Insurance waiting for the end of the expected rate cut

The rate cut, 1-year deposit rate to 2.52 percent, close to the August 2006 -2007 in the level of interest rates in March, representing a record low level of interest rates high 54BP (2002 years -2004 on 2-year in October of 1.98 percent). We believe that there is the possibility of rate cuts to continue, but there was not much room and space for future rate cut is estimated to be about 50BP, low interest rates are expected for the duration of 1-2 years.

From the implicit value of the point of view, the types of insurance related to the maintenance of listed companies 4.2% -4.5% of the long-term investment rate of return assumption. In the company based on the assumption that benchmark, we reduced long-term investment rate of return assumption 100BP, that is, China Life Insurance (601,628, it shares), Ping An of China (601,318, it shares), China Pacific Insurance (601,601, it shares) were 4.5%, 4.5 % To 4.2%. Considered a year of the value of new business growth in China Life's overseas investment may be over-income, as well as the efficiency of the management of China Pacific Insurance discounts related to the valuation of the company are: 15 yuan China Life, China Ping An 35.4 yuan, the China Pacific Insurance 11.5 Million.

Accounting profit from the point of view, short-term rate of return on investment to face downward pressure. 2003-2005 low interest rate environment, life safety and the minimum net investment income was 3.49 percent, the lowest rate of return for a total investment of 3.6 percent. At that time, the high rate of return is mainly due to larger proportion bank deposit agreement. We expect in 2009 related to the insurance company listed assets of fixed-income category with a total investment yield 3.95 percent. This is based on two assumptions: 75% of the proportion of the assets of the average stock yield to maturity of 4.5% and 10% of them due to low interest rate products; 25% of the proportion of new assets for the average yield to maturity 2.8%.

We expect the bond issue is expected to increase, including the long-term treasury bonds, local government bonds and corporate debt. Supply is expected to increase to break the existing imbalance, improve the return on long bonds.

The end of the rate cut, stock prices start rising. Impede the current insurance categories listed company's share price rise factor is: the expected rate cut is not over; premium growth is expected to slow to strengthen. November is expected to premium data is still not optimistic about the weakness in consumption will gradually appear. We believe that the future share price catalyst, is expected to cut interest rates as well as the end of the rate increase is expected to rise.

Valuation of the three major insurance companies

China Ping An of China Life Insurance China Pacific Insurance

The main assumption that the rate of return on investment 4.50% 4.50% 4.20%

Includes the value of the discount rate 11.50% 11.50% 12%

New business multiplier (times) 17.219.916.2

New business multiplier NBV implied 10-year 8% growth rate sustainable 3% 10 years 10% of the sustainable 3% of the 10-year 8% sustainable 3%

The value of the base containing 224,810 66,57243,724

The base year value of new business 16,3419,0243,912

Base value of life insurance 506,438 245,892107,055

Assuming the adjusted value of life insurance 382,538 199,44980,658

Other factors, the value of non-life insurance business 062,425 30,376

Total value of 382,538 261,874 111,033

Life overseas investment premium 41,304 __

Ping-tax impact of _-2, 000 _

Taibao management efficiency __80% discount

Assessment of the value of the appraised value of 423,842 259,874 88,826

Value per share (yen) 1535.411.5

Price / value 1.410.721.17