Incidents:

In the first three quarters of 2024, Xinhua Insurance's revenue was 106.96 billion yuan, +72.9%; insurance service revenue was 35.66 billion yuan, -10.2%; net profit to mother was 20.68 billion yuan, +116.7% year on year; weighted average return on net assets 21.0%, +12.5pct year on year; new business value +79.2%; annualized total return on investment 6.8%, +4.5 pct year on year; annualized comprehensive return on investment 8.1%, yoy + 5.1 pct.

Comment:

The scale of high-performing manpower increased year-on-year, and new orders from individual insurance channels grew rapidly. The company's individual insurance channels accelerated the construction of high-performing teams. In 24Q3, the scale of high-performing manpower increased year-on-year, and production capacity per capita increased dramatically. At the same time, the company vigorously promoted long-term business transformation. In the first three quarters, each insurance channel achieved first-year long-term insurance premiums of 12.42 billion yuan, an increase of 14.8 pcts over the first half of the year. Of these, 24Q3 single-season premiums were +70.2% year-on-year, mainly benefiting from the further release of savings insurance demand; among them, first-year long-term insurance premiums increased 18.8% year-on-year to 11.98 billion yuan. The increase was 14.7 pcts higher than in the previous half of the year. Futures premiums accounted for 96.5% of long-term insurance premiums for the first year, up 96.5% year-on-year. 1.7 pct.

Banking insurance business improved marginally, and the decline in total new orders narrowed. In the first three quarters of 2024, the first-year premium for long-term insurance of the company's banking insurance channel was 21.55 billion yuan, compared to -24.1%, mainly affected by pressure on the contract business, but the decline was 36.8 pcts narrower than in the first half of the year, achieving a significant marginal improvement. Among them, premiums for the first year of term payments increased 6.3% year over year to 12.66 billion yuan, an increase of 31.2 pcts compared to the first half of the year. Dragged down by the overall decline in new banking insurance policies, the company's total new orders fell 11.9% year-on-year to 37.42 billion yuan in the first three quarters, and the decline was 29.8 pcts narrower than in the first half of the year. Specifically, first-year premiums for long-term insurance fell 12.7% year on year to 34.15 billion yuan. The growth rate was 32.4 pct higher than in the first half of the year. Among them, first-year premiums increased 12.3% to 24.75 billion yuan, up 23.8 pcts from the first half of the year, and new orders paid for 10 years or more increased 21.3% year over year to 3.08 billion yuan, an increase of 5.0 pct over the first half of the year.

Increased value ratios drive NBV growth faster. In the first three quarters of 2024, the proportion of mid-term premiums paid in the first year of the company's long-term insurance business reached 72.5%, with a year-on-year increase of 16.2pct. The share of premiums paid for ten-year and above was 9.0%, an increase of 2.5 pct over the previous year, and the term structure was significantly optimized. Combined with factors such as lower product pricing interest rates and lower cost pressure in banking insurance channels, the increase in value ratio drove a sharp increase of 79.2% year-on-year. The increase was 21.5 pcts wider than in the first half of the year, showing impressive results.

The recovery in the equity market contributed to a sharp year-on-year increase in profits. In the first three quarters of 2024, benefiting from a significant recovery in the equity market, the company's total annualized return on investment increased by 4.5 pct to 6.8% year on year, and the annualized comprehensive return on investment increased 5.1 pct to 8.1% year on year. Benefiting from significant improvements in investment performance, the company's net profit to mother increased 116.7% year-on-year to 20.68 billion yuan in the first three quarters, an increase of 105.7 pcts over the first half of the year. Among them, the 24Q3 quarter turned a year-on-year profit of 9.6 billion yuan (loss of 0.44 billion yuan in the same period last year).

Profit prediction and rating: The company further promotes the transformation of individual insurance channels, strengthens the construction of high-performing teams, and adheres to the development path of “increasing production capacity, excellent structure, and steady growth” to build a team of efficient agents; at the same time, it actively builds a new ecosystem of banking insurance cooperation, optimizes product supply, and enhances value contributions through the “promotion period” strategy. At present, the company has formed a full-function health service system of “comprehensive health care community+nursing community+leisure and residential community+health management center”. It is expected that in the future, with the collaborative development of the company's health care industry and life insurance business, sales of insured products are expected to pick up; combined with continuous improvement in team quality and deepening banking insurance cooperation, NBV is expected to continue to grow well throughout the year. Considering the sharp increase in the company's profit growth rate in the first three quarters and the expected continued improvement on the asset side under the low base in the fourth quarter, we raised the company's 2024-2026 net profit forecast to 24.3/25.9/28.5 billion yuan (previous value 15.4/16.3/18.6 billion yuan), respectively. Currently, the A/H stock price corresponds to the company's 24-year PEV of 0.54/0.27, respectively, maintaining the “buy” rating for A/H shares.

Risk warning: Economic recovery fell short of expectations; policy reforms fell short of expectations; long-term interest rates declined beyond expectations.