On May 28th, Goldman Sachs released a report highlighting positive changes in shareholder returns for insurance stocks. The report noted that several insurance companies have announced plans to stabilize or increase dividend targets and are considering or have proposed share buyback plans. This aligns with the government’s intention to enhance the valuation of state-owned enterprises. Goldman Sachs anticipates that more insurance companies will adopt similar measures in the future to improve or stabilize shareholder returns.
Among the domestic insurance
companies covered by Goldman Sachs, China Life Insurance has garnered attention due to the significant mismatch between its strong balance sheet and the current low dividend payout ratio. Meanwhile, China Property & Casualty Insurance is identified as the company with the greatest potential to enhance shareholder returns, thanks to its estimated excess capital of 47 billion yuan for the fiscal year 2024. Goldman Sachs has accordingly raised its earnings per share forecast for domestic insurance companies in fiscal year 2025, with the increase ranging from 3% to 46%. The bank upgraded the rating of China Property & Casualty Insurance from “neutral” to “buy”, raised the target price from HK $12.9 to HK $16.1, maintained the “buy” rating for China Life Insurance and Ping An of China, and raised the target prices of both.
Key Highlights:
China Life Insurance: Known for its robust balance sheet but currently has a low dividend payout ratio. The company’s annual dividend yield is 4.48%, with a payout ratio of 15.96%.
China Property & Casualty Insurance: Identified as having significant potential to enhance shareholder returns due to its excess capital.
Earnings Forecast: Goldman Sachs has increased its earnings per share forecast for domestic insurance companies for fiscal year 2025.
Rating Upgrades: China Property & Casualty Insurance’s rating was upgraded from “neutral” to “buy”, with its target price increased from HK $12.9 to HK $16.1. China Life Insurance and Ping An of China maintained their “buy” ratings with increased target prices.
These moves reflect a positive outlook for the insurance sector, with companies taking proactive steps to enhance shareholder value.
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