Incidents:
In 2023, China Financial Insurance's original insurance premium income was 515.81 billion yuan, +6.3% year on year; insurance service revenue was 457.20 billion yuan, +7.7% year on year; net profit to mother was 24.59 billion yuan, -15.7% year on year; comprehensive underwriting cost ratio was 97.8%, year on year +1.2pct; total return on investment 3.5%, -0.3 pct year on year; dividend ratio of 0.49 yuan, +2.3% year on year; dividend ratio of 44.2%, year on year +4.4pct (calculated based on net profit to mother in the disclosure period).
Comment:
Revenue from insurance services has increased steadily, and the business structure continues to be optimized. In 2023, the company achieved insurance service revenue of 457.20 billion yuan, +7.7% year-on-year. The growth rate was 0.9 pct narrower than in the previous three quarters. Among them, 23Q1/Q2/Q3/Q4 were +9.5%/+7.3%/+5.1% year-on-year, respectively. The slowdown in growth in the fourth quarter was mainly affected by adjustments in the non-vehicle business.
Specifically: 1) Vehicle insurance service revenue in '23 was 282.12 billion yuan, +5.3% year-on-year, with a slight increase of 0.1 pct compared to the previous three quarters, with a year-on-year increase of 0.1 pct to 73.2%, the renewal rate for family cars increased 1.1 pct to 77.8% year on year, and the car insurance structure continued to be optimized; 2) Revenue from non-car insurance services in '23 was 175.09 billion yuan, +11.9% year-on-year. The increase was 2.3 pct narrower than the previous three quarters, mainly affected by the slowdown in the growth rate of health insurance, agricultural insurance and liability insurance; however, judging from the share ratio, it was affected by the slowdown in the growth rate of health insurance, agricultural insurance and liability insurance;, The share of non-car insurance service revenue increased by 1.4 pct to 38.3% year on year, and the business structure was further optimized.
The comprehensive cost ratio increased by 1.2 pct to 97.8% year on year, but the profitability of the non-auto insurance business increased significantly. In 2023, due to factors such as the disaster and the return to normal insurance rates after the pandemic, the company achieved underwriting profit of 10.19 billion yuan, -29.1% year-on-year, and the comprehensive cost ratio increased 1.2 pct to 97.8% year over year. Among them, the comprehensive payment/expense ratio was 70.6%/27.2%, respectively, and remained flat at +1.2 pct/y, respectively.
Looking at insurance types, 1) The comprehensive cost rate of the car insurance business in '23 was 96.9%, +2.4pct year on year. It was 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 on year, but car insurance COR decreased 0.5 pct month-on-month, improving; 2) The overall quality and efficiency of the non-car insurance business improved, and the comprehensive cost ratio improved by 1.1 pct to 99.1% year on year, achieving underwriting profits. Among them, Yijian The comprehensive cost ratio of insurance/liability insurance/corporate financial insurance decreased by 2.8 pct/2.1pct/0.4 pct to 97.7%/107.0%/103.8% year on year, and agricultural insurance COR increased 1.4 pct to 95.8% year over year, mainly affected by major disasters such as typhoons and torrential rains, which led to an increase of 2.2 pct to 80.3% year over year.
The decline in investment has put pressure on profits, but the dividend ratio has been rising steadily. In 2023, due to long-term interest rate fluctuations and increased equity market fluctuations, the company's total investment income fell 1.6% year on year to 20.81 billion yuan, the growth rate fell 5.3 pcts from the first half of the year, the total return on investment fell 0.3 pct to 3.5% year on year, compounded by a year-on-year increase in the comprehensive cost ratio on the underwriting side. The net profit of the company fell 15.7% year on year to 24.59 billion yuan in 23. The growth rate decreased by 21.1 pcts from the first half of the year. However, against the backdrop of a decline in net profit, the company's cash dividend increased steadily. The dividend was 0.49 yuan per share in '23, +2.3% year over year, and the dividend ratio reached 44.2%, +4.4 pct year on year (calculated based on net profit to mother for the disclosed period).
Profit prediction and rating: As a leader in the financial insurance industry, the company has continuously strengthened high-risk business management and improved its actuarial pricing capabilities and refined management level through “price and fee linkage”. The overall strength is strong. The company's market share in the financial insurance industry was 32.5% in '23, ranking first in the industry. In the future, as the company further optimizes its business model and further promotes quality improvement, cost reduction and efficiency, it is expected to maintain the leading level of COR for 24 years, and the future will show a strong trend due to scale effects. Under the new accounting standards, we expect the company's 2024-2026 net profit to be 291/323/35.9 billion yuan, respectively (not directly comparable to the previous forecast under the old accounting standards). The current stock price corresponds to the company's 2024-2026 PB of 0.86/0.82/0.77, respectively, maintaining a “buy” rating.
Risk warning: Economic recovery fell short of expectations; capital markets fluctuated sharply; interest rates declined beyond expectations.