The company disclosed its 2023 annual report and achieved net profit of 24.566 billion yuan, -15.6% year-on-year, ROE was 10.8%, and the dividend ratio continued to increase by 44.3%.
Debt-side premiums grew steadily, and underwriting profits declined year over year. In 2023, the company achieved original insurance premium revenue of $515.807 billion, with a market share of 32.5%, maintaining the industry's leading edge; revenue from insurance services was 457.203 billion yuan, +7.7% year-on-year, of which car insurance/non-car insurance accounted for 61.7%/38.3%. Affected by factors such as the disaster and the return of the insurance rate to normal after the epidemic prevention and control transition, the company achieved an underwriting profit of 10.189 billion yuan in 2023, -29.1%; the comprehensive cost ratio was 97.8%, +1.2pt year over year, of which the comprehensive payout rate was 70.6%, +1.2pt year on year, and the comprehensive expense ratio was 27.2%, the same as the previous year.
Auto insurance payout rates have risen markedly. In 2023, the company achieved auto insurance service revenue of 282.117 billion yuan, +5.3% year-on-year; underwriting profit of 8.623 billion yuan, -41.1% year-on-year. The comprehensive cost ratio was 96.9%, +2.4 pt year on year, with a comprehensive payout rate of 70.4% and +2.1 pt year over year, mainly affected by the restoration of social transportation and major disasters such as typhoons and torrential rains; the comprehensive cost ratio was 26.5%, +0.3 pt year over year, mainly affected by amortization of insurance policy acquisition costs under the new guidelines.
Non-car insurance underwriting profits improved, turning a year-on-year loss into a profit. In 2023, the company achieved revenue of 175.086 billion yuan from non-car insurance services, +11.9% year on year; underwriting profit of 1,566 billion yuan, reversing losses year on year; comprehensive cost ratio of 99.1%, -1.1 pt year on year. By insurance type: (1) agricultural insurance service revenue +10.6% year over year, underwriting profit -16.1%; comprehensive cost ratio 95.8%, +1.4pt year on year, with comprehensive payout rate of 80.3%, +2.2pt year on year, mainly affected by major disasters such as typhoons and torrential rain; comprehensive expense ratio 15.5%, -0.8pt year on year; (2) iHealth Insurance service revenue +23.8%, with underwriting profit significantly turned loss into profit; comprehensive cost ratio of 97.7%, -2.8pt yoy, of which the comprehensive payout odds were 59.3%, +1.8pt yoy Mainly affected by factors such as increased demand for medical treatment and the deepening of direct settlement policies for medical treatment across provinces; comprehensive cost rate 38.4%, -4.6pt year on year; (3) liability insurance service revenue +3.2% year on year, and underwriting loss narrowed year on year; comprehensive cost ratio 107.0%, -2.1pt year on year, with a comprehensive payout rate of 73.6%, -3.0 pt year on year, and a comprehensive cost ratio of 33.4%, +0.9 pt year over year, mainly due to the company's increased front-end resource investment in risk reduction services, leading to a sharp drop in back-end claims expenses; (4) enterprise financial insurance services Revenue was +5.1% year over year, and underwriting loss narrowed slightly year on year; the comprehensive cost ratio was 103.8%, -0.4 pt year on year, of which the comprehensive payout rate was 76.2%, +0.3 pt year on year, and the comprehensive expense ratio was 27.6%, and -0.7 pt year on year.
Investment returns are relatively steady, with net profit declining but dividends increasing. 1) The company's investment asset balance at the end of 2023 was $60,711 billion, up 4.3% from the beginning of the year; total investment income was 20.807 billion, -1.6% year over year; total return on investment was 3.5%, -0.3 pt year on year, superior to major peers (Ping An of China 3.0%, China Taiping 2.7%), mainly due to fluctuations in equity assets and bond market values included in FVTPL, as well as an increase in the operating performance of some associated companies and joint ventures. 2) In 2023, the company achieved net profit of 24.566 billion yuan, -15.6% year on year; net assets of 234.304 billion yuan, +5.7% year on year; ROE was 10.8%, with dividend of 0.489 yuan per share, up 2.3% year on year, and the dividend ratio reached 44.3%.
Maintain a “Highly Recommended” rating. In 2023, under adverse effects such as the resumption of vehicle travel and frequent disasters, the company's car insurance and non-car insurance COR were controlled within 97% and 100%, respectively, achieving the set business goals and demonstrating the company's strong business quality control and refined management capabilities. We believe that the company's advantages as a leader in the industry will continue to be highlighted, the ROE is stable, the dividend ratio is high, and it still has long-term investment value.
Considering the change in accounting standards, we adjusted the profit forecast. The company's net profit for 2024-2026 is estimated to be 284/314/34 billion yuan, respectively, corresponding to a growth rate of +15%/+10%/+8%. The current valuation of the company corresponds to 0.83 times net assets at the end of 24, the target valuation is 1 times PB by the end of 24, and the target price is HK$12.4. It continues to be “highly recommended”.
Risk warning: increased market competition, changes in regulatory policies, natural disasters exceeding expectations, economic recovery falling short of expectations, weak automobile consumption.