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中国财险(02328.HK):承保盈利低于预期 仍为可长期持有之选

China Financial Insurance (02328.HK): Underwriting profit below expectations is still an option to hold for a long time

9M24 underwriting profit fell short of our expectations

China Financial Insurance announced 3Q24 results: 9M24 net profit of 26.75 billion yuan, +38.0% year over year, in line with our expectations. 9M24's comprehensive cost ratio (CoR) was +0.3ppt to 98.2% year over year, and underwriting profit performance was lower than our expectations, mainly due to non-auto insurance underwriting profits lower than our expectations.

Development trends

Premium growth has accelerated compared to the first half of the year. 9M24 China's financial insurance premiums were +4.6% year-on-year, of which car insurance and non-car insurance premiums were +3.2% and 5.9%, corresponding to 3Q24 overall/car insurance/non-car insurance premiums were +7.1%/+4.6%/+11.8%, respectively, up from the first half of the year. Among them, iHealth Insurance and Liability Insurance premiums 3Q24 were +22.0% and 37.5%, respectively, and the growth rate was faster; agricultural insurance premiums 3Q24 were -10.2% year-on-year, which dragged down overall premium growth. We expect to still be affected by the slowdown in government business tenders..

CoR worsened in the first three quarters due to natural disasters. 9M24 China's overall financial insurance/auto insurance/non-car insurance CoR was +0.3/-0.6/+1.9ppt to 98.2%/96.8%/100.5%, respectively, corresponding to 3q24 -1.0/-1.3/+2.4ppt to 100.8%/97.5%/108.4%, respectively. Vehicle insurance underwriting profits continued to improve under the company's operating advantages and low base. Non-car insurance underwriting profits were lower than our expectations, mainly affected by 3Q24 natural disaster losses. We expect a month-on-month improvement in the fourth quarter.

Benefiting from significant improvements on the investment side, net profit rose sharply in the first three quarters. Thanks to the rapid recovery in the capital market at the end of September 2024, China Financial Insurance 9M24's total investment income was +70.4% year on year, and the unannualized total investment return was +1.7ppt to 4.4% year on year. Significant improvements in investment income drove 9M24's net profit +38.0% to 26.75 billion yuan, which corresponded to 3Q24 to achieve a net profit of 8.26 billion yuan, which turned a year-on-year loss into profit (3Q23 net loss of 0.87 billion yuan).

After adjustment, it is still an option to hold for a long time. We believe that although the profitability of the non-auto business may still fluctuate due to natural disasters and market competition, the company's auto insurance business advantage is stable and continues to strengthen, which will provide important support for the company's long-term profit trend to be steady, moderate and positive. Lower underwriting profits combined with the recent rapid rise in stock prices may put pressure on future short-term stock prices, but adjusted China Financial Insurance is still a long-term choice for the insurance sector.

Profit forecasting and valuation

We keep our profit forecast, industry rating and target price of HK$12.5 unchanged, corresponding to 1.0x2024e and 0.9x 2025e P/B. The company is currently trading at 1.0x 2024e and 0.9x 2025ep/b, with a potential upside of 2.5%.

risks

Natural disasters; increased competition in the car insurance market; large fluctuations in the capital market.

The translation is provided by third-party software.


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