Incidents:
The company released its 2023 annual report, and the company achieved NBV of 36.86 billion for the whole year, +11.9% year-on-year. Under the old standards, the company achieved net profit of 21.11 billion yuan, or -34.2% year-on-year. Under the new standards, the company achieved net profit of 46.181 billion yuan, or -30.7% year-on-year.
Investment income pressure affects net profit performance
1) Under the old standards, the company achieved net profit of 21.11 billion yuan, or -34.2% year-on-year. Among them, Q1/Q2/Q3/Q4 were +18% /profit/loss/-99%/+364% year-on-year respectively. Under the new standards, the company achieved net profit of 46.181 billion yuan, or -30.7% year-on-year. Among them, Q1/Q2/Q3/Q4 were +78%/-63%/profit/loss/-5% year-on-year respectively. The company's net profit was under pressure, mainly due to a year-on-year decline in investment income.
2) The company plans to pay a dividend of 0.43 yuan per share for the whole year, -12% over the same period last year. The dividend ratio was 58% (calculated based on total dividends/net profit from the old standard), +14PCT compared to the previous year. Against the backdrop of declining net profit, the company drastically increased its dividend ratio, showing that the company attaches great importance to shareholder returns.
Both NBV and EV have achieved steady growth, and the company has strong debt-side resiliency1) Using the year-end actuarial assumptions (return on investment of 5%, risk discount rate of 10%), the company achieved NBV of 41.035 billion, +14.0% year over year. Using the year-end actuarial assumption (return on investment of 4.5% and risk discount rate of 8%), the company achieved NBV of 36.86 billion, or +11.9% year-on-year. Let's say the adjustment has an impact of -10.2% on the company's NBV.
2) The company achieved new premiums of $210.813 billion, +14.1% over the same period last year. Among them, the first-year premium payment was 112.573 billion, +16.7% year-on-year, and the company's business structure continued to improve. Judging from the value ratio, the company's personal insurance NBV margin was 29.9%, +2.5PCT compared to the same period. It is mainly due to the company actively optimizing the business structure.
The share of first-year premiums paid in the company's individual insurance sector in '23 was +1.8PCT to 18.3% year-on-year.
3) At the end of the year, the company's individual insurance workforce was 634,000, a decrease of 26,000 compared to 23Q3, and the decline in the company's individual insurance team narrowed. At the same time, the quality of the company's team continued to improve. The company's monthly first-year premiums per person increased by 28.6% year-on-year, mainly due to the company's continuous promotion of marketing model reform.
4) At the end of the year, the company's EV was 126.567 billion, +5.6% compared to the beginning of the year under the same caliber. It mainly included expected return of value and stable contribution to new business value.
Low interest rates and equity market shocks dragged the company's investment income to achieve net/total investment income of 1982/142 billion, +4.1%/-24.4% year-on-year, respectively. The annualized net/total return on investment was 3.77%/2.68%, respectively, -0.23PCT/-1.26PCT year-on-year, respectively.
Profit Forecasts, Valuations, and Ratings
As the capital market recovers, the company's investment income is expected to improve year on year, supporting net profit growth.
We expect the company's net profit to be 254/285/32.6 billion in 2024-2026, with corresponding growth rates of 20%/12%/14%, respectively. In view of the company's stronger stability on the debt side and greater flexibility on the asset side, we maintained a target price of 45 yuan and maintained a “buy” rating.
Risk warning: Economic recovery falls short of expectations, customer demand falls short of expectations, and interest rates are falling.