China Insurers’ 2Q Net Profit Growth Expected to Improve on Reduced Capital Market Volatility

We expect China’s life insurers under our coverage to report a double-digit increase in second-quarter net profits versus the year-on-year contraction in the first quarter. While we expect their new business value growth in the first half will slow from 20%-50% in the first quarter, growth should stay healthy at 10% to 25% thanks to margin improvement and resilient demand for savings products as the deposit rate continues to trend down. We also expect property-casualty underwriting margin to improve from the first quarter, helped by reduced catastrophe losses. Despite the earnings improvement, we expect industrywide headwinds, including falling asset yield, potential commission rate cut in the agent channel, and uncertainty in catastrophe losses, will continue to weigh on investor sentiment.