1H24's performance exceeded expectations. 1H24 achieved net profit to mother of 11.083 billion yuan, yoy +11.1%, exceeding our expectations (we expect yoy -2.6%); among them, 2Q24's net profit to mother was +100.6% to 6.14 billion yuan on a low base basis. By the end of June, EVs were +7.1% compared to the beginning of the year to 268.368 billion yuan; among them, operating experience bias and economic experience bias contributed 4.407/2.759 billion yuan to EV increases respectively. The company plans to distribute an interim dividend of 0.54 yuan/share, with a dividend payment rate of 15.2%.

Significant improvements in NBVM led to a 57.7% year-on-year increase in NBV. 1H24 achieved NBV of 3.902 billion yuan, yoy +57.7% (23H1 value not repeated). On the basis of the high increase in 1Q24, the growth rate was further +6.7pct month-on-month, which greatly exceeded expectations (we expect 1H24 NBV yoy +26.0%). 1) New orders are under pressure: Affected by the banking insurance channel's “integration of reporting and banking” and the high base for the same period, the 1H24 new order YOY is -41.7% to 21.161 billion yuan; among them, the new long-term insurance order yoy is -45.1%, but the delivery structure improved, and the new long-term insurance period of 10 years or more yoy was +16.3%; 2) NBVM increased significantly: Under the first-year premium scale, the value rate for 1H24's new business yoy+12pct was 18.8%, based on the “integrated reporting and banking” of banking insurance and the decrease in the reservation interest rate compared to the same period last year. New order delivery time and channel structure Significant optimization. The share of new 1H24 long-term insurance orders increased dramatically by 31.6 pct to 83.3%, and the share of new individual insurance orders increased by 18.1 pct to 43.1%, driving significant optimization of NBVM.

The size and value of individual insurances have both increased, and process indicators have continued to improve. The NBV of the 1H24 insurance channels increased by 39.5% year-on-year, and NBVM (using NBV/new order approximation) /new order yoy +0.4% /+8.6pct to 9.116 billion yuan/30.5%. By the end of June, the agent team size had decreased by 10.3% from the beginning of the year to 0.139 million, and the average monthly qualified manpower/monthly high performing manpower reached 0.027/0.185 million, yoy -20.6%/+0%, and the average monthly merit rate/10,000 C manpower yoy+2.3 pct/+19.0%, and the average monthly comprehensive production capacity per capita yoy was +28.3% to 0.0104 million.

Banking Insurance NBVM was greatly optimized to drive NBV yoy +97.1%. Affected by the “integration of reporting and banking” and a high base, YoY -60.8% of the new order of the 1h24 banking insurance channel reached 9.971 billion yuan. However, the reduction in the processing fee rate and the improvement of the delivery structure drove NBVM (using NBV/new order approximation) yoy+11.1pct to 13.8%, driving the channel NBV to a 97.1% year-on-year increase.

Profit and loss from changes in fair value increased dramatically, leading to a year-on-year improvement in investment performance. The annualized net/total/comprehensive return on investment of 1H24 is 3.2%/4.8%/6.5%, yoy-0.2pct/+1.1pct/+1.8pct. Profit and loss from changes in fair value increased 104.7% year over year to 14.967 billion yuan (expected mainly due to the increase in fair value of bonds under the influence of falling long-term interest rates), driving total investment income yoy +43.3% to 31.613 billion yuan. At the end of the period, the company's total investment assets were 1.44 trillion yuan, +7.0% compared to the beginning of the year; among them, the allocation ratio of stocks, funds, and long-term equity investment increased by 2.1 pct/1.8 pct/0.7 pct from the beginning of the year, and the allocation ratio of other financial investments, bonds, trust plans, and debt investment plans decreased by 2.0pct/1.0pct/0.9pct/0.7pct, respectively, from the beginning of the year.

Investment analysis opinion: raise profit forecast and raise rating to “buy”. Xinhua Insurance is a flexible choice in the insurance sector, which has the three characteristics of high potential for growth on the debt side, high elasticity on the asset side, and low valuation. 1H24's performance exceeded expectations, and we raised our 24-26 net profit forecast to 14.988/17.351/21.812 billion yuan (the original forecast was 121.11/15.259/22.729 billion yuan). As of August 30, the corresponding PEV (24E) of the stock price was 0.38x, giving it a “buy” rating.

Risk warning: Long-term interest rates are declining, equity market fluctuations, regulatory policies are becoming stricter, and product sales fall short of expectations after the scheduled interest rate is switched.