Incident: China Taibao announced its 2024 quarterly report. The company achieved insurance service revenue of 66.968 billion yuan, +2.4% year on year, achieved operating income of 95.428 billion yuan, +1.1% year on year; realized net profit to mother of 11.759 billion yuan, +1.1% year on year; weighted average return on net assets was 4.6%, -0.3 pct year on year.
Comment:
The performance on the debt side was steady, and net profit increased positively year over year. 1Q24's insurance service revenue was +2.4% year-on-year to 66.968 billion yuan, of which Taibao Life Insurance and Taibao Industrial Insurance were -5.1% and +5.9%, respectively, achieving net profit of 11.759 billion yuan, or +1.1% year-on-year.
Life insurance business: The value of the new business increased significantly year-on-year, and the “Changhang” Phase II project is expected to continue to consolidate NBV's performance. The premiums for the new 1Q24 life insurance policy were +0.4% year over year, and NBV increased sharply by 30.7% year over year to 5.191 billion yuan. New policy premiums for agents/banking insurance/group administration channels were +31.3%/-21.8%/-14%, respectively. We believe that the decline in new banking insurance policies was mainly affected by “integration of reporting and banking”. The company took the initiative to adjust the product structure, and the NBVM performance of the banking insurance channel is expected to improve.
1) Individual insurance channels: In the context of the “Changhang” phase II, the company's individual insurance channels continued to adhere to the “three modernization and five most” transformation, focusing on activity volume management. The 1Q24 insurance core business indicators rose steadily, the premium ratio for the new personal insurance policy was +31.3%, the team quality and business quality improved significantly, and the per capita production capacity and income continued to increase. U Manpower monthly per capita first-year premium rate was +33.7% to 83,000 yuan. 2) Banking insurance channels:
Continue to cultivate strategic cooperation channels and focus on improving team expertise. 1Q24 was affected by the “integration of reporting and banking”, and premiums fluctuated, but we believe that the banking insurance product structure is expected to improve, and NBVM and value contributions are expected to increase.
Industrial insurance business: The scale is reasonable and steady growth, and the quality of underwriting is further improved. 1Q24's industrial insurance premiums were +8.6% year over year to 62,491 billion yuan, and car insurance and non-car insurance were +2.2% and 13.8%, respectively; 1Q24 industrial insurance COR was 98%, -0.4 pct year on year. The company continues to deepen quality control. COR performance in the first quarter ushered in an excellent start. Vehicle insurance strengthened quality and cost control, promoted the transformation of new energy vehicle insurance management, non-vehicle insurance actively grasped agricultural insurance development opportunities, strengthened risk identification to achieve a balance between quality and quantity, and COR performance in the financial insurance business is expected to improve year over year.
Investment: The return on investment was basically the same year on year, and the scale of investment grew steadily. The net return on investment and return on total investment of 1Q24 was 0.8% and 1.3%, which remained flat year on year and decreased by 0.1 pct year on year, respectively. The net return on investment was still under pressure due to falling interest rates. The company continues to pay attention to undervaluation, high dividends, and long-term profitable equity asset allocation, and continues to do a good job in allocating various types of assets in a low interest rate environment.
Profit forecasting and investment ratings: The company will advance “Operation Changhang” from the outside to the inside, continue to consolidate and enhance the transformation results of the first phase of the project, and continue to deepen the “three modernization and five greatest” transformation of agent channels. It is expected that the quality of channel debt and operating efficiency will continue to improve, and the industrial insurance business will continue to achieve coordinated development in quantity and quality. We believe that scale growth and COR performance are expected to continue to lead the industry. Overall, the company's financial burden is highly resilient. With macroeconomic recovery and the introduction and implementation of a series of capital market support policies, both the asset and debt sides are expected to recover and drive a rebound in valuation. We expect the company's EPS to be 3.28/3.29/3.59 yuan in 2024-2026, maintaining a “buy” rating.
Risk factors: The recovery progress of the agent exhibition industry fell short of expectations; the decline in agents' production capacity led to the loss of personnel; and the capital market fluctuated greatly.