Life insurance quality and efficiency continued to improve, financial insurance COR and business structure improved, and maintained a “buy” rating
The company disclosed the 2024Q1 quarterly report. The 2024Q1 has a comparable caliber of NBV of 5.19 billion yuan, +30.7% year over year; the new standard earns net profit of 11.76 billion yuan, +1.1% year over year, and insurance service performance/investment service performance, respectively, +3.2%/-22.0% year over year, which is in line with our expectations. Considering the improvement in the quality and efficiency of the company's life insurance and continuous optimization of financial insurance COR and business structure, we forecast that 2024-2026 NBV will be +10.0%/+13.0%/+12.0%, corresponding to the EV growth rate +6.5%/+7.7%/+8.0%. We raised the 2024-2026 net profit forecast to 337.3/397.8/43.88 billion yuan (previously adjusted to 325.0/389.7/42.87 billion yuan), respectively, +23.7%/+18.0%/+10.3%. The corresponding EPS is 3.51/4.14/4.56 yuan respectively. The company's core life insurance team has stabilized in size, per capita income has increased, the average monthly performance rate continues to rise, and the financial insurance COR and business structure have improved. The current dividend rate (TTM) has reached 4.02%. The current stock price corresponding to 2024-2026 PEV is 0.4/0.4/0.3 times, respectively, maintaining a “buy” rating.
Improved value ratios led to a high increase in NBV, increased production capacity of high-performing teams, and the expected value contribution of banking insurance increased (1) Life insurance service revenue of 20.86 billion, -5.1% year over year, new life insurance premiums of 32.83 billion yuan, +0.4% year over year. We estimate the NBV margin to be 15.8%, +3.7% year over year. It is expected that the main reason is the reduction in product reservation interest rates, product payment and term structure improvements, and the integrated reporting and banking policy will drive cost reduction and efficiency. (2) Individual insurance channels: High-performing teams increase production capacity, and insurance policy quality continues to improve. The premium for new individual insurance policies was 16.12 billion, +31.3% year-on-year, accounting for 49.1% of the premiums of the new insurance policy, and +11.5pct compared to the previous year. The transformation of individual insurance channels showed obvious results. Of this, 10.59 billion new premiums were paid in a single instalment, accounting for 66%, or 3.1 pct. The high-performing team is stable, and production capacity income continues to increase. The monthly first-year premium for U workers was 830,000 yuan, +33.7%, and the first-year commission income per U employee was 9313 yuan, +14.1% year over year; policy quality continued to improve, and the 13-month/25-month policy continuation rate was 96.9%/92.9%, +1.0/+7.3 pct, respectively. (3) Banking insurance channels: The decline in the new order business is affected by the “integration of reporting and banking” policy, and value contributions are expected to continue to increase. The premium for the new policy was 8.72 billion yuan, -21.8% year-on-year, mainly affected by the “integration of reporting and banking” policy. The bank insurance renewal premium was 3.66 billion yuan, +220% over the same period last year. The increase in renewal rate is expected to increase the value contribution of banking insurance.
Financial insurance COR continues to improve, business structure optimization due to high growth in non-car insurance, focusing on investment-side improvement trends (1) 2024Q1 financial insurance service revenue of 45.56 billion yuan, COR reached 98.0%, -0.4 pct year on year, financial insurance premium income of 62.49 billion yuan, +8.6% year on year, car insurance/non-car insurance ratio +2.2%/+13.8%, and non-car insurance accounted for 57.6%, +2.6 pct year over year, accounting for more than car insurance business. The cost structure of the company's new energy vehicle insurance has been optimized, and the high increase in non-car insurance premium income is expected to benefit from the pace of policy insurance bidding at the beginning of the year, deepen the agricultural insurance business, and continue to increase in the breadth and depth of coverage. (2) The company's investment assets at the end of 2024Q1 were 2.34 trillion yuan, +4.2% compared to the beginning of the year. The annualized net return on investment/return on total investment was 3.2%/5.2%, respectively, flat year-on-year (-0.4 pct).
Risk warning: Long-term interest rates have declined more than expected; life insurance transformation is progressing slower than expected.