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China People's Insurance Group released its 2024 semi-annual report. 2024H1 achieved insurance service revenue of 261.63 billion yuan, +6.0% year over year; net profit to mother was 23.4 billion yuan, +13.7% year over year. Among them, the COR for People's Insurance Insurance was 96.2%, +0.4 PCT; the NBV for Human Insurance Life Insurance was 3.94 billion yuan, +91.0% year over year; and the NBV for Human Insurance Health was 3.03 billion yuan, +159.0% year over year.

The COR of human insurance continues to improve, and underwriting profitability is at the leading level in the industry 1) 2024H1 Human Insurance achieved original insurance premium income of 311.996 billion yuan, +3.7% year over year (+4.5% for the industry), of which car insurance was +2.5% year over year, and non-car insurance was +4.6% year over year. The premium growth rate for human insurance is slightly lower than the industry level.

2) The COR for 2024H1 human insurance was 96.2%, +0.4PCT year over year, mainly due to the increase in payout rates due to the intensification of the impact of natural disasters. 2024H1's payout/expense ratio was 70.1%/26.1%, respectively, +1.2PCT/- 0.8PCT year over year, respectively. Looking at insurance types, the COR for car insurance and non-car insurance of 2024H1 personal insurance was 96.4% and 95.8% respectively, -0.3 PCT and +1.5 PCT, respectively, compared with the previous year. Among them, car insurance COR improved year-on-year, mainly due to the implementation of “integrated reporting” for car insurance, which led to an increase of 1.8 PCT in the cost ratio over the same period last year. In comparison, the COR of human insurance is significantly superior to its peers.

The COR of 2024H1 Ping An Insurance, Taiping Financial Insurance, and Sunshine Financial Insurance was 97.8%, 97.0%, and 99.1%, respectively.

Profitability of Life Insurance and Human Health has improved significantly

1) 2024H1 Life Insurance achieved NBV of 3.935 billion yuan, or +91.0% over the same period. NBV Margin improved mainly due to lower predetermined interest rates and implementation of “integration of reporting and banking” through banking insurance channels. 2024H1 Life Insurance achieved net profit of 9.93 billion yuan, +191.1% year-on-year, mainly due to the year-on-year improvement in investment income and year-on-year decrease in debt costs.

2) 2024H1 Human Insurance Health achieved NBV of 3.025 billion yuan, +159.0% YoY; achieved net profit of 3.427 billion yuan, +25.7% YoY, and the profitability of the health insurance business continued to improve. Overall, the profitability of the company's life insurance and health insurance has improved markedly. In the future, as the company continues to optimize its business structure and reduce debt costs, the profit level of life insurance and health insurance is expected to continue to rise.

Net profit growth improved significantly from month to month

2024H1 achieved net profit of 23.4 billion yuan to mother, +13.7% year over year, with significant month-on-month improvement in growth rate (-23.5%/+62.8% for 2024Q1/2024Q2, respectively). In terms of return on investment, 2024H1's total return on investment was 29.064 billion yuan, -7.7% year-on-year. The company's net annualized and total return on investment were 3.8% and 4.1%, respectively. The year-on-year ratio was -0.6 PCT and -0.8 PCT, respectively, mainly due to declining interest rates and capital market fluctuations.

Profit Forecasts and Ratings

We expect the company's net profit to be 28.4/31.3/36.4 billion in 2024-2026, with corresponding growth rates of +27%/+10%/+16%, respectively. In view of the company's prominent competitive advantage in financial insurance and the continuous improvement in the profitability of personal insurance, we maintain a “buy” rating.

Risk warning: natural disasters exceed expectations, market competition intensifies, personal insurance business transformation falls short of expectations, capital market fluctuates greatly