财险：境内业务盈利能力待改善，境外业务表现较好。太平财险整体规模较小，2023 年利润贡献不足5%。具体来看，境内财险业务受车险综改、费用竞争加剧等因素影响增速放缓，2019-2023年保费复合增速仅2%，市占率小幅下滑0.2pct 至1.9%，且承保盈利能力受制于规模效应整体偏弱，有待改善。境外财险业务以港澳地区为主，盈利能力显著优于境内业务，整体承保盈利延续。Investment logic
There is sufficient flexibility on the negative side of China Taiping. Under the policy of combining residents' strong desire to save and reporting, the 2024NBV is expected to grow by about 30%, which is expected to be faster than other insurance companies. Furthermore, the company's 23-year performance conference indicated that the historical risks on the asset side have basically been cleared, taken lightly, and profits can be expected to increase rapidly.
Life insurance: Strong strategic stability, and the three channels, customers, and products all have differentiated competitive advantages. The core management has been in office for a long time and has been promoted internally to support the continuity and stability of the company's strategy. During the period of deep industry adjustment, the overall company adopted a strategy and did not carry out drastic reforms. The compound growth rate of -13% in 2018-2022 was excellent. Listed companies were China Life Insurance -8%, People's Insurance Life -17%, Ping An -21%, Taibao -24%, and Xinhua -33%, respectively. ① Channel side: Individual insurance insists on human development as the main driving factor for the company's growth, and attaches great importance to organizational construction. ② Client: In 2001, a forward-looking “three high” strategy was proposed to enhance middle and high-end customer service capabilities and seize the middle and high-end market share. ③ Product side: Since 2006, the company has raised renewal premium management to an important level. The 13/25 monthly continuation rate of banks in 2023 was higher than 90%, which is significantly superior to listed peers, providing support for the operation of differentiated monthly payment products.
Financial insurance: The profitability of domestic business needs to be improved, and overseas business performance is good. The overall scale of Taiping Financial Insurance is small, contributing less than 5% to profits in 2023. Specifically, the domestic financial insurance business slowed down due to factors such as comprehensive car insurance reform and increased cost competition. The compound premium growth rate in 2019-2023 was only 2%, the market share fell slightly by 0.2 pct to 1.9%, and underwriting profitability was constrained by the overall weak scale effect and needed to be improved. Overseas financial insurance business is mainly in Hong Kong and Macau. Profitability is significantly superior to domestic business, and overall underwriting profits continue.
Asset allocation: Beta elasticity is significantly higher than that of peers. The company continued to increase the allocation of long-term interest rate bonds. The 2023 bond allocation ratio was as high as 68.7%, which is conducive to providing support for subsequent net return on investment; at the same time, the 2023 allocation ratio of the company's equity assets (stocks and funds) was 14.5%, which is 2-3 pct higher than that of peers. Assuming that the equity market rises 5% (debt side absorbs 50%), contributing 58% to 2024 profit growth, and beta elasticity is higher than that of peers. The company's net return on investment and return on total investment in 2023 were 3.6% and 2.7%, respectively, with sufficient flexibility under a low base.
Profit forecasts, valuations, and ratings
We forecast that in 2024/2025/2026, the company will achieve a new business value of HK$10/11.9/13.1 billion, +33%/+19%/+10% YoY, and net profit to mother of HK$8.6/9.7/11.2 billion, and +39%/+13%/+16% YoY. The company has sufficient flexibility on both sides of the asset balance. It was given a target PEV of 0.23X in 2024, corresponding to a target price of HK$14.17. It was covered for the first time, and a “buy” rating was given.
Currently, the company contains significant discounts in value. The PEV in 2024 is only 0.13X, and the return on investment implied by the valuation is -0.1%. The characteristics of undervaluation and high elasticity stand out.
Risk warning
Long-term interest rates declined beyond expectations; regulatory policies became stricter; equity markets fluctuated.
