Affected by the disaster in 2023, underwriting profits were under pressure: the company achieved original premium income of 515.8 billion yuan in 2023, an increase of 6.3% over the previous year, achieved insurance service revenue of 457.2 billion yuan, an increase of 7.7% over the previous year, and underwriting profit affected by the disaster fell to 24.6 billion yuan, a decrease of 15.7% year on year. The company plans to pay a dividend of $0.489 per share, increasing the dividend ratio to 44%.
The comprehensive underwriting cost ratio exceeded expectations and completion guidelines: Although the company was affected by typhoons such as Du Sului and Anemone in the third quarter of 2023, the company's comprehensive underwriting cost rate remained at 97.8% throughout the year. Among them, the comprehensive cost rate for car insurance was 96.9% and the comprehensive cost ratio for non-car insurance was 99.1%, all exceeding the annual guidelines, highlighting the company's cost advantage as an industry leader. In terms of car insurance, the company has an absolute competitive advantage as an industry leader, with underwriting profits accounting for 80% of the market share in 2023. The number of family car insurances increased by 6.9% year-on-year, and the car insurance renewal rate increased to 77.8%. In the development of the NEV business, market share and comprehensive cost ratio also remain industry-leading. In terms of non-car insurance, while maintaining a steady increase in premiums in 2023, the company achieved remarkable results in reducing costs and increasing efficiency, thereby reversing losses. The company's investment in risk reduction is also beginning to bear fruit. In 2023, a total loss of 849 million yuan was reduced through risk reduction, and there is huge room for future development in terms of mitigation. In 2024, the company will maintain the target of a comprehensive cost ratio of 97% for car insurance and a comprehensive cost ratio of 100% for non-car insurance for the whole year.
Stable performance on the investment side: On the investment side, the company's overall capital strength is strong, and the net reserve for outstanding claims increased by 2.6% year-on-year, bringing sufficient financial support to the company's investment side. The size of the company's investment assets grew steadily in 2023, and the investment portfolio remained stable. Under the new guidelines, the company's total investment assets increased 4.3% year over year. Under the circumstances of declining overall interest rates and fluctuations in the investment environment, it can still achieve a total investment income of 20.8 billion yuan, with a total return on investment of 3.5%. The company's 2023 investment portfolio is still dominated by fixed income products, reducing time deposits and increasing investment in treasury bonds, government bonds, long-term debt investment plans, and other types of fixed income. In the future, as the capital market recovers, the value of the company's equity investment is also expected to gradually be released.
The target price is HK$14.6, maintaining the purchase rating: We believe that the impact of natural disasters and changes in standards on the investment side will only have an impact on the company's short-term performance, and the long-term underwriting advantage will not change. As a financial insurance leader, the company's cost advantage will continue to be reflected in the future. As the only pure financial insurance target for Hong Kong stocks, the company's profit model is highly sustainable, fully considers shareholders' returns, and maintains stable dividends. The company's performance and ROE are expected to maintain steady growth, and it is one of the few high-quality targets in the market. We expect the company's insurance service revenue in 2024-2026 to be 4878/5203/555.6 billion yuan, respectively, and net profit to mother will be 286/313/33.8 billion yuan, respectively, +16/+10/ +8% year-on-year. We decided to give the company a target price of HK$14.6, which is 1.2 times PB. The target price has room to increase by 43.9% from the current price, giving it a buy rating.
Risk factors: Industry premiums have declined due to policies, and the decline in car ownership has led to car insurance premium income