Chinese Insurers: September Premium Growth Slowed After July Rush Sales

China Life’s 601628 year-to-Sept. 30 year-on-year growth in premium slowed to 4.5% from 5.6% in August. As the first insurer to report monthly premium growth, the performance generally tracks our expectations. The year-on-year contraction in September premium narrowed to 7% from 10% in August on low base in the year-ago period. We expect slowing sales for other Chinese life insurers in September and October due to weakened product demands after the last-batch sales of 3.5% guaranteed rate savings products in July. We also expect ongoing regulation of bancassurance sales (an arrangement between a bank and an insurance company through which the insurer can sell its products to the bank’s customers) to adversely affect September and October sales, but the impact should be small given these two months usually report weak sales. Despite the industrywide trend of slowing sales, we expect Ping An and PICC Life to see less downward pressure supported by lower base in the second half of 2022. We expect third-quarter new business value, or VNB, to decelerate significantly from the second quarter’s level, but fourth-quarter growth should rebound on low base and the resumption of bancassurance sales.

We leave our fair value estimates for insurers in our coverage unchanged, as there is no change to our near-term outlooks and 2023 VNB growth projections, which range from 14% to 25% year on year. Our preferred shares are Ping An Insurance and AIA. We like Ping An’s improving new business momentum after the successful implementation of life insurance reform. AIA is also undervalued after a 19% decline in share price in the third quarter, and we like AIA’s better-than-peer long-term growth supported by market-leading position in all of its key Asian markets.