[Incident] China Taibao issued a premium income announcement for January 2024: The company's premium income for life insurance and industrial insurance in January 2024 was 44.927 billion yuan and 25.393 billion yuan respectively, -14.7% and +8.9%, respectively.
In January, the premium growth rate of the company's life insurance business was under pressure in the short term. 1) The company's life insurance premiums were -14.7% in January 2024. We expect that the banking insurance channel's transaction business was affected to a certain extent after the “integrated reporting and banking” policy; ② the renewal growth rate due to the decline in new orders over the past few years was under pressure. ① 2) In 2023, Taibao Life Insurance's new single instalment payments were +35.0% year-on-year. The year-on-year growth rates of H1 and H2 were +38.8% and +28.0%, respectively. H2 fell 10.8pct from the H1 growth rate. We think it was mainly affected by factors such as the reduction in product reservation interest rates and the short-term suspension of banking insurance business due to “integrated reporting and banking”. 3) We expect that with macroeconomic recovery, the increase in residents' expected income levels, and the smooth progress of the second phase of the company's Changhang Operation Project, the company's debt side will still have sufficient long-term growth momentum.
The company's comprehensive financial insurance cost ratio is expected to increase year-on-year in 2023. 1) In 2023, the company's total insurance premiums were +11.4%. Among them, the growth rates of car insurance and non-car insurance premiums were +5.6% and +19.2%, respectively. The growth rate of the company's financial insurance premiums led the industry, mainly driven by the rapid growth of non-car insurance. 2) The comprehensive cost rate for the first three quarters was 98.7%, +1.0pct year-on-year. We expect that due to factors such as the low base for the same period in 2022 and the major disaster in 2023, the company's comprehensive cost ratio may continue to increase year-on-year for the whole of 2023.
The valuation is still low, and the rating is “superior to the market”. We are optimistic that the company's life insurance sector will launch organizational transformation led by internal office transformation, build a customer-centered and most dynamic value creation organization, comprehensively build an enabling headquarters and operating organization, and accelerate the transformation of the “core” model from “transformation” to “molding”; the property insurance sector will strengthen cost management, optimize costs, control the provision of differentiated products and service supply plans, and strengthen customer renewal capabilities. As of February 20, 2024, the company's stock price corresponds to 2024E PEV 0.41x. We gave 0.55-0.60 times 2024E PEV, a reasonable value range of 34.79 -37.95 yuan, and a “superior to the market” rating.
Risk warning: 1) Long-term interest rates are trending downward, 2) the stock market fluctuates greatly, and 3) New premium growth falls short of expectations.