Incident: The company disclosed its 2023 annual report: under the new standards, insurance service revenue was 30.16 billion yuan, up 7.3% year on year; net profit to parent was 2.9 billion yuan, up 9.0% year on year; annualized ROE reached 8.9%, down 1.6 pct year on year. The included value at the end of the period was $104.98 billion, an increase of 3.7% over the end of the previous year.
Performance and value performance exceeded expectations, and profit growth was superior to peers.
Special analysis of the new guidelines. The company simultaneously implemented IFRS9 and IFRS 17 guidelines at the beginning of the year. Net assets on the day the new standards were changed increased slightly from 60.741 billion yuan at the end of the previous year to 65.49 billion yuan at the beginning of this year. Under the new 1H23 standard, net profit growth rates for life insurance and financial insurance divisions were 5.2% and -21.7%, respectively. Under the new standards, the Group's gross profit margin for insurance services (1- insurance service costs/insurance service revenue) decreased by 0.1 pct over the same period last year.
To 11.0%, the income contribution ratio of insurance services increased from 76.0% in the same period of the previous year to 77.4%, and the net profit and loss ratio of financial underwriting (net profit and loss of financial underwriting and income from insurance services) was optimized from 21.8% in the same period of the previous year to 17.5%. The optimization of the reporting structure benefited from the optimization of the life insurance banking insurance structure and the improvement of financial insurance underwriting profits.
Life insurance NBV continues to grow under a high base. 1H23 Sunshine Life Insurance's new single-instalment premium revenue was 13.95 billion yuan, up 53.4% year on year, due to a 67.7% year-on-year increase in individual insurance term payments; a decrease of 53.1% year-on-year in single-instalment premium income; this was due to a sharp decline of 54.1% year-on-year in banking insurance transactions against the trend. 1H23 The share of new single-instalment premiums increased to 64.7% from 44.4% in the same period last year, and the share of renewal premiums increased to 53.0% from 44.4% in the same period last year. Thanks to the continuous increase in individual insurance channel transformation in recent years, the per capita production capacity of individual insurers was 26,000 yuan, an increase of 63.0% over the previous year, and the number of people meeting MDRT standards nearly tripled year-on-year. 1H23 achieved an NBV of 2.68 billion yuan, an increase of 37.1% year on year. Judging from volume and price attribution, new orders fell 7.90% year on year, but the value rate increased from 8.4% in the same period last year to 12.4%; from channel attribution, the year-on-year growth rates of personal insurance and banking insurance were 17.0% and 49.1%, respectively. The increase in value contribution of banking insurance was increased by 51.60% year-on-year to 7.017 billion yuan. The absolute scale has already ranked first in the industry.
It is not easy for Sunshine Financial Insurance to achieve management's guidelines for underwriting profits in advance. 1H23 Sunshine Financial Insurance achieved original premium revenue of 21.93 billion yuan, up 5.1% year on year. Auto insurance and non-vehicle growth rates were 3.0% and 8.4% respectively. The value business and strategic sectors achieved relatively rapid growth. Among them, family car premiums grew 9.5%, new energy vehicle premiums grew 80.3%, agricultural insurance premiums grew 42.9%, and policy health insurance premiums grew by 74.6%. The company actively reduced the guarantee insurance business, down 45.1% year on year. 1H23's comprehensive underwriting cost ratio was 98.2%, a year-on-year decrease of 0.7 pct. , thanks to enhanced business management and risk screening. 1H23 Financial Insurance's net profit decreased by 21.7% year-on-year, mainly because the cost growth rate was higher than the revenue growth rate. This was due to the rapid rise in the scale of non-vehicle insurance premiums and the increase in corresponding expenses, while at the same time, compensation expenses increased with the liberalization of the epidemic.
Investment performance has remained steady. 1H23's net/total investment income achieved year-on-year growth rates of -6.3% and 1.3%, respectively; annualized net/gross and comprehensive return on investment was 3.4%/3.5%/4.9%, year-on-year -0.8/-0.6/+2.2 pct. The 1H23 investment bias had a negative contribution of only -0.3% to EVs, which is better than the industry average.
Profit forecasting and investment ratings: Profit growth is superior to peers, and business structure improvements are moving closer to the top echelons.
According to the adjusted profit forecast disclosed in the interim report, we expect net profit to be 61, 81 billion yuan, and 9.1 billion yuan in 2023-25 (the original forecast was 68, 8 billion yuan, and 9 billion yuan), maintaining the “buy” rating.
Risk warning: The equity market continues to decline, and the banking insurance channel moat is unstable