报告名称：PICC Group(01339.HK)Pushing lower-guarantee-rate products in 2016
报告类型：港股研究
报告日期：2015-12-21
研究机构：大和证券(香港)有限公司
股票名称：中国人民保险集团
股票代码：01339
页数：5
简介：What's new: We recently discussed with PICC Group its product strategy for 2016, and believe it will be able to achieve a balance among its 3 major metrics: VNB margin, agency FYP growth and cash flow.
What's the impact: In the agency channel, no longer offering products with a “4% guarantee rate” in 2016’s New Year Sales. PICC Life plans to re-launch its participating annuity product, “Zun Xiang Sheng Huo”, in its 2016’s New Year Sales. However, the company has lowered the guarantee rate on the “Zun Xiang Sheng Huo” product to 3.5% for 2016 from 4.025% in 2015. The other 2 products PICC Life plans to promote in early 2016 are “Wu You Yi Sheng” (traditional critical illness) and “Mei Hao Sheng Huo”(participating annuity), both of which have guarantee rates of 3.5%.
As PICC Life does not plan to sell products with guarantee rates above 3.5% any longer, its agency channel VNB margin should be more resilient than peers that are still doing so (see Looking to 2016 New Year Sales, 15 December 2015, for details of the key products from each listed insurer).
In the bancassurance channel, 2-year high-cash-value products will be mainstream, similar to 2015. PICC Life targets only a single digit increase in its gross premiums for 2016, in order to further optimize its premium mix.
Less cash flow pressure in 2016, facilitating its transition to the agency channel. Cash flow pressure due to a large amount of surrenders has been a major constraint preventing PICC Life from reducing its bancassurance exposure in the past few years. However, we see 2016 as a good opportunity to change that because: 1) 2015 was the first year that PICC Life switched to high-cash-value products expected to be surrendered after 2 years, instead of 1 year for those before 2014, 2) regular product sales started to pick up in 2015, which provides renewal cash flow in 2016, and 3) the investment yield on its existing portfolio should be sound.
What we recommend: We reiterate our Buy (1) rating on PICC Group and keep our 12-month SOTP-based TP of HKD4.6, implying a 2016E P/EV (group) of 1.2x. The key risk to our call is the solvency margin at PICC Life, which could decline under C-ROSS.
How we differ: We think the market has been too pessimistic about PICC Life’s agency-channel development, and hence VNB growth, and has therefore not yet assigned a fair valuation multiple on PICC Life.

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