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02601 CPIC
RTNominal down23.000 -0.100 (-0.433%)
Research Report

26/06/2020 17:26

{I-bank focus}Credit Suisse lifts TPs for Chinese insurers

[ET Net News Agency, 26 June 2020] Credit Suisse said that concerns on low yield seem
to be overdone on both asset and liability sides, with H-share insurers trading at
depressed valuations.
Even assuming the 10-year CGB (Chinese government bonds) yield stays at the year-to-date
trough 2.5%, insurers' net investment yield (NII) should be resilient at 4.5% over the
medium term (2025), the research house said.
In liabilities, the VIF/VNB (value of in-force/value of new business) implied breakeven
investment return, Credit Suisse estimated, ranges at 2.0-3.0%, far below the medium-term
4.5% NII, suggesting the healthiness of the insurance book.
Credit Suisse revised up its base case assumption of long-term investment return under
EV to 4.75% from 4.5%, driven by the recent recovery of the 10-year CGB - to 2.9% from the
trough level of 2.5% - in tandem with the gradually improving economic condition.
It also lifted its target prices for Chinese insurers as follows:
Name Rating Target Price
---------------------------------------------------------
China Life (02628) Outperform HK$29.0 from HK$27.0
NCI (01336) Outperform HK$41.0 from HK$39.0
China Pacific (02601) Outperform HK$35.0 from HK$34.0
Ping An (02318) Outperform HK$96.0 from HK$95.0
China Taiping (00966) Outperform HK$22.5 from HK$22.0

(KL)

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