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. 

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

EURO STOXX 50 Price EUR / Technical Analysis

Our intermediate-term outlook remains constructive with major support levels holding on the broad global indexes (MSCI ACWI, ACWI ex-US, EM, and EAFE). Still, we continue to see some reason for caution as various market dynamics have deteriorated, leading us to a more neutral outlook in the near-term.

Our intermediate-term outlook remains constructive with major support levels holding on the broad global indexes (MSCI ACWI, ACWI ex-US, EM, and EAFE). Still, we continue to see some reason for caution as various market dynamics have deteriorated, leading us to a more neutral outlook in the near-term.

China Pacific Insurance / Equity Bottom-Up

*Weak 2H20 Results: China Pacific Insurance (2601.HK) (CPIC) reported full year 2020 results of CNY 31.1 bn, increasing CNY 3.2 bn (11.5%) YOY. On a HOH basis, however, CPIC’s results continue to exhibit challenges as 2H20 results declined CNY 3.7 bn (21.3%) – amounting to just CNY 13.7 bn. Profitability was hurt by both the Life and P&amp;C units; and*Get A Life: During 2H20, first year premium (FYP) agent per month declined by 48.6% HOH to CNY 1,648 due largely to CPIC relying on online channels to conduct new sales during the COVID-19 outbreak along with expanded the short-term policy sales. In addition, CPIC Life appears to have culled its salesforce over the period to 17,000 (2.2%) which now will impact future VONB. Life VONB declined 41.1%, largely as expected, due to COVID-19 volume drop and a VONB margin decline of 10%.

*Weak 2H20 Results: China Pacific Insurance (2601.HK) (CPIC) reported full year 2020 results of CNY 31.1 bn, increasing CNY 3.2 bn (11.5%) YOY. On a HOH basis, however, CPIC’s results continue to exhibit challenges as 2H20 results declined CNY 3.7 bn (21.3%) – amounting to just CNY 13.7 bn. Profitability was hurt by both the Life and P&amp;C units; and*Get A Life: During 2H20, first year premium (FYP) agent per month declined by 48.6% HOH to CNY 1,648 due largely to CPIC relying on online channels to conduct new sales during the COVID-19 outbreak along with expanded the short-term policy sales. In addition, CPIC Life appears to have culled its salesforce over the period to 17,000 (2.2%) which now will impact future VONB. Life VONB declined 41.1%, largely as expected, due to COVID-19 volume drop and a VONB margin decline of 10%.  

China Pacific Insurance – No Sign Of Life

China Life Insurance Co H / Equity Bottom-Up

*Reserve Top Ups Weigh On Numbers This Time: China Life Insurance (2628.HK) [China Life] reported 2020 bottom-line of CNY 50.3 bn – declining CNY 8.0 bn (13.7%) YOY. Excluding the impact of the 2019 tax refund of CNY 5.2 bn, China Life’s bottom-line performance would have declined only CNY 2.8 bn or 5.3% YOY – but still down; and*Value Challenges Ahead: With value challenges ahead in China Life’s illiquid securities portfolio (Challenged Tier 2/3 bank negotiable CDs and alternatives) and the CBIRC’s enabling of insurers to increase their concentration in equities, we not only question solvency margins but the viability of China Life’s full-year dividend per share – not to mention the impact of lower net yields.

*Reserve Top Ups Weigh On Numbers This Time: China Life Insurance (2628.HK) [China Life] reported 2020 bottom-line of CNY 50.3 bn – declining CNY 8.0 bn (13.7%) YOY. Excluding the impact of the 2019 tax refund of CNY 5.2 bn, China Life’s bottom-line performance would have declined only CNY 2.8 bn or 5.3% YOY – but still down; and*Value Challenges Ahead: With value challenges ahead in China Life’s illiquid securities portfolio (Challenged Tier 2/3 bank negotiable CDs and alternatives) and the CBIRC’s enabling of insurers to increase their concentration in equities, we not only question solvency margins but the viability of China Life’s full-year dividend per share – not to mention the impact of lower net yields.

*BEA Life Deal: In an effort to reinforce its Greater China franchise, AIA Group (1299.HK) [AIA] has entered into an agreement to purchase Bank of East Asia’s (23.HK) [BEA] wholly-owned life insurance unit, BEA Life, and entered into an exclusive 15-year bancassurance relationship with BEA for HKD 5.07 bn (USD 653 mn) covering Hong Kong and mainland China; and *Lost Focus: Acquiring a fledgling Hong Kong insurance franchise at a premium when you’re the dominant player and unemployment remains excessive, suggests that AIA is more concerned with growth metrics rather than addressing the risks that AIA is facing in mainland China, Hong Kong, and in its investment portfolio.

*BEA Life Deal: In an effort to reinforce its Greater China franchise, AIA Group (1299.HK) [AIA] has entered into an agreement to purchase Bank of East Asia’s (23.HK) [BEA] wholly-owned life insurance unit, BEA Life, and entered into an exclusive 15-year bancassurance relationship with BEA for HKD 5.07 bn (USD 653 mn) covering Hong Kong and mainland China; and *Lost Focus: Acquiring a fledgling Hong Kong insurance franchise at a premium when you’re the dominant player and unemployment remains excessive, suggests that AIA is more concerned with growth metrics rather than addressing the risks that AIA is facing in mainland China, Hong Kong, and in its investment portfolio. 

AIA Group – Confirming No Organic Growth On Horizon

United Kingdom

Prudential plc is an international company which provides a wide assortment of insurance and investment products and services. Insurance products include life, accident and health, property and casualty insurance, as well as fixed and variable annuities.  Financial and investment services include personal and group pensions, equity plans, mortgages and deposit accounts.

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Prudential PLC (PRU LN)

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

Major Breakout For EURO STOXX 50

Our intermediate-term outlook remains constructive with major support levels holding on the broad global indexes (MSCI ACWI, ACWI ex-US, EM, and...

Vermilion Research

China Pacific Insurance – No Sign Of Life

CHINA PACIFIC INSURANCE: CPIC HOH results continue to exhibit challenges, declining 21.3%. Profitability was hurt by both the Life and P&C units.

Thomas J. Monaco

China Life Insurance – Not So Good

CHINA LIFE: China Life reported a 13.7% YOY decline in 2020 bottom-line. With value challenges ahead in China Life’s illiquid securities portfolio,...

Thomas J. Monaco

AIA Group – Confirming No Organic Growth On Horizon

AIA GROUP: AIA entered into an agreement to acquire BEA Life, and entered into a bancassurance relationship with BEA. Acquiring a fledgling Hong...

Thomas J. Monaco

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