[Incident] China Taibao announced its 2023 results: 1) Net profit for the whole year was 27.3 billion yuan, -27.1% year over year; Q4 net profit to mother was 4.11 billion yuan, or -39.3% year-on-year. Operating profit attributable to mother was 35.5 billion yuan, -0.4% YoY.
2) Net assets attributable to mother were $249.6 billion, +27.0% at the beginning of the year and +4.6% at the end of Q3. 3) ROE 11.4%, year-on-year -7.7pct. 4) The dividend per share was 1.02 yuan, the same as in '22. According to the net profit scale, the dividend rate was 36.0%, -3.9 pct year on year; according to the operating profit caliber, the dividend rate was 27.6%, +3.2 pct year on year. The current dividend rates for A and H shares are 4.5% and 8.1%, respectively.
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) At the end of 23, the Group and Life Insurance EV were $5295 and 402 billion yuan respectively, +1.9% and +1.0% year-on-year, respectively. 2) Taibao Life Insurance's NBV was 11 billion yuan, +19.1% year over year; the NBV for Individual Insurance and Banking Insurance was +8.8% and +115.6%, respectively. Under the comparable caliber of Taibao Life Insurance, NBV was +30.8% year-on-year. NBV margin is 13.3%, of which the NBV margin for personal insurance/banking insurance is 29.5%/5.6%, respectively.
Under comparable caliber, Taibao Life Insurance's NBV margin was 14.6%, +3.0pct year over year.
Life insurance: The quality of business has improved, and the value rate of new businesses has picked up. 1) Premium: Taibao Life Insurance's new insurance premiums were +3.7% year-on-year; the individual insurance/banking insurance premiums were +14.2%/+3.6%, respectively. The new personal insurance period paid 26.2 billion yuan, +32.3% year-on-year; the new banking insurance period paid 9.02 billion yuan, +170.2% year-on-year. In terms of product structure, traditional insurance was +33.3% year over year, accounting for +14.2pct year over year. We believe that the popularity of whole life insurance such as “Long Together” in 23 years led to an increase in the share of traditional life insurance. 2) Manpower: The average monthly manpower of agents is 210,000, -24.7% compared to the beginning of the year and -4.1% compared to the middle of the year. The monthly first-year premium for core workers was 43,503 yuan per person, +26.6% over the same period last year. The monthly commission income of core workers was 6051 yuan per capita in the first year, +46.3% over the same period last year. We believe that although the number of agents is still shrinking, the production capacity of core manpower has increased dramatically. We are optimistic that corporate insurance will continue to deepen the “three modernizations and five greatest” career marketing transformation. In the future, core manpower will be an important source of contribution to new business value.
Industrial insurance: At the same time as premiums are growing at a high rate, the comprehensive cost ratio is better than that of listed peers. 1) Taibao Insurance's comprehensive underwriting cost ratio was 97.7%, +0.8pct compared to the previous year. Among them, the comprehensive insurance cost rate and compensation rate were 28.6% and 69.1%, respectively, -0.3 pct and +1.1 pct year-on-year, respectively. 2) Taibao Insurance's annual underwriting profit was 4.14 billion yuan, -15.6% year-on-year.
3) Taibao Insurance's original premium income was 188.3 billion yuan, +11.4% year-on-year. Among them, car insurance and non-car insurance were +5.6% and +19.3%, respectively. The proportion of car insurance and non-car insurance was 55.0% and 45.0% respectively, which was relatively stable for 22 years.
Investment: Bonds received a significant increase in allocations. 1) The Group's investment assets were 2250.1 billion yuan, +15.0% compared to the beginning of the year.
Bonds, stocks, equity funds, and fixed deposits accounted for 51.7%, 8.4%, 2.3%, and 7.3%, respectively, +8.7pct, -0.6pct, -0.2pct, and -3.1pct, respectively. 2) Net investment income for the year was 77.7 billion yuan, +2.3% year on year; total investment income was 52.2 billion yuan, -28.3% year over year. Net return on investment 4.0%, -0.3 pct year on year; total return on investment 2.6%, -1.5 pct year on year; comprehensive return on investment 2.7%, +0.4 pct year on year.
The valuation is still low, and the rating is “superior to the market”. We are optimistic that the company's life insurance sector will advance the “long-term aviation” transformation in depth, and that multiple channels will help value continue to grow in a balanced manner. As of March 29, 2024, the company's stock price corresponds to 2024EPEV 0.38x. We gave the company a rating of 0.55-0.6 times the 2024 PEV, a reasonable value range of 33.33-36.36 yuan, and a “superior to the market” rating.
Risk warning: 1) Long-term interest rates are trending downward, 2) the stock market fluctuates greatly, and 3) New premium growth falls short of expectations.