The quality and efficiency of life insurance improved significantly. Underwriting profit was corrected year on year. Companies maintaining the “buy” rating revealed that in 2023, the new/old hypothetical NBV was 109.6/12.04 billion yuan, respectively, +19.1%/+30.8% compared to 2022; net profit to mother under the new standard was 27.26 billion yuan, -27.1% year over year, and insured profit/investment profit, respectively, +2.8%/-60.8%. Fluctuations in the equity market dragged down net profit for the whole year. Considering the deepening transformation of the company's life insurance channels, the high increase in banking insurance channels and the improvement in the margin year over year, we forecast the 2024-2026E NBV to +10.0%/+13.0%/+12.0%, respectively, corresponding to the EV growth rate +7.1%/+8.2%/+7.8%. We raised the 2024-2025 net profit forecast to 325.0/38.97 billion yuan (previously 31.75/ 380.0 billion yuan), adding 2026E to 42.87 billion yuan, respectively Compared to the same period, +19.2%/+20%/+10.0%, the corresponding EPS was 3.38/4.05/4.46 yuan, respectively. The size of the company's life insurance core team stabilized, per capita income increased, the average monthly performance rate continued to rise, banking insurance value increased, the financial insurance sector grew steadily, and the cost structure was improved. The dividend ratio in 2023 reached 36%. The current stock price corresponding to 2024-2026 PEV was 0.4/0.4/0.3 times, respectively, maintaining a “buy” rating.

Margin and performance rates have improved markedly, the value of banking insurance continues to increase, and the debt side remains high. (1) At the end of 2023, the company adjusted the included value economy assumptions. The return on investment was 5% to 4.5%, and the risk discount rate was 11% to 9%. According to the 2023 economic assumptions (new caliber), Group/Life Insurance EVs were estimated at $5295/402 billion, respectively, +1.9%/+1.0% year-on-year. Based on the company's sensitivity analysis results, we estimate that the impact of the economic assumption adjustment on Group/Life Insurance EVs is -3.6%/-2.7%. (2) Production capacity has been effective under the transformation of individual insurance, and the value of banking insurance has increased. The new and old assumptions NBV were 109.6/12.04 billion yuan, respectively, and the NBV margin reached 13.3% compared to the same period in 2022, +1.7pct year over year, and personal insurance/banking NBV was +9%/+116% year over year; (3) Life insurance scale premiums of 252.8 billion yuan, +3.2% year over year, and new personal insurance payments reached 26.2 billion yuan, compared with +51.8%/+26.6% year-on-year, respectively. 4.5 pct to 67.9%; new insurance coverage of 9.20 billion yuan over the same period; (4) 13-month/25-month insurance policy continuation rates were +7.7/+10.6pct to 95.7%/84.0%, respectively. The marginal balance of life insurance contract services was 323.97 billion yuan, -0.8% compared to the beginning of the year, and the margin for new business contract services was 11.7 billion yuan, +39% over the same period last year.

The comprehensive cost ratio of financial insurance was superior to that of peers. Underwriting profit was corrected year on year, but the asset side dragged down net profit (1) financial insurance COR 97.7%, +0.7 pct year over year, and the cost ratio/compensation ratio was -0.3 pct/+1.1 pct, respectively. Revenue from financial insurance services was 177.13 billion yuan, +11.8% year over year, car insurance/non-car insurance 6.2%/+20.4% year over year, and non-car insurance accounted for 45.6%, an increase of 2.9 pct. Car insurance COR reached 97.6%, +1.1 pct year on year, new energy vehicle insurance +54.7% year on year; non-car insurance COR was 97.7%, the same as the same period. (2) The decline in the equity market and the high base (I9 position restated for the same period in 2022) put pressure on the investment side. The group's equity assets accounted for 14.5%, 2.6%/4.0% of total return on investment/net return on investment of -0.3 pct at the beginning of the year, -1.5 pct/-0.3 pct, respectively.

Risk warning: Long-term interest rates have declined more than expected; life insurance transformation is progressing slower than expected.