[Event] Sunshine Insurance announced 2023 results: 1) Net profit to mother was 3.74 billion yuan, -16.8% year over year; of these, 23H2 net profit to mother was 850 million yuan, or -54.1% year over year. 2) Net assets returned to mother were RMB 60.4 billion, +4.1% compared to the beginning of the year. 3) Annualized ROE 6.0%, -2.3 pct 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 9.5%, respectively, which had an impact on EVs and NBVs. 1) At the end of 23, the Group's EV was 104.1 billion yuan, +2.7% year-on-year.
Under comparable dimensions, Group EVs and life insurance EVs were +6.4% and +8.5%, respectively. 2) Sunshine Life's NBV was 3.6 billion yuan, +19.2% year-on-year. Under comparable measures, NBV was +44.2%. Among them, insurance and banking insurance NBV were +19.1% and +52.4%, respectively.
Life insurance: The premium structure has been improved, and the human quality has been greatly improved. 1) Insurance service performance of 2.35 billion yuan, +129.3% year-on-year. 2) Premium: Sunshine Life's new premium of 33.2 billion yuan, -4.6% year-on-year; mid-term premiums of $181 billion, +22.7% year-on-year. New insurance channel premiums of 4.87 billion yuan, +37.2% year-on-year; mid-term premiums were +46.5% year-on-year. New bank insurance channel premiums of 25.4 billion yuan, -10.4% year-on-year; mid-term premiums were +17.5% year-on-year. 3) Business structure: Life insurance/accident insurance/health insurance premiums were +11.9%/-19.7%/-2.7%, respectively. We anticipate that the sharp increase in life insurance premiums is mainly due to the popularity of increased lifetime products. 4) Manpower: The average number of agents per month is 53,432, -15.5% compared to the beginning of the year and -3.5% compared to the middle of the year; we believe that the decline in agents has been effectively mitigated, and it is expected that the number of agents will resume growth in 2024. The per capita production capacity exceeded 20,000 yuan, +44.4% year on year; the elite team had 1,735 people, +21.6% year over year; of these, the number of people who met MDRT standards was +84.7% year over year. We believe that the sharp increase in per capita production capacity and elite manpower proves that the company's manpower quality has improved significantly, and it is expected that the high-quality agency team may drive NBV growth in the future. 5) Banking Insurance:
The share of value-based businesses increased markedly, with an average network production capacity of 87,000 yuan, +32.6% over the same period last year. We continue to be optimistic about the company's advantages in the banking insurance channel.
Financial insurance: Remarkable fee control results have led to continuous optimization of the comprehensive cost ratio of underwriting. 1) Sunshine Financial Insurance's comprehensive cost ratio was 98.7%, -0.7pct year-on-year. Among them, the comprehensive underwriting cost rate was 33.7%, -2.0pct year on year; the comprehensive underwriting payout rate was 65.0%, +1.3pct year over year. 2) Sunshine Financial Insurance's original premium income was 44.2 billion yuan, +9.6% year-on-year, of which car insurance/non-car insurance were +6.1%/+14.9%, respectively. The ratio of car insurance/non-car insurance was 59.1%/40.9%, respectively.
Investment: Increase fixed income and reduce dividends. 1) The Group's investment assets were HK$479.8 billion, +15.5% compared to the beginning of the year.
The share of fixed income and equity assets was 69.2%/21.1%, respectively, +2.1pct/-1.2pct year-on-year, respectively. 2) Annual net investment income of $17.7 billion, +15.9% YoY; total investment income of HK$14.6 billion, -23.4% YoY.
Net return on investment 4.0%, +0.1pct year on year; total return on investment 3.3%, -1.6 pct year on year; comprehensive return on investment 4.8%, +2.0pct year on year.
Maintain an “better than the market” rating. We believe that as the company's life insurance continues to deepen its value development; financial insurance continuously optimizes its product structure, the company is expected to break through market competition in the future. We value them using a segmented valuation method. We give Sunshine Life 0.3-0.35 times 2024E PEV; Sunshine Financial Insurance and Sunshine Credit Insurance 0.6-0.65 times 2023E PB; other businesses 1 times 2024E PB. Corresponds to a reasonable value range of 3.9 to 4.43 yuan. Based on RMB 1 = HK$1.1041, corresponding to a reasonable value range of HK$4.40-4.89. Currently, the company's stock price corresponds to 2024E 0.48x PB and 0.27x PEV, giving it an investment rating of “superior to the market”.
Risk warning: 1) New premium growth falls short of expectations; 2. Long-term interest rates continue to trend downward.