Overview of the China/HK Insurance Sector

The China/HK insurance industry is experiencing steady premium income growth despite facing short-term headwinds. The sector’s fundamentals remain solid, driven by an aging population, rising life expectancy, and climate change. However, challenges such as a sharp dip in the 10-year Chinese government bond yield and volatile equity markets have put pressure on insurers’ share prices. The report recommends a defensive stance for investors until market uncertainties settle.

AIA Group Ltd (Ticker: 1299 HK)

Fair Value: HKD88.35 | Last Close: HKD54.20 | Rating: BUY

AIA Group stands out for its diversified and high-quality business model. Operating across multiple Asian countries like Singapore, Thailand, and Malaysia, AIA is well-positioned to capitalize on the region’s rapidly growing middle-class population. The company offers a wide range of products, including life insurance, accident and health insurance, and savings plans. It serves over 42 million individual policyholders and 18 million group insurance members through its extensive agent network and partnerships.

The report praises AIA for its focus on enhancing shareholder returns via share buybacks and dividends. With its diversified operations and resilience amidst China’s economic challenges, AIA remains a top pick for its growth potential and strong fundamentals.

Ping An Insurance Group Co (Ticker: 2318 HK for H shares, 601318 CH for A shares)

Fair Value (H Shares): HKD67.45 | Last Close: HKD41.70 | Rating: BUY

Fair Value (A Shares): CNY64.40 | Last Close: CNY49.25 | Rating: BUY

Ping An Insurance Group is highlighted for its diversified business segments, which set it apart from its Chinese peers. The company has successfully implemented a health and senior care strategy, with these services contributing over 69.6% to Ping An Life’s new business value (NBV) in the first nine months of 2024. Its home-based senior care services are particularly emphasized as a key enabler of its core business.

The report notes that Ping An is likely to experience the least negative impact among major Chinese insurers if economic assumptions, such as long-term investment returns and risk discount rates, are revised downward. The company’s use of the highest risk discount rate gives it more flexibility to absorb changes, mitigating potential downsides. Ping An is also expected to benefit from property easing measures, which could alleviate concerns about its exposure to China’s real estate sector.

China Life Insurance Co (Ticker: 2628 HK for H shares, 601628 CH for A shares)

Fair Value (H Shares): HKD16.15 | Last Close: HKD13.46 | Rating: BUY

Fair Value (A Shares): CNY34.90 | Last Close: CNY38.43 | Rating: SELL

China Life Insurance is identified as one of the major beneficiaries of China’s demographic trends, such as an aging population and rising life expectancy. In 2024, the company achieved a 4.7% increase in premium income, reaching CNY671.7 billion. However, the report takes a cautious stance on its A shares, suggesting a SELL rating due to overvaluation relative to its fair value.

China Life is expected to experience relatively lower negative impacts from potential downward revisions in long-term investment assumptions and risk discount rates, making its life business more resilient in the current economic landscape.

China Pacific Insurance Group (Ticker: 2601 HK for H shares, 601601 CH for A shares)

Fair Value (H Shares): HKD42.50 | Last Close: HKD22.60 | Rating: BUY

Fair Value (A Shares): CNY47.85 | Last Close: CNY31.31 | Rating: BUY

China Pacific Insurance Group delivered a mixed performance in 2024. Its life insurance premium income grew by 2.4% to CNY238.8 billion, while its property and casualty (P&C) business achieved a stronger growth of 6.8%, reaching CNY203.2 billion.

The report highlights the company’s role in addressing climate change. China Pacific Insurance is actively leveraging its expertise to offer climate risk coverage and green insurance products, reinforcing its position as a key player in the sector.

PICC Property & Casualty Co (Ticker: 2328 HK)

Fair Value: HKD14.95 | Last Close: HKD12.08 | Rating: BUY

PICC P&C is recommended for its resilient business model, which is less cyclical and better suited to an interest rate downcycle. Its focus on property and casualty insurance makes it a defensive choice during times of economic uncertainty. The company is well-positioned to benefit from the rising need for P&C insurance, driven by extreme weather events and climate change.

China Taiping Insurance (Ticker: 966 HK)

Fair Value: HKD13.39 | Last Close: HKD10.86 | Rating: BUY

China Taiping Insurance is highlighted as an undervalued player in the market, with a strong potential upside of 23%. The company’s steady performance and attractive valuation metrics make it a compelling choice for investors seeking opportunities in the sector.

Sunshine Insurance Group Co (Ticker: 6963 HK)

Fair Value: HKD4.92 | Last Close: HKD2.65 | Rating: BUY

Sunshine Insurance Group is one of the most undervalued stocks covered in the report, with a potential upside of 86%. The company offers a high dividend yield, making it an attractive option for income-focused investors. Its low price-to-book (P/B) ratio further underscores its value proposition.