The company disclosed its 2023 mid-year report, achieving net profit of HK$5.22 billion, +20.5% year on year, and NBV of 3.65 billion yuan, +28.5% year on year. The trend of fluctuation was obvious, and it maintained its “highly recommended” investment rating.
Net profit increased markedly. 23H1 achieved net profit of HK$5.22 billion, +20.5% year-on-year. Looking at net profit from various businesses, life insurance contributed 99.4%. Other items (mainly including operating results of holding companies, Taiping Investment (Hong Kong), etc., and mergers and adjustments) lost HK$120 million, a year-on-year decrease of 83.7%.
Debt-side life insurance is recovering strongly. 1) 23H1 Taiping Life Insurance achieved a life insurance NBV of RMB 3.65 billion, +28.5% year-on-year. The growth rate is expected to lead the main industry. It is expected to be mainly due to strong wealth management demand from residents since the beginning of the year and market concerns about lowering pre-determined interest rates for life insurance products, which have driven the continued popularity of savings insurance such as incremental whole life insurance. 2) New insurance premiums were +42.4%, with individual insurance and banking insurance increasing by 21.8% and 82.5% respectively; Margin was 12.2%, -1.3 points year over year. 3) The number of agents was 320,000, a net decrease of 710,000 from the beginning of the year. The monthly average annual premium was RMB 18,167, +32.8% compared to the beginning of the year. It is expected that the team quality will further improve as low-performing agents are cleared at an accelerated pace. 4) The continuation rates for individual insurance and banking insurance in December were 96.1% and 98.1% respectively, and the continuation rates for 25 months were 91.6% and 96.8% respectively, continuing to rank among the highest in the industry. 5) Mid-year CSM was HK$217.788 billion, down 1.6% from the beginning of the year; life insurance EV was HK$254.856 billion, up 5.0% from the beginning of the year.
The industrial insurance and reinsurance business both continued to grow. 23H1 Taiping's financial insurance service revenue was +7.7% (RMB caliber), of which auto insurance, water insurance, and non-water insurance premiums accounted for 56%, 2%, and 42% respectively. The business structure continued to be optimized; the overall comprehensive cost ratio was 97.6%, +2.4pt year on year. Revenue from overseas financial insurance services was +7.6% year-on-year (HKD caliber), and overall underwriting profit was covered. Reinsurance insurance service revenue was +2.1% (HKD caliber), and the comprehensive cost ratio was 105.8%, +4.4pt year on year.
Investment returns have improved significantly. As of the end of June, the Group's total investment assets were HK$1,262.8 billion, up 7.5% from the beginning of the year. Of these, fixed income and equity categories accounted for 74.8% and 18.8% respectively. The company strengthened research-driven investment. The equity market performance was significantly better than in the same period last year. 23H1 achieved a total investment income of HK$23.705 billion, +105.9% year on year; total return on investment of 3.89%, +1.91 pt year on year; net return on investment of 3.63%, -0.31pt year on year; and a comprehensive return on investment of 5.92%, +4.0pt year on year. Furthermore, the company's real estate debt financial products account for only 1.9% of total assets.
Maintaining the “highly recommended” investment rating, 23H1's fundamentals have recovered strongly. The debt side has reached an inflection point. The risk on the asset side has gradually been cleared up and taken lightly. The size is small, the trend is smooth, and the flexibility is high. Considering that the company's net profit for the first half of the year has greatly exceeded the level for the full year of last year, we have adjusted our profit forecast based on historical data. Currently, the company's stock price corresponds to only 0.14 times the PEV in 2023, which is at the bottom of historical valuations. The target valuation corresponds to 0.2 times the EV at the end of 23, the target price is HK$11.0, and the corresponding space is 46%.
Risk warning: Life insurance development is hampered, product attractiveness is declining, team transformation is below expectations, economic growth is weak, supervision is tight, the stock market is sluggish, and interest rates are declining.