Incidents:
The company released its 2023 annual report, and the company achieved NBV of 10.962 billion for the whole year, +19.1% year-on-year. Under the new standards, the company achieved net profit of 27.257 billion yuan, -27.1% year-on-year.
Net profit is under slight pressure, and dividends remain stable
1) Under the new standards, the company achieved net profit of 27.257 billion yuan, or -27.1% year-on-year. Among them, Q1/Q2/Q3/Q4 were +27%/-39%/-54%/-39% year-on-year respectively. The company's net profit was under pressure, mainly due to the year-on-year decline in investment income. The company's investment income fell 90.9% year on year to 7.053 billion in '23.
By business, Taibao Life Insurance and Taibao Industrial Insurance achieved net profit of 19.532 billion and 6.575 billion yuan respectively, or -33.7%/-19.7% year-on-year respectively.
2) Under the new standards, the company achieved operating profit of 35.518 billion yuan, or -0.4% year-on-year. Among them, Taibao Life Insurance achieved operating profit of 27.257 billion yuan, +0.4% over the same period last year. The company's operating profit remained steady.
3) The company plans to distribute a dividend of 1.02 yuan per share throughout the year, which is the same as the previous year. The dividend ratio is 36.0% (calculated based on total dividends/net profit attributable to mother under the new standard), -3.9PCT year over year (39.9% in '22, calculated based on total dividends/net profit attributable to mother under the old standard). The company's dividend level remains stable under the new guidelines.
NBV continues to grow, and debt-side resilience is strong
1) Using the actuarial assumption at the end of '22 (return on investment of 5%, risk discount rate of 11%), Taibao Life Insurance achieved NBV of 12.039 billion, +30.8% year-on-year (+17%/+55%/+52%/+3% in Q1/Q2/Q4, respectively), and NBV continued to grow. Using the year-end actuarial assumption (return on investment of 4.5% and risk discount rate of 9%), Taibao Life Insurance achieved NBV of 10.962 billion dollars. Assume that the adjustment will have an impact of -8.9% on Taibao Life Insurance's NBV.
2) Taibao Life Insurance achieved new insurance business revenue of 82,876 billion yuan, +2.4% over the same period last year. NBV margin was 13.3%, +1.7PCT year over year. The company's value ratio level has improved, mainly due to business structure optimization. The share of prepaid premiums in the company's agent channel new insurance business in '23 was +11PCT to 80.8% year-on-year.
3) The number of agents for Taibao Life Insurance at the end of the year was 199,000, a decrease of 17,000 compared to 23H1. In terms of agent production capacity, the company's core manpower monthly FYP/FYC was +26.6%/+46.3% year-on-year, respectively, and company agents showed a steady upward trend in quantity and quality.
4) At the end of the year, the company's EV was 529.493 billion, +1.9% compared to the beginning of the year, mainly including expected return on value and stable NBV contribution.
Industrial Insurance COR performed well and was superior to peers
Taibao Industrial Insurance achieved premium income of 18.342 billion yuan, +11.4% year over year, including car insurance +5.6% year over year and non-car insurance +19.3% year over year. Looking at COR, Taibao Insurance's overall COR was 97.7%, +0.8PCT year over year. Among them, the payment/expense ratio was 69.1%/28.6%, respectively, with a year-on-year change of +1.1 PCT/-0.3 PCT.
By type of insurance, car insurance COR was 97.6%, +1.1 PCT year on year; non-car insurance COR was 97.7%, the same as year on year. Taibao Insurance has strong profitability and is superior to its peers, mainly due to the gradual results of the company's “prevention and mitigation” integrated disaster response service model and risk reduction management system.
The company's overall investment income is under pressure, mainly due to changes in accounting standards and equity market shocks. The company achieved total/net investment income of 522/77.7 billion, -28.3%/+2.3% year-on-year, respectively. The annualized total/net/comprehensive return on investment was 2.6%/4.0%/2.7%, respectively, -1.5/-0.3/+0.4PCT year-on-year, respectively.
Profit Forecasts, Valuations, and Ratings
Considering the company's strong debt-side resilience and the recovery in the external market is expected to drive improvements in investment income, we expect the company's net profit to be 311/350/38.9 billion yuan in 2024-2026, respectively, with corresponding growth rates of 14%/13%/11%, respectively. As the company continues to promote life insurance transformation, NBV's performance is significantly superior to its peers. We are optimistic about the company's subsequent investment opportunities, maintain a target price of 40 yuan, and maintain a “buy” rating.
Risk warning: equity market fluctuations, declining interest rates, management changes.