JP Morgan: Insurers' Solvency Largely Stable in Q3; Top Picks Are Ping An Insurance (02318) and China Life Insurance (02628)

JP Morgan released a research report stating that solvency ratios in China's insurance industry remained largely stable in Q3, despite the industry widely recording quarterly net losses. The average core solvency ratio of major life insurers rose 2 percentage points quarter-on-quarter to 140%, while that of major non-life insurers fell 9 percentage points quarter-on-quarter to 188%. The bank continues to top-pick Ping An Insurance (02318) and China Life Insurance (02628) H-shares. The bank noted that major insurers reiterated their commitment to maintaining stable dividends at results meetings, and emphasized steady growth in core earnings after excluding short-term stock market volatility, as well as a clear recovery in new business momentum since August. Management stated that new business sales will rebound rapidly in Q4, helping the market refocus on the industry's attractive dividend yield of about 5% to 8%. The bank believes that policies on tax-advantaged long-term savings and pension products, which are expected to be launched by year-end, are also important near-term catalysts. JP Morgan stated that under China Accounting Standards, the industry's net profit fell 27% to 47% year-on-year in the first nine months of this year. China Life Insurance's new business value rose 13% year-on-year in the first nine months, New China Life Insurance (01336) also recorded positive new business value growth, while China Pacific Insurance's (02601) life insurance new business value fell 6.5% year-on-year. The bank noted that China Life Insurance and Ping An Insurance's life insurance businesses successfully reduced interest rate risk through prudent asset-liability management.