantages in this regard. Positive/negative: Positive for Ping An of China (H shares) and New China Insurance. It is negative for PICC Property and Casualty and PICC Group (H shares). Price in situation: The positive profit forecast has been partially reflected, but the logic of high dividends and the growth of life insurance CSM still have room for pricing. Catalysts: 1) Interim dividend and dividend rate data of Ping An and major insurance companies; 2) Life insurance new business value (NBV) growth and CSM recovery trend in the second half of the year; 3) The continued presentation of “earnings quality” under the IFRS-17 standards.