Incident Overview

China People's Insurance Company released its 2024 mid-year report. In the first half of 2024, the Group achieved net profit of 22.687 billion yuan, up 14.1% year on year; basic earnings per share of 0.51 yuan, up 14.1% year on year; weighted average ROE was 9.0%, up 0.7 percentage points year on year. In the first half of 2024, the Group achieved insurance service revenue of 261.629 billion yuan, an increase of 6.0% over the previous year, and the original insurance premium income was 427.285 billion yuan, an increase of 3.3% over the previous year. The Group plans to pay an interim 2024 cash dividend of $0.63 (tax included) for every 10 shares to shareholders.

Analytical judgment:

Financial insurance: The car insurance structure continues to improve, and overall non-vehicle profits have been achieved.

In the first half of 2024, Human Insurance achieved insurance service revenue of 235.841 billion yuan, an increase of 5.1% over the previous year, mainly due to the increase in the business scale of auto insurance, health insurance, liability insurance, etc.; it achieved original premium revenue of 311.996 billion yuan, an increase of 3.7% over the previous year, accounting for 34.0% of the property insurance market, maintaining the leading position in the industry. Affected by factors such as the disaster, the COR for human insurance was 96.8% (of which the comprehensive payout rate was 70.7%), an increase of 0.4 percentage points over the previous year, but we believe it is still at a healthy level, and is 1.1 percentage points lower than the company's average COR of 97.9% in the past three years. Looking at insurance types, the profitability of the car insurance business continued to increase. The original premium income increased 2.5% year on year to 139.364 billion yuan, COR decreased 0.3 percentage points to 96.4%, and underwriting profit increased 13.3% year on year to 5.2 billion yuan. The non-auto insurance business developed steadily. The original premium income increased 4.6% year over year to 172.632 billion yuan, and the COR was 97.3%, making an overall profit.

Life and health insurance: The sharp rise in volume and price contributed to a year-on-year increase in NBV.

People's Insurance Life Insurance focuses on optimizing the business structure, increasing the proportion of value futures products, and promoting high-quality channel transformation. In the first half of 2024, People's Insurance Life Insurance achieved original premium income of 79.056 billion yuan, an increase of 0.3% over the previous year, of which the prepayment scale premium was 62.476 billion yuan, an increase of 8.8% over the previous year; the original premium income of ordinary life insurance was 41.176 billion yuan, an increase of 21.5% over the previous year, accounting for an increase of 9.1 percentage points. In terms of channels, individual insurance channels promoted the continuous improvement of team size and structure, achieving original premium income of 34.374 billion yuan, an increase of 5.4% over the previous year. Among them, the average monthly effective manpower increased 4.9% year on year, and the monthly per capita new single premium payment increased by 8.2% year on year. Banks continued channel transformation and high-quality development, achieving NBV of 1.934 billion yuan in half a year, a significant increase over the previous year. The sharp rise in quantity and quality drove life insurance to achieve NBV of 3.935 billion yuan for half a year, an increase of 91.0% over the previous year, and an increase of 5.4 percentage points over the previous year for NBVM. The development of human insurance health management continued to maintain a good trend. In the first half of 2024, it achieved original premium income of 36.231 billion yuan, an increase of 7.4% over the previous year, and 3.693 billion yuan of premiums for the first year, an increase of 17.0% over the previous year; achieved NBV of 3.025 billion yuan for half a year, an increase of 159.0% over the previous year.

Investment: The asset size continues to grow, and the investment portfolio is prudent and steady.

The asset scale continued to grow. As of June 30, 2024, the Group's investment assets reached 1531.827 billion yuan, an increase of 6.89% over the end of 2023. The investment portfolio was prudent and steady, with fixed income investment assets accounting for 67.3%, an increase of 2.8 percentage points over the beginning of the year. The Group strengthened balance and liability matching management and took the initiative to seize long-term treasury bonds and government debt allocation opportunities. The share of treasury bonds and government bonds increased 5.2 percentage points to 21.1% compared to the beginning of the year. Equity investment in fair value accounted for 19.2%, down 2.3 percentage points from the beginning of the year. Among them, the scale of OCI stock investment increased 13.8% from the beginning of the year. Investment performance is basically stable. In the first half of 2024, the Group achieved a total return on investment (annualized) of 4.1%, down 0.8 percentage points from the previous year; the net return on investment (annualized) was 3.8%, down 0.6 percentage points from the previous year. Among them, the annualized yield of fixed income assets was 4.89%, an increase of 6 basis points over the same period last year, giving full play to the role of a “ballast stone” for investment income.

Investment advice

We are optimistic about China People's Insurance's steady profit in the financial insurance business and the value growth potential of high-quality life insurance transformation. We expect revenue for 2024-2026 to be 602.5/647.1/696.2 billion yuan, respectively; net profit to mother for 2024-2026 is 26.2/29/31.4 billion yuan respectively; corresponding EPS is 0.59/0.66/0.71 yuan; PE corresponding to closing price of 5.75 yuan on August 28, 2024 is 9.72, respectively /8.76/8.11 times, PB was 0.99/0.92/0.85 times, respectively, maintaining the “buy” rating.

Risk warning

The risk of transformation falling short of expectations; sharp fluctuations in capital markets; risk of natural disasters.