Core views:
China Insurance International, the predecessor of China Taiping, was listed on the Hong Kong Stock Exchange in 2000 and was the first overseas listed insurance company in China. Looking back at the company's strategy and business situation, the glorious period of the two three-year strategies, the trough period of industry shocks and frequent management changes, and the reform period. Currently, the company's valuation is low, there is room for improvement compared to peers, and the effects of the reform continue to be unleashed. We think the company can be expected to be very successful.
Life insurance business: Continued deepening of reforms promotes leading performance in the industry. The company established a life insurance department in 1937, suspended domestic business in 1956, and resumed domestic business in 2001. The premium CAGR for 2009-2023 was 16.7%, and the market share increased from 2.8% to 4.8%, and the ranking rose to fifth place.
In 11-17, two three-year strategies drove the NBV compound growth rate of 35%, far higher than that of peers (China Life Insurance 20%, Ping An 26%, Taibao 26%); while 18 years later, the growth rate declined due to declining industry sentiment and frequent changes in company management. The compound growth rate of NBV in 17-20 was -14%, lower than the main peers (China Life Insurance -1%, Ping An -10%, Taibao -13%); after the pandemic, the company promoted the NBV growth rate superior to peers through differentiated agent strategies and clear reforms. The 20-23 compound growth rate was higher than -5%. Peers (China Life Insurance -14%, Ping An -14%, Taibao -15%). Looking forward to the future, on the one hand, team reform continues to deepen. Banking insurance channels provide comprehensive advantages such as professional teams, exhibition services, and medical and health care ecosystems. New life insurance policies and NBV are expected to continue to lead the industry.
Investment business: The company increased its long-term asset allocation, and the bond ratio increased to 68.7% in 2023, which is the highest level among listed insurers. The share+fund allocation ratio is 14.5%, which is slightly higher than that of major peers. The average return on the company's net investment in 11-23 was 4.3%, slightly lower than that of its peers. It is estimated that mainly cash and equivalents account for a relatively high share, while the average return on total investment for the same period was 4.7%.
Profit forecast and investment advice: Considering the continued recovery in the company's performance and low valuation level, we expect the company's EPS for 2024-2026 to be 1.75/2.02/2.39 HKD/share, respectively. The EV Act gave the company a reasonable valuation of 0.25XPEV for 24 H shares, corresponding to a reasonable value of HK$13.51 per share, covering the first time giving the company a “buy” rating for H shares.
Risk warning: Agents have declined on a large scale, product sales have fallen short of expectations, and catastrophic damage is frequent.