Incident: China Taibao released its 2023 annual report. In 2023, China Taibao achieved total operating revenue of 323.945 billion yuan, of which insurance service revenue was 266.167 billion yuan, an increase of 6.6% over the previous year. Net profit was 27.257 billion yuan, down 27.1% year on year; operating profit was 35.518 billion yuan, down 0.4% year on year.
Comment:
The investment side dragged down the decline in net profit. In 2023, China Taibao's net profit was 27.257 billion yuan, down 27.1% year on year, mainly due to pressure on investment income. The company implemented the new accounting standards and the overall decline in the stock market led to a decrease in profit and loss from securities trading and profit and loss from changes in fair value. The total return on investment was 2.6%, down 1.5 percentage points from the previous year. Total investment income was $52.237 billion, down 28.3% year-on-year, and was the main drag on net profit.
Life insurance NBV achieved relatively rapid growth, and the quality of the agent team was optimized. In 2023, China's Taibao will further consolidate the “long-term aviation” transformation achievements and promote the “core” model from “model transformation” to “model molding”. (1) The value of the new business has achieved rapid growth, and the value of the new business has been rising steadily. The value of the new business was 10.962 billion yuan, up 19.1% year on year; the value ratio of new business was 13.3%, up 1.7 percentage points year on year. (2) Team quality continues to be optimized, and core manpower production capacity and revenue are steadily increasing. The monthly first-year premium per core employee was 43,503 yuan, an increase of 26.6%; the monthly first-year commission income per core employee was 6,051 yuan, an increase of 46.3% over the previous year. (3) Banking insurance channels continue to be consolidated. In 2023, the banking insurance channel achieved large-scale premiums of 38.069 billion yuan, an increase of 12.5% over the previous year. Of these, the new insurance premium payment was 9.024 billion yuan, an increase of 170.2% over the previous year, and the value of the new business increased by 115.6% over the previous year.
Industrial insurance premiums lead the way in growth, and payout rates have increased. (1) In 2023, Taibao Industrial Insurance achieved original insurance premium income of 190.614 billion yuan, an increase of 11.4% over the previous year, leading the industry in growth rate. Mainly driven by non-car insurance, non-car insurance premium income increased 19.1% year-on-year, accounting for 45.6%, an increase of 2.9 percentage points. (2) The comprehensive underwriting cost ratio was 97.7%, up 0.8 percentage points from the previous year. Among them, the comprehensive insurance compensation rate was 69.1%, up 1.1 percentage points from the previous year. Due to the resumption of economic activity and the increase in residents' travel, the comprehensive underwriting compensation rate increased compared to last year; the comprehensive underwriting cost ratio was 28.6%, down 0.3 percentage points from the previous year.
Investment advice: Maintain China's Taibao “buy” rating. The estimated intrinsic value per share of China Taibao in 2024 is 58.89 yuan, and the PEV corresponding to the current stock price is 0.46.
Risk warning: the risk that the loss of agents exceeds expectations, production capacity increases less than expected, and the development of banking insurance channels falls short of expectations; the risk that return on asset-side investment falls beyond expectations due to a rapid decline in long-term interest rates; the risk that the return on asset-side investment will fall beyond expectations; the risk that the continued tightening of regulatory policies will make it more difficult to sell new insurance policies.