Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Better, But Off A Low Base: AIA Group (1299.HK) [AIA] released its limited set of 1Q21 results. AIA’s overall Value of New Business (VONB) improved 404 or 62.3% on a linked quarter basis due to a combination of higher new sales volume (ANP up 422 or 32.9%) and an VONB margin expansion of 11.7% to 61.6% - closing in on pre-Covid levels and driven by mainland China, Thailand, and Malaysia; and* China And Hong Kong Risks Still Need To Be Addressed: Concerned about weakening organic growth, AIA has gone on a deal-making spree: Bank of East Asia’s (23.HK) [BEA] wholly-owned life insurance unit, BEA Life; an exclusive 15-year bancassurance relationship with BEA; acquisition of Blue Cross (Asia-Pacific) Insurance’s underwritten closed life insurance; a strategic digital partnership with ZhongAn Online P&amp;C Insurance’ (6060.HK) [ZhongAn]; and received CBIRC approval to restructure its Shanghai-based life insurance branch into a wholly-owned subsidiary. In addition to the massive managerial distractions with so many deals at one time, there are challenges of bogusly rated AAA mainland Chinese bonds; no end in sight with its flailing Hong Kong flagship; and getting the BEA Life team on the same with AIA Hong Kong.

*Better, But Off A Low Base: AIA Group (1299.HK) [AIA] released its limited set of 1Q21 results. AIA’s overall Value of New Business (VONB) improved 404 or 62.3% on a linked quarter basis due to a combination of higher new sales volume (ANP up 422 or 32.9%) and an VONB margin expansion of 11.7% to 61.6% - closing in on pre-Covid levels and driven by mainland China, Thailand, and Malaysia; and* China And Hong Kong Risks Still Need To Be Addressed: Concerned about weakening organic growth, AIA has gone on a deal-making spree: Bank of East Asia’s (23.HK) [BEA] wholly-owned life insurance unit, BEA Life; an exclusive 15-year bancassurance relationship with BEA; acquisition of Blue Cross (Asia-Pacific) Insurance’s underwritten closed life insurance; a strategic digital partnership with ZhongAn Online P&amp;C Insurance’ (6060.HK) [ZhongAn]; and received CBIRC approval to restructure its Shanghai-based life insurance branch into a wholly-owned subsidiary. In addition to the massive managerial distractions with so many deals at one time, there are challenges of bogusly rated AAA mainland Chinese bonds; no end in sight with its flailing Hong Kong flagship; and getting the BEA Life team on the same with AIA Hong Kong. 

*Better, But Off A Low Base: AIA Group (1299.HK) [AIA] will report 1Q21 operating metrics on May 14, 2021. We anticipate a low base YOY rebound in VONB to USD 950 mn (15%). Mainland China and Malaysia should be this quarter’s standouts, whilst Hong Kong likely exhibits yet another decline in 1Q21 due to the border closure with mainland China;  and * China And Hong Kong Risks Still Need To Be Addressed: Concerned about weakening organic growth, AIA has gone on a deal-making spree: Bank of East Asia’s (23.HK) [BEA] wholly-owned life insurance unit, BEA Life; an exclusive 15-year bancassurance relationship with BEA; acquisition of Blue Cross (Asia-Pacific) Insurance’s underwritten closed life insurance; a strategic digital partnership with ZhongAn Online P&amp;C Insurance’ (6060.HK) [ZhongAn]; and received CBIRC approval to restructure its Shanghai-based life insurance branch into a wholly-owned subsidiary. In addition to the massive managerial distractions with so many deals at one time, there are negative tax implications for mainland Chinese subsidiaries versus branches; challenges of bogusly rated AAA mainland Chinese bonds; no end in sight with its flailing Hong Kong flagship; and getting the BEA Life team on the same with AIA Hong Kong.

*Better, But Off A Low Base: AIA Group (1299.HK) [AIA] will report 1Q21 operating metrics on May 14, 2021. We anticipate a low base YOY rebound in VONB to USD 950 mn (15%). Mainland China and Malaysia should be this quarter’s standouts, whilst Hong Kong likely exhibits yet another decline in 1Q21 due to the border closure with mainland China;  and * China And Hong Kong Risks Still Need To Be Addressed: Concerned about weakening organic growth, AIA has gone on a deal-making spree: Bank of East Asia’s (23.HK) [BEA] wholly-owned life insurance unit, BEA Life; an exclusive 15-year bancassurance relationship with BEA; acquisition of Blue Cross (Asia-Pacific) Insurance’s underwritten closed life insurance; a strategic digital partnership with ZhongAn Online P&amp;C Insurance’ (6060.HK) [ZhongAn]; and received CBIRC approval to restructure its Shanghai-based life insurance branch into a wholly-owned subsidiary. In addition to the massive managerial distractions with so many deals at one time, there are negative tax implications for mainland Chinese subsidiaries versus branches; challenges of bogusly rated AAA mainland Chinese bonds; no end in sight with its flailing Hong Kong flagship; and getting the BEA Life team on the same with AIA Hong Kong. 

AIA Group – 1Q21 Preview; Better But Off Low Base

*Pointless Shenzhen Deal: Ping An Insurance (2318.HK) [Ping An] has announced that it has agreed to invest CNY 37-51 bn in a restructured Founder Group, an unlisted mainland Chinese-controlled conglomerate. Under the proposal, Ping An will have own between 51.1%-70% of a newly formed entity called New Founder Group; and*Enough On Its Plate: In our view, Ping An has far too much on its plate to worry about than purchasing another company’s mess. There are weak fundamentals at Ping An Life, poor profit metrics at Ping An Property &amp; Casualty; and weak fundamentals at Ping An Bank. There are just so many IPOs and secondaries that Ping An can do with its FinTech investments to offset the insurer’s poor performance.

