Incidents:
In 2023, China People's Insurance's revenue was 553.10 billion yuan, +4.4% year on year; net profit to mother was 22.77 billion yuan, -10.2% year on year; weighted average return on net assets 9.6%, -2.0pct year; comprehensive cost ratio 97.6%, year on year +0.9 pct; new business value of 6.49 billion yuan, +105.4% year on year; personal insurance included a value of 123.97 billion yuan, +5.6% compared to the beginning of the year; net return on investment 4.5%, -0.6 pct year on year; return on total investment 3.3%, -1.3 pct; return on total investment; The annual dividend was 0.16 yuan per share, -6.0% year over year, and the dividend rate was 30.3%, up 0.2 pct year over year.
Comment:
Property insurance: The business structure continued to be optimized, and COR improved month-on-month in the fourth quarter.
1) In 2023, the company achieved property insurance premium income of 515.81 billion yuan, +6.3% year-on-year. The increase was 1.2 pct narrower than in the previous three quarters, mainly affected by adjustments in non-car insurance business. Specifically, car insurance premium revenue was 285.63 billion yuan, +5.3% year-on-year. The increase was slightly narrower than in the previous three quarters by 0.1 pct. Among them, car insurance premiums accounted for +0.1 pct year on year, and the renewal rate for domestic cars was +1.1 pct year on year. The quality of car insurance business continued to improve. Non-car insurance premium revenue was 23.18 billion yuan, +7.4% year-on-year. The increase was 2.2 pct narrower than in the previous three quarters, mainly affected by the slowdown in the growth rate of health insurance, agricultural insurance and liability insurance. The year-on-year increase in 23 was 3.6%, 11.9%, and 1.3% to 922.3, 582.3, and 34.21 billion, respectively. The increase was 1.4 pct, 4.3 pct, and 1.5 pct, respectively, narrower than in the previous three quarters; however, the share of non-car insurance premiums increased by 0.5 pct to 44.6% year on year in '23, and the business structure continued to be optimized.
2) In 2023, due to factors such as the major disaster and the return to normal insurance rates after the epidemic, the company achieved underwriting profit of 11.07 billion yuan, or -22.1% year-on-year, but the decline was 16.9pct narrower than in the previous three quarters. Among them, the 23Q4 quarter increased 74.5% year-on-year to 3.69 billion yuan. The comprehensive cost ratio for 23 rose 0.9 pct year on year to 97.6%, with a payout rate of 70.4%, +0.9 pct year on year, and the cost rate was 27.2%, which was the same year on year. Looking at a single quarter, as the impact of natural disasters such as the typhoon abated in the third quarter, the 23Q4 comprehensive cost ratio recorded 96.7%, an improvement of 1.3 pct year over year, and an improvement of 3.9 pct compared to Q3, showing strong operational resilience.
Looking at insurance types, the comprehensive cost rate of the 23-year car insurance business was 96.9%, +2.4pct year on year, mainly affected by factors such as social transportation travel recovery and amortization of the cost of obtaining insurance policies under the new insurance contract guidelines. The payment/expense ratio increased by 2.1 pct/0.3 pct to 70.4%/26.5% year over year, respectively; the overall operating quality of the non-car insurance business improved, and the comprehensive cost ratio improved by 1.7 pct to 98.6% year on year. Among them, agricultural insurance/health insurance/liability insurance/corporate financial insurance COR decreased by 0.7 pct/2.8 pct/ year on year, respectively. 2.1pct/0.4pct to 94.0%/97.7%/107.0%/103.8%.
Personal insurance: New orders continue the high growth trend, and the improved business structure favors long-term value growth. 1) In 2023, the company's personal insurance business (Life Insurance + Human Health, same later) achieved new premiums of 82.54 billion yuan, +12.1% year-on-year. The increase was 3.0 pct narrower than the previous three quarters, mainly affected by the change in predetermined interest rates and strict supervision of “reporting and banking integration” of banking insurance channels. Among them, premiums for the first year of long-term insurance payments increased 36.7% year-on-year to 29.45 billion yuan, an increase of 7.3 pcts compared to the previous three quarters. At the same time, first-year premiums for long-term insurance accounted for 48.2% of first-year premiums for long-term insurance, up 8.4 pct from the previous three quarters, a further increase of 0.3 pct over the previous three quarters. Business structure improvements compounded bank insurance channel rate pressure drop. The value ratio of the new human insurance life insurance/human insurance health business increased 1.6 pct/+5.0 pct year over year, respectively. The “sharp rise in volume and price” drove the NBV of the company's personal insurance sector to a significant increase of 105.4% year-on-year to 6.49 billion yuan (comparable caliber).
2) Impact of adjustment of actuarial assumptions: At the end of 2023, the company lowered the traditional insurance return on investment/dividends and universal insurance return ratio/risk discount rate assumptions of 50 bp/25 bp/100 bps to 4.5%/4.75%/9%, respectively. After the retroactive adjustment, the included value/new business value of the company's personal insurance sector fell 3.8%/14.7% from before the adjustment, respectively.
Capital market fluctuations led to a decline in investment income, and the financial insurance sector supported a 105.1% year-on-year increase in Q4 earnings. In 2023, affected by long-term interest rate fluctuations and increased equity market fluctuations, the company's net return on investment/total return on investment fell 0.6 pct/1.3 pct to 4.5%/3.3%, respectively. Combined with a year-on-year increase in the comprehensive cost ratio, the company's net profit to mother fell 10.2% year on year to 22.77 billion yuan in 23 Q4, but increased 105.1% year on year to 2.27 billion yuan in the 23Q4 single quarter, mainly benefiting from a significant improvement in underwritten profit in the financial insurance sector in the fourth quarter.
Profit prediction and rating: As a comprehensive insurance and financial group, the company's service network is rooted in urban and rural areas, all over the country, and has a broad and deep customer base. Among them, the financial insurance market share in 23 years was 32.5%, maintaining the top position in the industry. In the future, the financial insurance business is expected to show a strong trend due to scale effects and maintain COR's leading edge; the personal insurance business is also expected to continue to improve the NBV growth trend as channel transformation results continue to show results and banking insurance channel fee control. Under the new accounting standards, we expect the company's 2024-2026 net profit to be 287/321/32.6 billion, respectively (not directly comparable to the previous forecast under the old accounting standards). Currently, the A/H stock price corresponds to the company's 24-year PEV of 0.74/0.33, maintaining the “buy” rating for A/H shares.
Risk warning: premium income falls short of expectations; capital markets fluctuate greatly; interest rates fall below expectations.