Key investment points: Investment performance is under pressure dragging down profits, and performance is in line with expectations. In 2023, the company achieved net profit of 27.257 billion yuan, yoy -27.1%. The profit decline was 2.7 pct higher than 9M23; 23Q4 net profit yoy -39.3% to 4.11 billion yuan. The company simultaneously reduced the actuarial assumption of return on long-term insurance investment and risk discount rate by 0.5 pct/2 pct to 4.5%/9.0%, which affected EvYoY +1.9% to $529.493 billion (negative contribution of changes in evaluation methods, assumptions and models).
The company plans to pay a dividend of 1.02 yuan/share in '23, the same as the previous year; as of April 10, the dividend rate for A/H shares was 4.5%/7.6%.
Volume and price have risen sharply, and NBV is growing steadily. Under the original hypothesis/new hypothesis, in 2023, the company achieved NBV of 120.39/10.962 billion yuan, yoy +30.8%/19.1%, assuming that adjustments caused NBV -8.9%; new premium yoy +3.7%, and NBVM yoy+1.7pct to 13.3%. Under the original assumption, 23Q4 NBV yoy +3.3% reached 17.1 billion yuan, achieving six consecutive quarters of positive growth. 1) The core indicators of individual insurance channels showed steady performance: NBV/new insurance business yoy +8.8% (new hypothetical caliber)/+14.2% in 23 years; the average monthly team size was -4.1% to 210,000 people at the end of June 23, the decline was 17.4 pcts narrower than the previous period; the average monthly performance rate of marketers yoy+4.5 pct to 67.9%, and the average monthly core manpower per capita FYP per month was +26.6%/+46.3% to 43,500 yuan/6051 yuan. 2) Banking insurance channel performance increased significantly: NBV/new insurance business YoY +115.6% (new hypothetical caliber)/+3.6% to 18.54/33.291 billion yuan. 3) Significant improvement in policy quality: the 13/25-month policy continuation rate yoy+7.7pct/+10.6pct reached 95.7%/84.0%, and operating deviations contributed 2,850 million yuan.
The 23Q4 underwriting profit is impressive, helping to improve COR throughout the year. Taibao Financial Insurance's 2023 premium/insurance service revenue yoy +11.8%; the comprehensive cost ratio was 97.7%, yoy+0.8pct/qoq-1.0pct, underwriting profit yoy -15.6% to 4.14 billion yuan; 23Q4 underwriting profit reached 2.33 billion yuan, and COR was 93.8%, showing impressive performance. 1) Auto insurance: 23-year premium/insurance service revenue yoy +5.6%/+6.2%, COR yoy +1.1pct to 97.6%, and underwriting profit of 2.410 billion yuan. 2) Non-car insurance: 23-year premium/insurance service revenue yoy +19.3%/+20.4%; annual COR was 97.7%, the year-on-year COR was flat, and underwriting profit was +20.4% to 1.73 billion yuan; among them, the COR for liability insurance/agricultural insurance/health insurance/corporate financial insurance was 100.6%/98.8%/99.2%/97.2%, respectively, contributing to underwritten profit of 1.09/1.94/0.72/206 million yuan respectively.
Investment performance is under pressure. The company's total/net/comprehensive return on investment in '23 was 2.6%/4.0%/2.7%, yoy-1.5pct/-0.3pct/+0.4pct, respectively. Compared with the beginning of the year, various types of investment assets at the end of the period accounted for 74.5% of credit-based financial assets (yoy5.4pct), 14.5% of equity financial assets (yoy-0.4pct), 7.4% of term deposits (yoy-3.1pct), 1.5% of cash and cash equivalents (yoy-1.2pct), long-term equity investment 1.0% (yoy-0.2pct), and 0.5% (yoy-0.1pct) of investment real estate.
Investment analysis: Maintain a “buy” rating and adjust profit forecasts to the new accounting standards. The company's personal insurance business transformation process is superior to that of peers, and the second phase of the “Operation Changhang” project is expected to further consolidate the results of the reform. Under the new accounting standards, net profit for 24-26 is estimated to be 343.51/391.48/48,845 billion yuan, yoy +26.0%/+14.0%/+24.8%, respectively. The 24-26E PEV corresponding to the latest closing price is 0.39/0.36/0.33 times, maintaining the “buy” rating.
Risk warning: long-term interest rate decline, equity market fluctuations, real estate risk exposure, reforms falling short of expectations.