Introduction to this report:

The improvement in investment income boosted the company's profit recovery in the first three quarters. OPAT reversed losses, the core sectors were steady, life insurance NBV continued to grow, and the narrowing of guarantee insurance losses promoted COR optimization in industrial insurance, and the return on comprehensive investment increased significantly.

Key points of investment:

Maintaining the “increase in holdings” rating, the target price was raised to 67.26 yuan/share, corresponding to the 24-year P/EV of 0.75 times: the company's net profit for the first three quarters of 24 was 36.1%, in line with expectations. It is mainly expected to be an improvement in investment income and the one-time profit and loss effects of Lujin's merger; operating profit attributable to parent was 5.5% year-on-year, and the operating profit growth rates of life insurance, financial insurance, and banking operating profits of 3.0%, 39.7%, and 0.2%, respectively. Considering the improvement in investment income driving profit recovery, EPS was raised to 7.65 (5.74, 33.2%) /8.67 (6.44, 34.6%) /9.88 (7.09, 39.3%) in 2024-2026. Considering that the improvement in capital is expected to drive a value boost, the target price was raised to 67.26 yuan/share.

NBV continues to grow, and life insurance reforms continue to show results. Life insurance NBV for the first three quarters was 34.1% year-on-year, and the NBV for the Q3 quarter was 110.1% year-on-year, better than market expectations. Continued improvement in value ratio (up 7.3 points to 25.4% year over year) is the core driver, mainly due to lower pricing interest rates, improvements in banking insurance “integrated reporting” rates, and product term structure optimization. Used to calculate NBV's first-year premiums were -4.2% year-on-year. It is expected that there will still be negative pressure on new orders in the first three quarters under “integrated reporting and banking”. Q3 is 50.4% month-on-month. It is expected that there will be strong demand for centralized insurance purchases by customers during the product switch period. Individual insurance NBV was 31.6% year over year, and channel reforms continued to show results in a sharp rise in the quantity and quality of agents. As of the end of September, the number of individual insurers was 0.362 million, compared with 4.3% at the beginning of the year. The proportion of “excellent +” manpower increased by 4 points, and the NBV per capita was 54.7%. The value contribution of multiple channels increased steadily. Banking insurance, community finance and other channels contributed 18.8% of the value of the new business, an increase of 2.4 points over the previous year. Among them, banking insurance NBV was 68.5% compared to the same period. It is expected to benefit from improved value rates and an increase in internal and external banking channel production capacity due to rate optimization.

Industrial insurance COR has been optimized, and investment has improved significantly. The comprehensive cost ratio of industrial insurance was optimized 1.5 pt to 97.8% year on year in the first three quarters of 24. It is expected that due to a sharp decrease in underwriting losses due to active contraction of the insurance business scale, and car insurance was limited by the increase in debt costs and disaster compensation due to the reduction in discount rates under the new standards, COR increased 0.8 points to 98.2% year on year; the investment side benefited from the recovery of the Q3 capital market to increase TPL equity investment income. The company's annualized comprehensive investment return in the first three quarters of 24 was 1.3 pt to 5.0% year on year, subject to a decline in long-term interest rates Interest income declined, and the net return on investment was -0.2 pt to 3.8% year over year.

Catalyst: The equity market improved beyond expectations.

Risk warning: capital market fluctuations; declining long-term interest rates; rising real estate risks.