Core views:
The company released its 23rd annual report: net profit to mother in 2023 -16.8% YoY, NBV +44.2% YoY.
NBV +44.2% in 2023 (after retroactive adjustment according to the new actuarial assumptions), the significant increase in NBV was mainly due to the optimization of channels and payment structures, resulting in a value ratio of +3.7 pct to 10.8% year over year. The share of new insurance premiums was +12.1 pct to 54.4% year over year, and the share of individual insurance contributions to new orders was +4.5 pct. Therefore, the changes in the personal insurance/banking insurance channel NBVM were -4.1 pct/+1.5 pct, respectively. In addition, premiums for new orders in 2023 were -4.6% year-on-year, mainly due to the reduction in the scale of transactions through banking insurance channels, but benefiting from the deepening reforms and the delisting of 3.5% products, the production capacity per capita of individual insurance/banking insurance channels was +44.4%/+37.3%, respectively. Looking ahead to 2024, benefiting from strong demand for residents' savings and deepening agent reform, it is expected that the new orders and values of individual insurance channels will remain stable, while NBVM of the banking insurance channel is expected to gradually increase under the “integration of reporting and banking” to reduce processing fees, commission rates, and optimization of payment structures, thus achieving price compensation.
The Group's EV was +2.8% YoY (+3.6% for life insurance) in 2023, assuming positive growth after adjustments.
Looking at EV life insurance factors, due to the decline in long-term interest rates, the company is still relatively cautious about lowering the return on investment rate by 50BP to 4.5%, and the overall change in assumptions dragged down EV -6.9%; while the sharp increase in NBV contributed to the EV growth rate to 4.7%, and the EV growth rate, which contributed to the difference in return on investment, fell sharply by 5.5 pct to -0.4% compared to the same period last year.
The implementation of the guidelines and market fluctuations led to the company's net profit of -16.8% year-on-year. The company did not track the data for the same period according to I9, and the total return on investment was -1.6 pct to 3.3% year over year.
Profit forecast and investment advice: EPS is expected to be 0.59/0.99/1.35 yuan/share for 24-26, respectively. The segmented valuation method estimates the company's reasonable value at HK$4.46 per share, maintaining the company's “buy” rating.
Risk warning: New order sales fall short of expectations, long-term interest rates have declined, and the scale of manpower has declined.