As capital disbands from banks and shifts to other sectors, the A-share market has welcomed a rare collective surge. By the close of trading, nearly 4,700 stocks in the A-share market had risen, with a total transaction volume of 876.6 billion yuan for the day, a significant increase of 269.3 billion yuan compared to the previous day. What's more unusual is that there were less than 10 stocks that fell by more than 5% across the market, and none hit the limit down, indicating a significant recovery in market confidence.
It is worth mentioning that after the market opened today, the insurance sector took the lead in a collective sharp rise, leading the market. Tianmao Group and New China Life Insurance once hit the upper limit, while Ping An, Taikang, Life, and PICC followed strongly, bringing a huge boost to the market sentiment.
In fact, in recent days, as insurance companies have successively disclosed their semi-annual performance and received positive reviews and attention from institutions and capital, the insurance sector has gradually shown an upward trend. Ping An has risen by more than 5% in the A-shares after the release of its semi-annual performance, and its H-shares have soared by 9%. It is also noted that Ping An has received the most net inflow of main funds among the major insurance companies in the past 20 days.
Clearly, as the confidence in the overall market trading recovers, Ping An's strong growth in various indicators in its financial report has been recognized by institutions and investors, and continues to form positive feedback.
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Insurance stocks surge collectively, catalyzed by multiple benefits
The significant strength of today's A-shares and Hong Kong stocks is driven by multiple benefits.
In addition to the disbandment of bank capital flowing to other sectors to boost the market, there has been frequent large-scale entry of national team and institutional funds in recent times, bringing huge support and confidence.
At the same time, recent market rumors suggest that Chinese enterprises may have more than 500 billion US dollars in foreign exchange funds overseas, which may speed up the settlement and return due to the interest rate reduction of the US dollar and the appreciation of the renminbi, bringing a contraction in interest rate differentials. This has brought a huge amount of incremental funds. The recent rapid appreciation of the renminbi further confirms the rumors, thereby stimulating market trading confidence.Additionally, the real estate industry is also welcoming significant positive stimulus. It is reported that China is considering further reducing the interest rates on existing mortgages, allowing a scale of up to 38 trillion yuan in existing mortgages to seek mortgage refinancing, in order to reduce the debt burden on residents and stimulate consumption.
This year, the comprehensive cooling of the entire real estate industry chain has brought continuous concerns to the economy and financial markets, becoming an important reason for the low and falling stock market. Now, the policy is expected to introduce a major real estate stimulus policy, which can significantly strengthen market confidence in the short term.
As for the short-term disintegration of funds in bank stocks, this does not mean that the logic of funds embracing dividend assets is invalid. In the A and H share markets, banks, insurance, energy (coal and electricity), public utilities, and resources are key components of dividend stock assets.
Most other non-bank dividend assets have been reasonably adjusted in the previous period and have gained the favor of funds flowing out of the banking sector. Today, even though bank stocks with considerable weight have plummeted, the dividend index still rose by 1.2% during the trading day, among which insurance is one of the more benefited sectors.
The relatively beautiful mid-term performance of the insurance industry is also an important trigger for its ability to lead the strength of dividend assets.
As of August 29, the five major listed insurance companies in the A shares, including Ping An, Life Insurance, PICC, Taikang, and New China Life Insurance, have all disclosed their mid-year "report cards", and the overall performance shows a clear trend of recovery.
Specifically, the net profit of the five insurance companies in the first half of 2024 reached 171.799 billion yuan, a year-on-year increase of about 12.55%. Among them, Ping An's net profit total in the five listed insurance companies ranked first, reaching 74.619 billion yuan, a year-on-year increase of 6.8%. China Life, China Pacific, China People's Insurance, and New China Life's net profit attributable to the parent company were 38.278 billion yuan, 25.132 billion yuan, 22.687 billion yuan, and 11.083 billion yuan, respectively, with year-on-year increases of 10.6%, 37.1%, 14.1%, and 11.1%.
At the same time, in July, the business of insurance companies continued to accelerate, such as the most important life insurance business. The single-month premium year-on-year growth rates of PICC Life Insurance, Ping An Life Insurance, New China Life Insurance, and China Life in July were 21.8%, 17.2%, 11.3%, and 8.3%, respectively.
On the investment side, although the downward trend of interest rates and fluctuations in the capital market brought adverse interference in the first half of the year, the growth of insurance companies' investment income remained strong. The total investment income of the five insurance companies reached 337.063 billion yuan, a year-on-year increase of 33.29%, which significantly demonstrated the characteristics of insurance companies as the "ballast stone" in China's dividend assets.
