Matters:

2024H1 achieved insurance service revenue of 261.629 billion yuan, +6.0% year over year; net profit to mother of 22.687 billion yuan, +14.1% year over year; weighted average ROE of 9.0%, +0.7 pct year on year. The COR of Human Insurance reached 96.8%, +0.4pct year on year; the total NBV of Human Insurance and Human Insurance Health was +115.6% compared to 6.96 billion yuan. 2024H1, the Group achieved net/total return on investment (annualized) of 3.8%/4.1%, -0.6pct/-0.8pct, respectively.

Commentary:

Human insurance: premiums have increased low, and COR has increased slightly due to natural disasters. With 2024H1, the company achieved insurance service revenue of 235.841 billion yuan, +5.1% year-on-year. On the cost side, the overall COR was +0.4 pct to 96.8% year over year, mainly due to the increase in the frequency of natural disasters, putting pressure on the compensation side. The cost ratio was +1.2 pct to 70.7% year over year, while the cost ratio was -0.8 pct to 26.1% year over year.

1) In terms of car insurance, cost-side improvements offset compensation pressure, and COR was slightly optimized. 2024H1 insurance service revenue was +5.3% YoY to 145.157 billion yuan, COR -0.3pct YoY to 96.4%, and underwriting profit +13.3% YoY to 5.202 billion yuan. Among them, the payout rate was +1.5pct year over year, mainly affected by disasters such as rain, snow and freezing in Q2 and torrential rain in the south in Q2, compounded by factors such as rising spare parts and working hours prices, and higher personal injury compensation standards; however, the cost rate was -1.8 pct year over year, mainly due to strengthened cost control in the industry, and the company strengthened resource integration and cost control.

2) In terms of non-car insurance, agricultural insurance COR improved significantly, contributing to the main underwriting profit of non-car insurance. Agricultural Insurance 2024H1 insurance service revenue was -7.0% year-on-year to 23.292 billion yuan, mainly affected by the pace of government project bidding. Thanks to the company's risk reduction and emergency treatment of major disaster claims, agricultural insurance COR was -1.7 pct to 94.8% year-on-year, contributing 1.215 billion yuan in underwriting profit. Among them, the payout rate was -1.2 pct year over year, and the fee rate was -0.5 pct year over year. eHealth Insurance COR was +1.4pct to 99.9% year over year, liability insurance COR was +1.3pct to 104.1% year over year, and enterprise financial insurance COR was +7.6pct yoy to 99.6%; the total COR for other types of insurance was +3.6pct to 87.7% year over year, contributing 1.899 billion yuan in underwriting profit.

People's Insurance Life Insurance: NBV is growing at an impressive rate, and the size of the agency team has steadily rebounded. 2024H1, Life Insurance achieved NBV of +91.0% year-on-year to 3.935 billion yuan. It is expected to be mainly driven by improvements in the value ratio of new businesses, putting pressure on the overall size of new orders. 2024H1 Life Insurance achieved the original premium ratio of +0.3% to 79.056 billion yuan, of which ordinary insurance was +21.5%, accounting for +9.1pct to 52.1% year over year, dividend insurance ratio -19.9%, accounting for -9.1pct to 36.4% year over year, health insurance ratio +0.7%, maintaining 10.7% year-on-year share. In terms of channel structure, individual insurance channels were +5.4% year-on-year, contributing to the main growth rate, accounting for 43.5%. The size of the agency team achieved a steady recovery. The number of marketers increased by +3.7% to 0.082 million people. At the same time, per capita production capacity increased, and monthly premiums per capita in a new single instalment were +8.2% to 0.014 million yuan. The banking insurance channel was affected by the integration of reporting banks. Overall premiums were -3.5% compared to the same period, and the proportion narrowed slightly to 54.1%.

Human health: Both volume and price drive, NBV soared. With 2024H1, the NBV achieved +159.0% to 3.025 billion yuan in NBV, and the original premium was +7.4% to 36.231 billion yuan. In terms of product structure, medical insurance is still the main type of insurance, with +5.3% to 18.43 billion yuan, accounting for 50.9%; dividend-type insurance accounting for 25.8%; nursing insurance +46.6% compared to the same period, accounting for an increase of 3.3 pct to 12.5%; and sickness insurance accounting for 9.6%. In terms of channel structure, omnichannel achieved premium growth, and individual insurance/banking insurance/group insurance were +5.3%/+4.4% year-on-year, respectively.

However, from the perspective of new orders, only one insurance channel achieved a positive increase in premiums for the first year of long-term insurance, +58.4% over the same period last year to 1.955 billion yuan, supporting the overall increase in the size of new orders.

There was a slight decline on the investment side, reducing TPL fund holdings and increasing OCI stock holdings to smooth out the fluctuation in the statement. As of 2024H1, the Group's investment assets were +6.9% compared to the end of the previous year to 1531.827 billion yuan. 2024H1, the Group achieved a net/total return on investment of 3.8%/4.1%, respectively, -0.6pct/-0.8pct year-on-year, which is expected to be mainly affected by continued decline in interest rates, equity market shocks, and weakening fund dividend capacity. In terms of allocation structure, the Group increased fixed income assets by 2.8 pct to 67.3% compared to the end of the previous year, including bonds +2.8 pct month-on-month and -2.2 pct month-on-month; reduced holdings of equity assets measured at fair value by 2.3 pcts to 19.2%, of which fund holdings were drastically reduced (-1.8 pct to 6.4% month-on-month). It is expected that stocks will also be -0.2 pct to 2.9% month-on-month due to flat statement considerations. Judging from the accounting measurement method, the share of OCI assets in stock assets also increased 4.9pct month-on-month to 40.5%.

Investment advice: 2024H1. Although COR was affected by natural disasters, human insurance maintained a leading position in the industry; life insurance and health insurance together more than doubled NBV. Looking ahead to 2024, we are still optimistic about the company's advantage as a financial insurance leader. 1/3 market share plus continuous improvement in risk management level will drive underwriting profits to continue to rise. Pressure on the new life insurance base has abated in the second half of the year, while further cuts in scheduled interest rates will continue to improve the value ratio of new businesses. As demand for medical care and old-age care continues to be released and the company is deeply involved in the field of health management, People's Health Insurance may continue to perform well. We raised the 2024-2026 EPS forecast value to 0.71/0.81/0.89 yuan (the original value was 0.59/0.66/0.73 yuan), maintain the 2024 PB target value of 1.1x for the property insurance business, 1x for other businesses, and 0.5x for the PEV target value for personal insurance business, corresponding to the 2024 target price of 7.3 yuan. Maintain a “Recommended” rating.

Risk warning: regulatory changes, reforms falling short of expectations, long-term interest rates continue to decline