Incident: The company disclosed results for the first quarter of 2024, which were better than expected. The company achieved net profit of 11.8 billion yuan/yoy +1.1% in 1Q24 and a new business value of 5.191 billion yuan/yoy +30.7%, better than expected. Production insurance achieved COR 98%/yoy-0.4pct. The net return on investment on the asset side is 0.8% (unannualized), the same as the same period last year, with a total return on investment of 1.3% (unannualized) /yoy-0.1pct.
Net profit growth exceeded expectations, and NBV grew rapidly year over year. The company achieved net profit of 11.8 billion yuan/yoy +1.1% in 1Q24, better than expected; achieved a new insurance premium of 32.8 billion yuan/yoy +0.4%, and a new business value of 5.191 billion yuan/yoy +30.7%. It is estimated that NBVM 15.8% /yoy+3.7pct is mainly due to the increase in profitability due to the decline in the industry's predetermined interest rate, restructuring of products operated by multiple channels, and the reduction of integrated banking insurance channel reporting fees.
The per capita indicators for all agents have improved, and banking insurance channels are under pressure in the short term. 1Q24's agent channel achieved large-scale premiums of 84.9 billion yuan, including a new insurance premium of 161 billion yuan/yoy +31.3%, an instalment premium of 10.6 billion yuan/yoy +25.4%; U-manpower monthly first-year premiums of 83,000 yuan/yoy +33.7%, and first-year commission income of 9,313 yuan/yoy +14.1% per person per person per U manpower month, and continuous increase in production capacity and revenue.
Personal life insurance customers have a 13-month policy continuation rate of 96.9%/yoy+1.0pct, and a 25-month policy continuation rate of 92.9%/yoy+7.3pct. The 1Q24 banking insurance channel achieved current premiums of 12.4 billion yuan, of which 8.7 billion yuan/yoy -21.8% of the new insurance scale premiums were mainly affected by the integration of banking insurance channel reporting.
The non-auto insurance business is growing rapidly. 1Q24 Taibao Insurance achieved premium income of 62.5 billion yuan/yoy +8.6%.
Among them, car insurance premium income was 26.5 billion yuan/yoy +2.2%; non-car insurance premium income was 36 billion yuan/yoy +13.8%, mainly because the company grasped the development opportunities of the rural revitalization strategy and continued to promote expansion and product upgrades to enhance the breadth and depth of agricultural insurance coverage. 1Q24 Taibao Industrial Insurance achieved insurance service revenue of 45.6 billion yuan/yoy +5.9%. The comprehensive cost ratio is 98.0%/yoy-0.4pct. It is expected that the company will strengthen quality cost management and optimize both business costs and structure.
The scale of asset management continues to expand, and the return on investment remains stable. The company's assets under management reached 2.3 trillion yuan in '23, +4.2% compared to the end of the previous year. The net return on investment was 0.8% (unannualized), the same as the same period last year, and the total return on investment was 1.3% (unannualized) /yoy-0.1pct. In the future, the company will continue to allocate equity investment types with undervalued values, high dividends, and good long-term profit prospects, and the asset side is expected to improve as market expectations recover.
Investment advice: Maintain the company's “Highly Recommended” rating. Debt side: Changhang has helped the company's agent team continue to increase production capacity. The banking insurance channel value ratio is expected to continue to increase in the context of integrated reporting and banking, jointly promoting the steady growth in the value of the company's new business in 24 years; the car insurance business grew steadily, and non-car insurance continued to expand rapidly. Asset side: The decline in return on investment is mainly due to market fluctuations, and it is expected that it will continue to improve as the market recovers. The estimated net profit for 24-26 was 313, 351, and 38.4 billion yuan, with year-on-year growth rates of +14.9%, +12%, and +9.5%, respectively; NBV 125, 140, and 15.4 billion yuan in 24-26, +14.2%, +11.8%, and +9.9% year-on-year respectively. The current closing price corresponding to 24E-26E dynamic P/EV is 0.44 times, 0.43 times, and 0.42 times, respectively.
Risk warning: 1) Policy implementation falls short of expectations; 2) A sharp decline in the number of agents; 3) Sudden catastrophe; 4) equity market fluctuations and credit risk exposure.