In the first half of the year, thanks to the stable cash flow contribution brought by the growth of premiums, the balance of insurance funds used was 30.9 trillion yuan, a growth of 9.6% compared to the end of last year. This year, several major insurance companies have also increased their bond allocation in a timely manner, with the proportion of bonds increasing by 1.2 percentage points quarter-on-quarter to 47.5%. At the same time, the proportion of stocks and funds also increased by 0.2 percentage points quarter-on-quarter to 12.7%.Against the backdrop of this year's bond bull market and the stock market's continued embrace of dividend-paying stocks, these two major investments have led to significant growth in returns for insurance companies.
Ping An is a representative that has performed relatively well. As of the end of June, Ping An's book value of bond investments was 3.16 trillion yuan, and the book value of bond fund investments was 0.12 trillion yuan, accounting for 60.7% and 2.3% of the investment portfolio, respectively.
Deng Bin, Assistant General Manager and Chief Investment Officer of Ping An, stated, "Bond investments are the most core part of insurance funds allocation, and they are the most important ballast stone for extending asset duration and matching liability needs. The company's investment returns in the first half of the year improved compared to the same period last year, mainly due to the company's early allocation of many long-term interest rate bonds and many high-value stocks. The company will continue to maintain a balanced allocation in the second half."
It is worth mentioning that in early August, the Financial Regulatory Authority issued the "Notice on Improving the Pricing Mechanism of Life Insurance Products". The new regulations clearly stipulate a significant reduction in the upper limit of the预定 interest rates for ordinary, dividend-paying, and universal insurance products, and will start to switch in batches from September. This will be more conducive to insurance companies reducing interest rate risk and improving the level of asset-liability management.
From the final effect, the new regulations will significantly help insurance companies' life insurance business to usher in prosperity, and will also bring an increase to the subsequent profit side of insurance companies.
This is also an important reason for the recent significant increase in the capital market's optimistic attitude towards insurance companies.
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Under the high base, the value continues to grow, and Ping An begins to cash in strong Alpha.
Returning to the company level, it is not difficult to see the market's professional institutions' optimistic attitude towards Ping An from the research reports of the above-mentioned securities firms. Behind this, in addition to the resonance of the industry's "Beta", it is inseparable from the "Alpha" presented by Ping An itself.Judging from the semi-annual report previously released by Ping An, despite the overall external environment still facing pressures, Ping An has shown a recovery trend that is superior to the industry. CICC also believed in a research report that the inflection point of Ping An's profitability may have already appeared.
Looking at this report card specifically, on the one hand, the value of new life insurance business has maintained a high growth rate on a high base. In the first half of the year, Ping An achieved a new business value of 22.3 billion, a year-on-year increase of 11.0% under comparable terms, and in the second quarter, it was basically flat compared to the high base of the same period last year. As a core indicator for measuring the underwriting quality and growth potential of life insurance companies and judging the operation of life insurance companies, Ping An's new business value performance has continued to cash in on its performance recovery momentum.
In fact, looking back at the previous data, Ping An's life insurance and health insurance new business value has achieved positive growth for six consecutive quarters. It is not difficult to see that this ballast business of Ping An has been continuously strengthened.
On the other hand, the agent channel continues to optimize the structure, continuously cashing in on reforms and presenting, and the advantage of production capacity is continuously expanding. The financial report shows that in the first half of the year, the new business value of the agent channel was 18.106 billion yuan, a year-on-year increase of 10.8%, and the per capita new business value increased by 36% year-on-year. Focusing on "excellent" to increase "excellent", the proportion of "excellent +" in new personnel increased by 10.2 percentage points year-on-year.
In addition, the new business value of the bank insurance channel reached 2.641 billion, a year-on-year increase of 17.3%.As of the first half of the year, the number of individual life insurance sales agents reached 340,000, a decrease of about 2% compared to the end of last year.
It is undeniable that in the past, the focus on channel reform and agent quality improvement has put pressure on the company's performance due to the decline in the number of agents.
Now, it can be observed that the downward trend in the number of company agents is narrowing, and their quality has been effectively improved and consolidated.
One effective observation indicator lies in the growth of agent income.
The semi-annual report data shows that the average monthly income of agents in Ping An's life and health insurance business was 12,000 yuan in the first half of the year, a year-on-year increase of 9.9%, while this figure was only 5,889 yuan in the first half of 2021. It can be said that it has doubled in three years.
It is not difficult to see that with the increase in agent income, the stability of the agent team will be further enhanced, and it will also release a multiplier effect. Whether it is improving customer satisfaction, enhancing sales ability, increasing the company's economic contribution and profitability, it will bring continuous positive feedback.
