JPMorgan has released a research report stating that the solvency ratios of China's insurance industry remained broadly stable in the third quarter, despite the sector widely reporting quarterly net losses. The average core solvency adequacy 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 favor Ping An Insurance (Group) Company of China, Ltd. (ASX: 02318) and China Life Insurance Company Limited (ASX: 02628) H-shares as its top picks.
The bank noted that major insurers reaffirmed their commitment to maintaining stable dividends during earnings calls, 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 indicated that new business sales will rebound rapidly in the fourth quarter, helping the market refocus on the industry's attractive dividend yield of approximately 5% to 8%. The bank believes that the potential introduction of tax-advantaged long-term savings and pension product policies by year-end could also serve as an important short-term catalyst.
JPMorgan stated that under Chinese accounting standards, the industry's net profit for the first nine months of this year fell 27% to 47% year-on-year. China Life Insurance Company Limited (ASX: 02628) recorded a 13% year-on-year increase in new business value for the first nine months, while New China Life Insurance (ASX: 01336) also posted positive new business value growth. China Pacific Insurance (ASX: 02601) saw its life insurance new business value decline 6.5% year-on-year. The bank pointed out that China Life Insurance Company Limited (ASX: 02628) and Ping An Insurance (Group) Company of China, Ltd. (ASX: 02318) successfully reduced interest rate risk through prudent asset-liability management.
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