2023 profit was better than our and market expectations
China Taiping announced its 2023 results: Assuming that the RMB Caliber New Business Value (NBV) was +27.8% YoY (assuming +2.2% after adjustment), the comprehensive cost ratio (CoR) of domestic financial insurance business was 98.4% year over year; the Group's HKD-caliber net profit was +44.1% YoY to HK$6.19 billion, exceeding our expectations, mainly due to investment performance and guideline changes being better than our expectations.
Development trends
Life insurance growth and quality continue to lead the industry. 2023 Taishou NBV +27.8% (except for the adjustment of the RMB caliber before using the assumptions in this section), individual insurance/banking insurance NBV was +8.7%/221.8%, respectively, and the new business value rate was +0.3/+6.2ppt, respectively; individual insurance team production capacity and revenue increased, and the average monthly production capacity of supervisors and newcomers increased year-on-year +7.3%/+10.4%, respectively. The average monthly income of business managers/senior managers/regional directors and above was +19.8%/+20.2%/+14.9%, 13/25 month continuation rate, respectively At 96.2%/90%, maintaining the leading level in the industry; monthly bank insurance premiums per capita were +51.2% year over year, and NBV still achieved a year-on-year increase of more than 400% after adjusting the 1-2 M24 banking insurance hypothesis under “integration of reporting and banking”.
Domestic financial insurance business CoR was +1.2ppt to 98.4% year over year, or affected by the low compensation base in '22 and natural disasters. The overall underwriting profit situation was better than our and market expectations; all sectors of the overseas financial insurance business achieved underwriting profits, with Taiping Hong Kong, the United Kingdom, Singapore, and Indonesia CoR improving year over year.
Taking into account changes in the economic environment, the company lowered the return on implied value/risk discount rate of 50/200bps to 4.5%/9%, respectively. The impact of the above assumptions on NBV/Group's intrinsic value (RMB caliber) was -20%/-6%, respectively. Group intrinsic value before and after adjustments +10.5%/3.9% YoY.
Shu Deyun saw the moonlight. Although the impact of the new standard switch is complex and difficult to compare with peers, Taiping's annual net profit increased 44% year over year to HK$6.19 billion, exceeding our and market expectations. The net, total, and comprehensive return on investment was -0.30/+1.45/+2.66ppt to 3.56%/2.66%/5.01% year over year, respectively. The Group's high dividend strategy outperformed the Hang Seng Index (with interest) 18.47ppt, driving overall equity outperforming the Shanghai and Shenzhen 300 Index 8.18ppt. The total after-tax profit of businesses other than life insurance changed from loss to profit of HK$860 million, and other businesses changed from a loss of HK$2.6 billion to a profit of HK$100 million. We believe that the risk assets of other businesses may have been cleared to a certain extent, and we are optimistic about the trend of improving profits after the equity market stabilizes. The company declared a dividend of +15% to HK$0.3 per share in 2008, with a dividend ratio of about 20%. The dividend rate corresponding to the current stock price (2023a) is approximately 4.6%.
Profit forecasting and valuation
As losses in other businesses were better than our previous expectations, we raised 2024e EPS by 24% to HK$2.56 per share and introduced 25e EPS at HK$3.21 per share. Maintain outperforming industry ratings. Considering the current market environment, we maintain a target price of HK$9.5, corresponding to 2024e/25e 0.2x/0.2x P/EV. The current stock price corresponds to 0.1x/0.1x 2024e/25e P/EV, and the target price has 47% upside compared to the current stock price.
risks
The increase in premiums for new orders fell short of expectations; long-term interest rates fell sharply; capital markets fluctuated greatly; and policy and regulatory uncertainty.