Incident: On October 8, Xinhua Insurance announced the third quarter results forecast. According to preliminary estimates, the company's net profit for the first three quarters of 2024 is expected to be 18.607-20.515 billion yuan, up 95% to 115% year on year. Among them, Q3's net profit to mother was 7.524-9.432 billion yuan, an increase of 7.96-9.868 billion yuan over the same period last year (3Q23 lost 0.436 billion yuan, year-on-year performance not applicable), benefiting from recent periods The capital market picked up significantly, and the company's return on investment increased significantly, driving performance growth beyond expectations.
Equity market sentiment has improved dramatically, and the company's low stock allocation has benefited significantly. 1) Significant improvements in the capital market: Since September 24, favorable policies have “gone hand in hand”, significantly boosting the equity market. The 3Q24 Shanghai and Shenzhen 300 Index/China Securities 800 Index/ China Securities Dividend Index rose 16.1% /16.1%/6.4%, better than 20.0pct/20.4pct/4.7pct in the same period last year; 2) Low-level additional stocks and funds, FVTPL accounted for a relatively high share: By the end of June, the company's stock and fund allocations had reached 144.298/116.311 billion yuan respectively, accounting for 144.298/116.311 billion yuan The share of investment assets reached 10.0%/8.1% respectively, higher than the average value of A-share listed insurers of 2.9 pct and 2.9 pct, up 2.1 pct/1.8 pct from the year-end level, respectively. The company increased its stock allocation at a low level in the market, which is expected to significantly benefit from this round of market conditions. From an accounting classification perspective, as of the end of June, the share of the company's stock investment classified as FVTPL/FVOCI was 87.5%/12.5%, respectively. Compared with the average value of A-share listed insurers, it was +16.2pct/-16.2pct, that is, fluctuations in stock market value entered more of the profit table, helping the company's performance to outperform its peers.
Debt-side flexibility cannot be ignored. Affected by the channel structure and delivery structure, before the “integration of reporting and banking” was implemented, the company's NBVM was at a low level in the industry, and NBV's sensitivity to NBVM changes was significantly higher than that of its peers. The company is expected to continue to benefit from the upward trend of industrial NBVM brought about by the “integration of banking and bank reporting” of banking insurance and individual insurance, the decline in scheduled interest rates, and product structure optimization. The company's NBV growth rate is expected to remain at the forefront of the industry in the first three quarters.
The implementation of supporting policies is imminent, and it is expected that sector valuations will continue to be positively catalyzed, and the company's highly elastic attributes are expected to continue to show. The new “Ten Rules of the State,” the National Information Conference, and the “Long Term Investment” supporting policies are about to be implemented, and have not yet been fully reflected in the valuation. On September 29, the HKMA held a meeting to convey the spirit of the Politburo Central Committee meeting on September 26, stressing that “we must vigorously promote the implementation of key tasks and results”, and called for “sticking to the letter, resolutely shouldering responsibilities, seizing time windows... planning and implementing measures quickly, and acting quickly to promote work”. It was recommended to focus on follow-up solvency, reserves, overseas asset allocation, and the implementation of the “long money and long-term investment” optimization policy to positively catalyze industry development and sector valuation.
Investment analysis opinion: maintain the “buy” rating and raise profit forecasts. Xinhua Insurance is a flexible choice in the highly flexible sector of the insurance sector. It has the triple characteristics of high asset-side elasticity, high potential for debt-side growth, and strong beta attributes. The profit performance of the three-quarter report exceeded expectations. We raised our 24-26 net profit forecast to 21.417/22.923/25.991 billion yuan (the original forecast was 14.988/17.351/21.812 billion yuan). As of October 8, the corresponding PEV (24E) of the stock price was 0.57x, maintaining a “buy” rating.
Risk warning: Stricter regulatory policies, declining long-term interest rates, equity market fluctuations, and sales of new products falling short of expectations.