[Incident] China Taiping announced 2023 results: 1) Net profit to mother of HK$6.19 billion, +44.1% year-on-year; of these, 23H2 net profit to mother was HK$970 million, turning a loss into a profit during the same period. Life insurance/domestic financial insurance/overseas financial insurance/reinsurance/asset management were +2.3%/-71.0%/+87.1%/-21.8%/respectively. 2) Net assets of HK$79 billion, -5.9% compared to the beginning of the year. 3) ROE 8.5%, +1.2pct year over year.
The 2023 annual report lowered the long-term return on investment assumptions and risk discount rate assumptions from 5% and 11% to 4.5% and 9%, respectively, which had an impact on EVs and NBVs. 1) The Group's EV was HK$23 billion at the end of the year, +2.5% year-on-year.
Under comparable standards, Group EVs and life insurance EVs were +9.1% and +8.2%, respectively. 2) Taiping Life NBV was HK$7.51 billion, +0.7% YoY. Under comparable standards, NBV was +26.0% year-on-year. Among them, insurance and banking insurance NBV were +7.2% and +217%, respectively. NBV margin is 15.9%, of which the NBV margin for personal insurance/banking insurance is 22.2%/5.9%, respectively. According to the 2022 assumption, the NBV margin was 19.9%, +1.2pct year on year; the NBV margin for individual insurance/banking insurance was 25.2%/11.9%, respectively, +0.3 pct/+6.3 pct year on year, respectively.
Life insurance: The banking insurance channel is expected to become a new growth point. 1) Premium: Taiping Life's new policy premium was +24.3% year-on-year.
Individual long-term insurance paid HK$20 billion in the first year, +13.3% over the same period. Bank Insurance long-term insurance paid HK$16.9 billion in the first year, +45.5% year-on-year; banking insurance channel premiums accounted for +0.9 pct year over year. In terms of product structure, traditional life insurance was +39.7%, accounting for +9.5pct year over year. We believe this is a 23-year increase in the share of traditional life insurance, which has led to an increase in the share of traditional life insurance. 2) Manpower: The number of agents is 230,000, -40.0% compared to the beginning of the year and -26.7% compared to the middle of the year. The monthly average monthly premium per person was +5.3% compared to the beginning of the year to 14,410 yuan. We believe that the reduction in the number of agents is related to the company's initiative to clean up and promote high-quality development of the business team. We expect the company's manpower to rise steadily in 24 years. 3) Taiping Life resolutely implemented the “integration of reporting and banking” of banking insurance. In January-January '24, after adjusting economic assumptions, NBV was over 400% year over year, and NBV margin was +20pct year over year. We believe that the 2024 banking insurance channel will be a successful new value driver within the company.
Financial insurance: All financial insurance divisions have maintained underwriting profits, and the share of domestic non-water insurance has increased dramatically. 1) Taiping Financial Insurance's comprehensive cost ratio was 98.4%, +1.2pct year-on-year. 2) Taiping Financial Insurance's original premium income was HK$33.4 billion, +1.4% year over year, of which car insurance/water insurance/non-water insurance were -2.0%/+6.2%/+7.5%, respectively. 3) Vehicle insurance/water insurance/non-water insurance accounted for 61.6%/2.1%/36.3%, respectively. 4) The comprehensive underwriting cost ratio of Taiping Hong Kong/Taiping Macau in overseas financial insurance business was 93.3%/80.8%, respectively, -2.1pct/+9.2pct year-on-year, respectively.
Investment: Optimize the investment structure and increase the allocation of bonds. 1) Steady growth in investment scale: The Group's investment assets were HK$1349.5 billion, +14.9% compared to the beginning of the year. The share of fixed income and equity assets was 78.3%/16.3%, respectively, +2.7 pct/-1.5 pct year-on-year, respectively. 2) Total investment income increased steadily: annual net investment income of $44.9 billion, -0.1% year over year; total investment income of HK$33.6 billion, +138.8% year over year. Net return on investment 3.56%, -0.3pct year on year; total return on investment 2.66%, +1.45pct year on year; comprehensive return on investment 5.01%, +2.66pct year on year. We believe there are two reasons for the sharp increase in return on comprehensive investment: 1) high-dividend stocks performed better, and stock investment losses decreased; 2) domestic interest rates declined, and the fair price of OCI bonds rose.
The current stock price is only 0.1x the 2024E PEV. China Taiping will unswervingly follow the path of financial development with Chinese characteristics, and is actively forging ahead in transforming methods, restructuring, improving quality and increasing efficiency, and accelerating high-quality development. We are optimistic about the company's long-term development and resilience. We gave the company 0.14-0.15 times 2024E PEV, corresponding to a reasonable value range of HK$8.66-9.28, maintaining a “superior to market” rating.
Risk warning: 1) Long-term interest rates are trending downward; 2) New premium growth falls short of expectations.