*Pointless Shenzhen Deal: Ping An Insurance (2318.HK) [Ping An] has announced that it has agreed to invest CNY 37-51 bn in a restructured Founder Group, an unlisted mainland Chinese-controlled conglomerate. Under the proposal, Ping An will have own between 51.1%-70% of a newly formed entity called New Founder Group; and*Enough On Its Plate: In our view, Ping An has far too much on its plate to worry about than purchasing another company’s mess. There are weak fundamentals at Ping An Life, poor profit metrics at Ping An Property &amp; Casualty; and weak fundamentals at Ping An Bank. There are just so many IPOs and secondaries that Ping An can do with its FinTech investments to offset the insurer’s poor performance.

People's Insurance (PICC) / Equity Bottom-Up

*Improving Profitability: PICC Group (1339.HK) [People’s] reported 1Q21 net profit after tax of CNY 10.0 bn, increasing by a whopping CNY 8.7 bn mn (6.7x) on a linked quarter basis. The linked quarter improvement can be attributed both to the PICC Life and PICC P&amp;C (2328.HK) whose bottom-line’s improved CNY 4.4 bn (vs a loss of CNY 1.8 bn in 4Q20) and CNY 3.8 bn (156.3%) - accounting for 61% and 27% of the group's earnings;  and *PICC P&amp;C Posts Big Expense Improvement: PICC P&amp;C (2328.HK) reported a 1Q21 net profit of CNY 8.9 bn, increasing 156.3% linked quarter. The overall combined ratio declined from 101.3% in 4Q20 to 95.7%. Compositionally, the overall expense ratio decreased 650 bp linked quarter to 25.4%, while the loss ratio increased 90 bp to 70.3%, reflecting a change in auto insurer’s cost structure after implementing pricing reforms.

*Improving Profitability: PICC Group (1339.HK) [People’s] reported 1Q21 net profit after tax of CNY 10.0 bn, increasing by a whopping CNY 8.7 bn mn (6.7x) on a linked quarter basis. The linked quarter improvement can be attributed both to the PICC Life and PICC P&amp;C (2328.HK) whose bottom-line’s improved CNY 4.4 bn (vs a loss of CNY 1.8 bn in 4Q20) and CNY 3.8 bn (156.3%) - accounting for 61% and 27% of the group's earnings;  and *PICC P&amp;C Posts Big Expense Improvement: PICC P&amp;C (2328.HK) reported a 1Q21 net profit of CNY 8.9 bn, increasing 156.3% linked quarter. The overall combined ratio declined from 101.3% in 4Q20 to 95.7%. Compositionally, the overall expense ratio decreased 650 bp linked quarter to 25.4%, while the loss ratio increased 90 bp to 70.3%, reflecting a change in auto insurer’s cost structure after implementing pricing reforms. 

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Thematic (Sector/Industry)

As an important supplement to China's basic medical insurance and an integral part of the multi-level medical security system, commercial health insurance has developed rapidly in recent years. The product structure, market scale, insured population and service connotation of commercial health insurance have undergone tremendous changes. However, it is undeniable that compared with other mature markets, the market of commercial health insurance in China still needs to be further explored, and the insurance products and service models also need to be continuously innovated. In particular, how to keep up with the pace of the times, meet the needs of the market, and constantly realize the iterative upgrading of health insurance products and services, so as to meet the diversified and personalized health insurance needs of people based on the inclusive basic medical insurance is undoubtedly a new subject for domestic commercial health insurance companies.

As an important supplement to China's basic medical insurance and an integral part of the multi-level medical security system, commercial health insurance has developed rapidly in recent years. The product structure, market scale, insured population and service connotation of commercial health insurance have undergone tremendous changes. However, it is undeniable that compared with other mature markets, the market of commercial health insurance in China still needs to be further explored, and the insurance products and service models also need to be continuously innovated. In particular, how to keep up with the pace of the times, meet the needs of the market, and constantly realize the iterative upgrading of health insurance products and services, so as to meet the diversified and personalized health insurance needs of people based on the inclusive basic medical insurance is undoubtedly a new subject for domestic commercial health insurance companies.

Industry Report - Insights on China Commercial Health Insurance Industry

China

New China Life Insurance Company Limited provides life insurance in local and foreign currencies, acts as an insurance agent, provides checks, claims and insurance consulting. The Company's main products include life insurance, accident insurance, health insurance products and services.

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New China Life Insurance (601336 CH)

AIA Group – Risks Remain High

AIA GROUP: AIA 1Q21 results with VONB improving 62.3% QOQ due to higher sales volume and VONB margin expansion driven by China, Thailand, and...

Thomas J. Monaco

AIA Group – 1Q21 Preview; Better But Off Low Base

AIA GROUP: AIA reports 1Q21 metrics on May 14. We expect a low base YOY rebound in VONB of 15%. With weaker organic growth, AIA went on a deal...

Thomas J. Monaco

Ping An Insurance - Totally Unnecessary

PING AN INSURANCE: Ping An has announced that it has agreed to invest CNY 37-51 bn in a restructured Founder Group. Ping An will own between 51.1%...

Thomas J. Monaco

PICC Group – Big Print

PICC GROUP: PICC reported QOQ 1Q21 net profit growth of 6.7x, attributed both to the PICC Life and PICC P&C (2328.HK) whose bottom-line’s each...

Thomas J. Monaco

Industry Report - Insights on China Commercial Health Insurance Industry

This article mainly analyzed the current situation, market potential, industry characteristics, challenges and future trends of China commercial...

Xinyao (Criss) Wang

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