China Insurance Sector : Growth slower across both life and P&C

The Chinese insurers have all reported their March 2014 premiums, where we saw slower headline growth in both life and P&C insurance. For life insurance, we believe that the quality mix is likely to be improving and will improve further throughout 2014 as new bancassurance rules requiring 20% of sales to be 'insurance' comes in from 1 April 2014-with a lot of (low-margin) growth from this channel currently ahead of the change.

    Key premium trends in March 2014 were as follows:

    Life insurance-growth slowing: Headline March premium growth was weaker for many insurers: China Pacific +16.2% YoY, Ping An +8.7%, China Taiping +3.7% YoY (APE +25%), New China Life -5.2%, China Life -21.3% and PICC Life -37.4%,.

    P&C insurance-growth robust: Growth was robust in general for the sector (but below 1Q14 growth for most) with Ping An +27.4%, China Taiping +20.7%, China Pacific+11% and PICC +10% YoY.

    We continue to believe that life insurance underlying growth will continue to improve in 2014, with bancassurance rule changes helping companies improve their value focus. P&C insurance growth will likely remain mid-teens overall for 2014, with key issue being a lack of price increases this year which are needed to restore margins and hence sector lacks near-term catalysts.

    We continue to prefer companies where we believe better underlying quality new business growth exists - which in our view remains Ping An, China Pacific and China Taiping (with agent retention key given high growth).