[Incident] Sunshine Insurance released its 2023 mid-year report results: 1) Net profit of 2.90 billion yuan, +9.0% year-on-year; of these, net profit attributable to life insurance/financial insurance was 2,43/80 billion yuan, respectively, +5.2%/-20.6%. 2) NBV of 2.68 billion yuan, +37.1% year on year; EV 105 billion yuan, +3.7% from the beginning of the year. 3) Net assets of 65.3 billion yuan, +12.5% compared to the beginning of the year. 4) Annualized ROE of 8.9%, year-on-year -1.6 pct.
Insurance service performance was 3.09 billion yuan, +9.2% year on year. Financial expenses of 5.34 billion yuan were covered, -13.4% year-on-year.
Life insurance: Product structure optimization, manpower quality improvement. 1) Insurance service performance was 2.39 billion yuan, +1.8% year on year.
2) Premiums: Total premium income was 45.85 billion yuan in the first half of the year, an increase of 9.0% over the previous year; new premiums were 21.6 billion yuan, -7.9% year-on-year. New single-instalment premiums were 14 billion yuan, +53.4%; of these, the new single-instalment premiums for individual insurance channels/banking insurance channels were 3,02/106 billion yuan, respectively, +67.7%/51.6% of the same period; we believe that the share of value-oriented businesses is constantly increasing. 3) Business structure: Life insurance/accident insurance/health insurance premiums were +11.4%/-22.5%/-2.9%, respectively. We expect that the sharp increase in life insurance premiums is mainly due to the popularity of increased whole life products. 4) Manpower: The average monthly manpower was 55,351, or -15.8%; of these, the elite team had 1,706 people, +13.5%; the number of people who met MDRT standards nearly tripled year-on-year. The per capita production capacity of individual insurance channels was 26,000 yuan, +63.0%; of these, the per capita production capacity of newcomers was 19,000 yuan, +95.0%. We believe that the company has achieved an increase in the number of high-level teams and continuous improvement in the quality and efficiency of agents through excellent training.
Industrial insurance: Achieve underwriting profits, and increase the share of non-auto insurance. 1) Achieved net profit of 800 million yuan, -20.6% year-on-year.
Sunshine Financial Insurance achieved underwriting profit of 320 million yuan, of which auto insurance underwriting profit was 210 million yuan. 2) Insurance service performance was 700 million yuan, +45.1% year-on-year. 3) Sunshine Financial Insurance's original premium income was 21.9 billion yuan, +5.1% year-on-year; of these, auto insurance/non-car insurance premiums were +3.0%/+8.4%, respectively. 4) The comprehensive cost rate was 98.5%, -0.3 pct year on year; of these, car insurance/non-car insurance were 98.3%/98.7%, respectively. 5) We believe that with the improvement of risk identification and product pricing capabilities, the industrial insurance business is expected to continue to increase profits in 2023.
Investment: Investment income increased year over year, and fixed income assets were allocated. 1) Total investment assets were 466.6 billion yuan, +12.4% compared to the beginning of the year. The share of fixed income/equity assets is +2.9 pct/-1.3 pct respectively, adhering to risk management and control. 2) Total investment income was 7.69 billion yuan, +1.3% year-on-year. The annualized net return on investment was 3.4%, -0.8 pct; the annualized total return on investment was 3.5%, the year-on-year -0.6 pct; the annualized comprehensive return on investment was 4.9%, +2.2 pct.
The current stock price corresponds to 2023E PB 0.67x and PEV 0.42x. We believe that as the company insists on focusing on the main insurance business, focusing on value development, strengthening technological empowerment and medical care collaboration, and adhering to the principle of matching assets and liabilities, the company is expected to break through in market competition in the future. We value it using a segmental valuation method. We gave Sunshine Life 0.35-0.4 times 2023E PEV; Sunshine Financial Insurance and Sunshine Credit Insurance 0.65-0.7 times 2023E PB; other businesses 1 times 2023E PB. Corresponds to the reasonable value range of 4.72-5.16 yuan. Based on RMB 1 = HK$1.1041, corresponding to a reasonable value range of HK$5.22-5.70. Currently, the company's stock price corresponds to 2023E PB 0.67x and 0.41x PEV, giving it an investment rating of “superior to the market”.
Risk warning: 1) New premium growth falls short of expectations; 2) equity market volatility intensifies; 3) Long-term interest rates continue to trend downward.