Insurers down but bottom appears closer
China's insurers fell a further 13.7% in February, led by weaker fundamental play,
PICC (down 17%). On a relative basis, Ping An outperformed China Life by 6%
due to stronger sales and margin trends in FY07 results. Of the other large-caps,
ShinKong was down 1% despite further CDO related losses, suggesting credit
related concerns are already in the price. Samsung F&M performed best, up 9%.
This report amends the previous version's Fig 1 and right-hand tables.
Theme of the month –India’s private sector: strong growth and profitability
We believe India’s private sector will continue its strong growth and improvement
in profitability. With 90% YTD ’08 NB growth, the private sector has increased its
market share to 49% from 37% in FY07. Rising ticket sizes and declining
importance of single-premium policies will lead to more profitable growth, albeit
competition is intensifying and remains a risk to this thesis. Holding companies
ICICI and HDFC are our favoured exposures.
China Life and Ping An report below-industry growth rate
China’s life insurance sector achieved high YoY premium growth rate of 72% but
China Life and Ping An Life reported below-industry growth rate of 38.6% and
38.3% respectively. As a result, China Life’s market share stood at 40.9% (vs 50%
year ago), and Ping An’s at 13.1% (vs. 16%). PICC premium increased 22.6% (vs
industry 29%), however market share came down to 44%, its lowest in history.
Valuation metrics
Following recent share price declines in China, valuation metrics have contracted
to 6 month lows and FY09 NB multiples of 18x and 13x for China Life and Ping An
respectively, are becoming more attractive. Taiwan (especially ShinKong, which
currently trades at around 0.6x FY09 EV) still offers deep value, but may remain so
until US credit concerns abate. In Korea, we prefer Samsung and Dongbu on the
belief that their earnings will be resilient against falling rates.