Big Winner, or Insurance Institution!

The market rally that started on September 24, 2024 caught many investors off guard.

However, there is a certain type of institution that is set to benefit with certainty.

According to announcements as of October 16, four leading insurance companies in the industry have forecasted an increase in performance for the first three quarters of this year, with growth ranging from 60% to 185%.

The stock market rebound has brought a "sunshine bath" to the performance of insurance companies.

Multiple Insurance Companies Forecast Performance Increase

In the past week, major insurance companies such as NCI, CPIC, PICC Group, and PICC GROUP have successively disclosed announcements forecasting an increase in performance for the first three quarters of 2024.

Among them, CPIC announced a forecasted net profit attributable to shareholders of the parent company for the first three quarters of 2024 to be between 37 billion and 39.4 billion, an increase of 13.9 billion to 16.3 billion compared to the same period in 2023, representing a year-on-year increase of 60% to 70%.

PICC Group is forecasting a net profit attributable to shareholders of the parent company for the first three quarters to be between 33.83 billion and 37.931 billion, representing a growth of 65% to 85%.

NCI announced that the forecasted net profit attributable to shareholders for the first three quarters of 2024 is expected to be between 18.607 billion and 20.515 billion, with a year-on-year increase of 95% to 115%.

PICC GROUP announced that the estimated net profit attributable to shareholders of the parent company for the first three quarters of 2024 is approximately 101.135 billion to 108.767 billion, with a year-on-year growth of about 165% to 185%.

Overall, the forecasted growth rates of these companies are quite substantial.

One Quarter's Revenue Surpasses the Previous Year

All insurance companies have reached a turning point in performance this year, but significant growth truly began in the third quarter.

Taking PICC GROUP as an example, the net profit attributable to shareholders for the first half of 2024 was 38.278 billion, a year-on-year increase of 10.58%.

In the previous year of 2023, PICC GROUP achieved a net profit of 21.1 billion for the full year, a year-on-year decrease of 34%.

Looking back at the performance forecast announcement for the third quarter, the company predicts a net profit between 101.135 billion and 108.767 billion.

Based on this calculation, in just the third quarter of 2024, the company achieved 62.8 to 70.5 billion, which is more than 160% of the net profit in the first half of this year, and three times the profit of the entire previous year.

NCI also demonstrated a similar performance. The company achieved a net profit of 11.08 billion in the first half of this year, with a growth rate of 11.07%; and a profit of 8.712 billion for the entire previous year.

The forecasted net profit range for the third quarter of NCI is 18 billion to 20.5 billion, which is likely on par with the profit for the entire previous year within just the three quarters of this year.

Stock Market Returns Drive Main Revenue

So, what are the reasons for the significant increase in performance?

In the performance forecast announcements of relevant insurance institutions, they all mentioned the benefits brought by the significant rebound in the stock market.

For example, CPIC announced that the main reason for the expected growth in performance for the first three quarters of 2024 is: based on the strategic asset allocation plan, the company maintained a certain proportion of equity assets in the investment portfolio. With the recent rise in the capital market, the investment income of the company in the first three quarters of 2024 increased significantly year-on-year, leading to a substantial growth in net profit for the first three quarters of 2024.

PICC Group also stated that the main reason for the expected increase in performance is the significant rebound in the stock market in the third quarter of 2024, leading to a substantial increase in investment income year-on-year.

NCI and PICC GROUP (as shown in the image below) have also made similar statements.

Is the performance sustainable?

Will the trend of significant performance growth in various insurance institutions continue?

Let's analyze it specifically.

Firstly, the equity investments of various insurance companies have been relatively stable in recent years, with balanced allocations, and the changes in the scale of equity-related investments are not significant.

According to WIND's statistics on interim report data of various companies, the total scale of stock investments for each company is as follows.

Assuming a 25% average increase in stock indices in late September (Shanghai and Shenzhen 300 Index), a considerable portion of the profit adjustments of these institutions can be explained by the incremental scale of their equity investments.

In addition, there are still many assets in insurance fund investments related to A-shares and Hong Kong stock markets, such as fund investments and assets related to listed companies of some equity investment projects, which will benefit from the stock market rebound.

However, it should also be noted that some insurance institutions invest through OCI accounts, and the investment income of these accounts is recorded in other accounts and does not directly reflect in profits.

From this perspective, if the stock indices can stabilize at a relatively high level, the potential account appreciation of insurance institutions may continue to emerge in the future.

Premium income has bottomed out and rebounded

In addition to the investment income item, the premium income of related insurance institutions has shown a clear bottoming out and rebound since the beginning of this year This may also be another characteristic that supports the future valuation and market confidence of insurance companies.

According to the premium income situation disclosed by various companies from January to September:

• China Life: From January to September 2024, the cumulative original insurance premium income was approximately RMB 608.3 billion, a year-on-year increase of 5.1%.

• PICC Group: From January to September 2024, the total original insurance premium income obtained by its subsidiaries PICC Property and Casualty Company Limited, PICC Life Insurance Company Limited, and PICC Health Insurance Company Limited was RMB 568.916 billion, with overall growth also in single digits.

• NCI: From January to September 2024, the cumulative original insurance premium income was RMB 145.644 billion, a year-on-year increase of 1.9%.

• CPIC: From January to September 2024, the total original insurance contract premium income of its subsidiaries CPIC Property and Casualty Company Limited, CPIC Life Insurance Company Limited, CPIC Pension Company Limited, and CPIC Health Insurance Company Limited was RMB 689.175 billion, a year-on-year increase of 8.42%.

Overall, the trend of premium income growth for various insurance companies has already shown a certain degree of certainty