Incident: The company disclosed 1Q24 results, which were in line with expectations. The company's net profit for 1Q24 was 8.96 billion yuan/yoy -23.5%; financial insurance COR 97.9%/yoy+2.2pct (based on China Financial Insurance 1Q23), slightly lower than expected; financial insurance profit of 5.871 billion yuan/yoy -40.2%; NBV (same assumption) yoy +81.6%, exceeding expectations.
The profit performance of various business segments is divided, and short-term profit pressure is mainly hampered by the financial insurance business. The financial insurance/life insurance/health insurance sector of the 1Q24 company achieved profits of 5.87 billion yuan/3.82 billion yuan/1.52 billion yuan, and YOY -40.2%/+28%/+48.7% respectively. The profit performance of various sub-sectors was divided. Among them, financial insurance profit declined significantly, which is expected to be mainly due to frequent disasters in 1Q24 and the high base for the same period in 1Q23. The net profit of 1Q24's financial insurance/life insurance/health insurance sector accounted for 48.7%/31.7%/12.6%, yoy-12.5pct/+13.1pct/ +6.2pct, respectively. It is expected that with the accelerated development and asset-side improvements of the personal insurance business in 24 years, the profit contribution structure is expected to be more balanced and diversified.
Financial insurance: COR was under pressure due to frequent disasters, and the premium growth rate picked up marginally in March. ① COR side: 1Q24 financial insurance business COR 97.9%. Based on the 1Q23 COR disclosed by China Financial Insurance, the year-on-year increase was 2.2 pct. It is expected that compensation will increase dramatically due mainly to frequent disasters such as winter rain in 1Q24. ② On the premium side: 1Q24 financial insurance premium income was 174 billion yuan/yoy +3.8%, including car insurance premiums of 69.2 billion yuan/yoy +1.9%, and non-car insurance premiums of 104.7 billion yuan/yoy +5%; among them, the overall monthly growth rate of auto insurance/car insurance/non-car insurance premiums in March was +7.8%/+3.1%/+10.4%, respectively. It is expected that the premium growth rate will gradually accelerate.
Personal insurance: NBV and term premiums have maintained rapid growth, and the premium structure has been optimized. The NBV of 1Q24 Life Insurance surged 81.6% year on year. It is expected to continue to grow rapidly under a high base. It is expected to benefit mainly from product structure optimization, integration of reporting and banking promotion, etc., as well as rapid growth in installment premiums. At the same time, People's Insurance Health's first-year premium payment is 2.26 billion yuan/yoy +48.1%, and the value growth rate is also expected to be higher than the premium growth rate.
The personal insurance premium structure is also being continuously optimized. The 1Q24 human insurance life insurance/health insurance accounts for 49% and 11.2%, respectively, yoy+8.1 pct/+3.0 pct.
Investment advice: Maintain the company's “Highly Recommended” rating. The company's life insurance business continued to grow rapidly in 24, and the risk of financial insurance catastrophes increased, but it is expected to remain stable with contributions such as corporate risk reduction. At the same time, 2Q-4Q on the investment side is expected to gradually improve as the market recovers. Net profit for 24-26 is estimated at 262, 295, and 32.6 billion yuan, with year-on-year growth rates of +15%, +13%, and +10%; 24-26 NBV of 77, 84, 9.2 billion yuan, +18%, +10%, and +9% year-on-year respectively; COR 98%, 97.9%, and 97.8% for 24-26. The current closing price corresponds to 24E-26E dynamic P/B, 0.91 times, 0.83 times, and 0.76 times, respectively.
Risk warning: 1) Interest rates continue to decline; 2) frequent natural disasters; 3) equity market fluctuations.