From the above, it is sufficient to verify that the company's value transformation has achieved phased results, and various indicators show a continuous improvement trend in the company's main life insurance business, which is also making the market optimistic about its subsequent operations.
At present, the value judgment of Ping An cannot be separated from the following core logic:
Firstly, no matter how the industry changes, Ping An can always maintain a stable growth momentum, which has been repeatedly verified from past operating results.
Although it has gone through a short-term painful period, it can be seen that in the long-term historical development, Ping An has always maintained a good development momentum and continuously fulfilled performance results.Looking solely at the total assets, Ping An's total assets have grown from 182.7 billion in 2003 to over 12 trillion today, showing a continuous upward trend.
From the current perspective, the company has a leading market share, and its brand value is at the forefront of global insurance brands. Considering that the domestic insurance industry is still far behind developed economies in terms of insurance density and depth, and even has a certain gap with the global market average, the advantages accumulated by Ping An determine that it will continue to realize value growth in the future.
Secondly, after passing the period of reform pain, the quality of operations continues to be consolidated.
Now, as the company has passed the period of reform pain, the quality of operations has been fully consolidated.
Whether it is from the diversification of channels and the improvement of agent efficiency, or from product innovation and service upgrades, it has laid the foundation for Ping An to continue high-quality growth in the future.
Looking at the first half of this year, Ping An's life insurance business's "4 channels + 3 products" strategy has been further deepened. The company not only fully strengthened channel construction and improved business quality but also provided customers with more worry-free, time-saving, and cost-saving "three savings" services by upgrading the "insurance + service" plan. In addition, the company's in-depth layout in the field of health and elderly care has further empowered the high-quality development of the business.
Ping An's transformation is not an isolated event, but a part of the reform wave of the entire insurance industry. As a pioneer in the industry, Ping An's reform measures have led the industry trend, encouraging other insurance companies to continuously revolve around reforms such as the marketing system, promoting the sales team to develop in a professional and occupational direction.
Ping An has not only comprehensively improved its own competitiveness through the high-quality, high-performance, and high-quality "three highs" team it has built, but also set a benchmark for the healthy development of the industry.
Now, as Ping An enters a new stage and the performance reaches an inflection point, looking back, the company still has certainty in maintaining a momentum of high-quality development for a long time.
Thirdly, the comprehensive financial model coordinates the medical and elderly care strategy to build a deep moat.Ping An focuses on "Comprehensive Finance + Medical Care and Elderly Care," showcasing its strong ecological extensibility and value mining capabilities through this model.
By integrating its diversified financial services, including insurance, banking, and investment, Ping An has built a comprehensive financial service ecosystem that promotes mutual growth and resource sharing. This model not only meets customers' needs in various financial scenarios but also enhances their experience and loyalty through cross-selling and value-added services.
In the field of medical care and elderly care, Ping An has recognized the significant market demand brought about by the aging of Chinese society. By providing customized medical and elderly care services, such as "Insurance + Health Management" and "Insurance + Home-Based Elderly Care," it has met customers' comprehensive needs in medical care and elderly care. These services not only increase customer stickiness but also open up new revenue streams for the company.
It can be said that the combination of comprehensive finance and medical care and elderly care strategies has formed a dual-wheel drive effect, enabling the company to achieve a more robust growth curve around medical care and elderly care while maintaining steady development in its financial business.
Looking at the first-half data, customers with access to the medical care and elderly care ecosystem account for over 68% of the new value of life insurance business. Among them, customers with medical and health rights contributed 30.4% to NBV; customers with elderly care rights contributed 38.3% to NBV.
It is evident that the construction of the medical care and elderly care ecosystem has not only greatly promoted the growth of the company's life insurance business but also deepened customers' service experience and satisfaction, building a moat for Ping An that is difficult for competitors to cross in the industry competition.
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Conclusion
Nowadays, against the backdrop of a still complex external macro environment, the domestic stock market has already corrected from the high point of 2021 to the present, which can be said to have fully digested most of the bearish expectations.
The Chinese stock market is currently driven by various positive factors, showing an upward trend. Externally, the US dollar interest rate cut and the appreciation of the yuan lead to a narrowing of the China-US interest rate differential, attracting capital backflow; internally, policy and capital are also continuously forming a joint force, guiding capital inflow and supporting the stock market to stabilize and improve. Therefore, the A-share and Hong Kong stock markets in the fourth quarter may no longer need to be pessimistic.In it, the insurance industry, which has shown a clear rebound in performance, will be one of the important leaders in the rebound of dividend asset valuation in the coming period. Since mid-August, Ping An has been fluctuating upwards, and the opportunity on the right side may have emerged.
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