[Incident] China People's Insurance announced premium income for January 2024: The company's cumulative original premium income for financial insurance, life insurance and health insurance in January 2024 was 62.8 billion yuan, 32 billion yuan, and 112 billion yuan respectively, +2.7%, -18.5%, and -4.5%, respectively.
The growth rate of car insurance and non-car insurance premiums in January showed a slow growth trend. 1) In January 2024, the premium income of People's Insurance Insurance increased 2.7% year on year, of which the car insurance business increased 2.9% year on year. We think this is related to the higher base for the same period last year. According to data from the WeChat account of the China Association of Automobile Manufacturers, New Year's promotions continued, and demand for pre-holiday car purchases was released to a certain extent. In January, automobile production and sales increased by 51.2% and 47.9%, respectively. 2) People's insurance premiums were +2.6% year-on-year in January. We believe that the lower growth rate of non-car insurance may be mainly due to some policy business delays. Among them, freight insurance/corporate insurance/liability insurance/health insurance/agricultural insurance/credit insurance business were +27.2%/+10.0%/+6.7%/+1.6%/-2.1%/-33.3%, respectively. 3) We believe that in 2023, due to factors such as vehicle travel recovery and strong typhoon disasters, the company's comprehensive cost ratio is expected to increase year over year, but the overall cost rate is still relatively good. It is expected that in 2024, as the company continues to strengthen business quality control, there may be room for improvement in the comprehensive cost ratio.
The personal insurance transaction business contracted markedly in January. It is expected to be mainly affected by the “integration of reporting and banking” through banking insurance channels. 1) The first-year premium ratio of People's Insurance Life Insurance's January long-term insurance was -27.0%, mainly dragged down by the 42.7% year-on-year contract business. We expect that the banking insurance channel will be greatly affected by the “integrated reporting and banking” policy; the first-year contract contract is +0.4%. We expect that the optimization of the new order structure will help increase the overall value rate; renewal premiums are -10.8%. We expect mainly due to the lower growth rate of new orders in January 2023, which will put pressure on the growth rate of premiums corresponding to renewal in January 2024. 2) The first-year premium for the first year of Human Insurance Health Insurance's January long-term insurance was -14.3%. Of these, the one-year premium paid was -22.9%, and the first-year premium paid for the term increased sharply by 102.3%. We expect this is mainly due to the lower base for the same period in 2023.
I am optimistic about the competitive advantage of the company's financial insurance business and give it an “superior to the market” rating. People's Insurance's car insurance business is in good condition. In the car insurance business, home-owned cars with low payout rates account for a relatively high share, and channel rates are manageable. Therefore, we believe that the company's profit margin far exceeds that of small and medium-sized insurers, and its competitive advantage will become more prominent in the second half of the comprehensive auto insurance reform. China People's Insurance currently values 2024E shares 0.66 times PEV and 0.87 times PB. We carry out a segmented valuation of China People's Insurance:
In 2024, the People's Insurance and Financial Insurance business will be given 1.1x-1.2x PB, the People's Insurance Life Insurance and Health Insurance will be given 0.45-0.5xPEV, and other businesses will be given 0.85x PB. Under the Segment Valuation Act, the reasonable value range of China People's Insurance Company is 6.77-7.32 yuan/share, giving it an “superior to the market” rating.
Risk warning: 1) The industry's premium growth rate is lower than expected; 2) Commercial vehicle fee reform continues to put pressure on industry underwriting profits.