The company disclosed its 2023 annual report, achieving net profit of HK$6.190 billion, +44.1% year over year; NBV of 8.515 billion yuan, +27.8% year on year; comprehensive return on investment of 5.01%, +2.66pt year on year, and overall performance exceeded expectations.
Net profit increased dramatically, and other businesses turned losses into profits. In 2023, the company achieved net profit of HK$6.190 billion, +44.1% year-on-year (+20.5% for H1/H2, respectively). By business segment, net profit from life insurance/financial insurance/reinsurance/asset management/other businesses accounted for 92%, 5%, 3%, -1%, and 1%, respectively. Other items (mainly including operating results and consolidated adjustments of holding companies, Taiping Investment (Hong Kong), etc.) made a profit of HK$113 million for the first time since 2019.
Life insurance NBV maintained a high increase, and the agency team cleared up speed. 1) In 2023, the company achieved life insurance NBV of RMB 8.515 billion, +27.8% (H1/H2/+27.3%, respectively), and maintained significant positive growth on a high base. It is expected that the 24Q1 NBV growth rate will still be significantly superior to that of its peers. 2) The premiums for the new policy were +24.3%. Among them, the first-year premiums paid for individual insurance and long-term bank insurance were +18.7% and +52.4%, respectively; NBV Margin was 19.9%, +1.2pt year over year, with individual insurance and bank insurance being 25.2% and 11.9%, respectively. 3) The number of agents was 235,000, -40.0% year on year, monthly per capita premium of 14,410 yuan, +5.3% year over year. As low-performing agents were cleared faster, the team quality gradually improved. 4) The monthly continuation rates of personal insurance and banking insurance were 96.2% and 98.0% respectively. The monthly continuation rates were 90.0% and 95.9% respectively, leading the industry for many years. 5) Life Insurance EV HK$262,588 billion, +8.2% compared to the beginning of the year.
Furthermore, the company assumed that the long-term return on investment and risk discount rate was 4.5% (previously 5%) and 9% (previously 11%), respectively, and the adjusted impact on life insurance NBV and EV was -20.1% and -6.6%, respectively.
Both the industrial insurance and reinsurance businesses maintain underwriting profits. 1) Revenue from financial insurance services in 2023 was +7.9%. Among them, car insurance and non-car insurance were +3.5% and +16.7%, respectively, and the business structure continued to be optimized.
In terms of comprehensive cost ratio, domestic business COR was 98.4%, +1.2pt year over year. It is expected to be affected by increased payout rates due to natural disasters and vehicle travel recovery; with the exception of the increase in overseas business, Taiping Macau COR, all other regions have been significantly optimized. 2) Reinsurance service revenue +8.6% YoY, comprehensive cost ratio 95.6%, YoY +0.9pt, maintaining underwriting profit.
Investment returns have improved markedly, and the weight of real estate debt and financial products is smaller. At the end of the year, the Group's investment assets were HK$1,349.5 billion, +14.9% compared to the beginning of the year; total investment income was HK$33.566 billion, +138.8% year over year, mainly benefiting from its high dividend strategy, Hong Kong stocks outperformed the Hang Seng Index (interest included) by 18.47 points, and overall equity outperformed the Shanghai and Shenzhen 300 Index by 8.18 points. In 2023, the company's comprehensive return on investment was 5.01%, +2.66pt year on year; total return on investment 2.66%, +1.45pt year on year; net return on investment 3.56%, -0.30pt year on year. In addition, the company invested about HK$20.7 billion in real estate debt financial products, accounting for 1.4% of total assets, down 0.6 percentage points from the end of last year.
Maintain a “Highly Recommended” investment rating. The 2023 annual report continued the company's impressive performance in the medium term. Both investment and debt performance exceeded expectations, but the valuation was still at an extremely low level in history, which seriously mismatched the high fundamentals. We have repeatedly emphasized that as the company's asset-side risks are gradually cleared and lightened, the flexibility to improve performance is expected to be significantly higher than that of peers. Taking into account the change in accounting standards, we adjusted the profit forecast. The company's net profit for 2024-2026 is expected to be HK$78/90/10.1 billion, respectively, corresponding to a growth rate of +25%/+16%/+13%. Currently, the company's stock price is only 0.09 times the 2023 PEV, and it is expected that there will be plenty of room for further growth.
Risk warning: Life insurance development is struggling, product attractiveness is declining, team transformation is lower than expected, economic growth is weak, regulations are tight, stock market is sluggish, and interest rates are declining.