Underwriting performance exceeded expectations, profit performance was in line with expectations, and the dividend strategy remained steady. China Financial Insurance announced its 2023 results. The company achieved net profit of 24.585 billion yuan, yoy -15.7%. The performance was in line with expectations, and the return on net assets reached 10.8%. The underwriting performance was outstanding. Under the impact of the 23Q3 disaster, it still exceeded expectations and achieved the comprehensive cost rate target for the whole year (the comprehensive cost rate target for car insurance was set at the beginning of '23 to be within 97%, and the target rate for non-car insurance was within 100%), and the underwriting profit reached 10.189 billion yuan, yoy -29.1%. The dividend strategy remained steady. The dividend ratio reached 44.24% for 23 years, exceeding 40% for 5 consecutive years, and the dividend per share yoy +2.3% to 0.489 yuan, corresponding to the latest closing price was 5.23%.
The results of the reform continued to show, with auto insurance and non-vehicle underwriting profits of 8.623/1,566 billion yuan respectively. The company adheres to the path of high-quality development, and its management strategy of improving structure, improving quality and increasing efficiency continues to show results. On a comparable scale, the company's total premium revenue in 2023 yoy +6.3% was 515.807 billion yuan; the comprehensive cost ratio yoy+1.2pct was 97.8%, 0.1 pct optimized over the 9M23 level, and the cost rate/compensation ratio yoy+0.0pct/+1.2pct reached 27.2%/70.6%; among them, 23Q4 achieved an underwriting profit of 2,810 billion yuan, corresponding comprehensive cost ratio of 97.5%, which was impressive.
The volume and price of car insurance has risen sharply. Vehicle insurance service revenue yoy +5.3% to 282.17 billion yuan, with a comprehensive cost ratio of yoy+2.4pct to 96.9%, 0.5 pct optimized over 9M23, better than the target of 0.1 pct at the beginning of the year (97%); annual underwriting profit yoy -41.1% to 8.623 billion yuan, accounting for 84.6%. Excellent structural results continued to show, and the renewal rate for family cars yoy+1.1pct reached 77.8%; car insurance and non-vehicle linkage mechanisms were further optimized, and the penetration rate yoy+2.1pct per vehicle was 70.8%.
Qualitative optimization of non-vehicle insurance. Non-car insurance service revenue yoy +11.9% to 175.086 billion yuan, and the comprehensive cost ratio yoy-1.1 pct was 99.1%, better than the target of 0.9 pct at the beginning of the year (100%); underwriting turned a loss into profit, contributing 1,566 billion yuan to underwriting profit, an increase of 1,836 billion yuan over the previous year. Among them, the comprehensive cost rates for agricultural insurance/health insurance/liability insurance/corporate financial insurance/other insurance were 95.8%/97.7%/107.0%/103.8%/95.5%, yoy+1.4pct/ -2.8pct/ -2.1pct/ -0.4pct/ +1.2pct, respectively.
Investment performance was under pressure, and solvency performance was steady. The company's total return on investment in '23 was yoy-0.3pct to 3.5%, compared to 9M23 annualized level-0.1 pct. Compared with the beginning of the year, cash/fixed income/equity/investment property/investment property/joint venture investment/other accounts for 2.8%/58.2%/26.4%/1.3%/10.4%/1.0%/1.0%, respectively, compared to the beginning of the year, -0.9pct/-1.3pct/+1.9pct/+0.0pct/+0.3pct/+0.0pct, respectively. By the end of 2023, the company's core/comprehensive solvency ratios were 208.7%/232.4%, respectively, +6.8pct/+3.1pct compared to the beginning of the year.
Investment analysis opinion: Maintain a “buy” rating and adjust profit forecasts to the new accounting standards. The company attaches importance to shareholder returns, with a dividend ratio of over 40% for 5 consecutive years, which is the core target of high dividends within the insurance sector. Shareholders' Insurance Group is a central financial enterprise directly under the Ministry of Finance and has strong strength, and is expected to benefit from the optimization of the central enterprise assessment system and the trend of central enterprise reform in the next stage. The company continues to promote high-quality transformation, and the combination of optimizing the business structure, reducing operating costs, and improving risk identification capabilities is expected to continue to show results. As regulatory and cost control policies advance, the company's operating advantages are expected to continue to show. We have adjusted our profit forecast to the new accounting standards. The net profit forecast for 2024-2026 is RMB 285.39/324.83/35.951 billion, respectively. As of March 26, the company's PB (24E) was 0.86x, maintaining a “buy” rating.
Risk warning: equity market fluctuations; long-term interest rate decline; large fluctuations in the Hong Kong stock market; exchange rate fluctuations; frequent disasters.