Key points of investment

Performance Overview

According to 2024Q1-3 cumulative, Taibao's net profit was 38.31 billion yuan, +65.5% year over year; revenue was 310.564 billion yuan, +21.3%; weighted ROE was 14.6%, +4.7pt year on year; life insurance NBV reached 14.238 billion yuan, +37.9% year on year, and the comprehensive cost ratio (COR) of industrial insurance was 98.7%, which was flat year on year; the profit increase was in line with the company's performance advance announcement, which was generally in line with expectations.

Core concerns

1. Life insurance: NBV accelerates high growth

(1) NBV: Cumulative of 2024Q1-3, Taibao NBV was +37.9% year over year, and the growth rate accelerated by 15.1pt compared to 2024H1. We expect products with high fixed interest rates to be discontinued one after another in the third quarter of this year. Taibao is actively operating and sales are strong.

Looking at the driving factors, the value rate of the new business is the core factor driving the high growth of Taibao NBV. On a cumulative basis of 2024Q1-3, Taibao's new business value ratio increased 6.2 points to 20.1% year over year.

(2) Team: The core operating indicators of Taibao's agent channel increased steadily. In the first three quarters of this year, the scale of Xinbao increased 16.3% year on year. The average monthly core manpower was 0.058 million, +2.4%, and the monthly first-year premium for core manpower was 0.061 million yuan per person, +15% compared to the same period; the number of new employees increased significantly; the number of new employees increased by +15.5%.

(3) Looking forward to the future: Taihe continues to deepen the transformation of “core personal insurance”, and the banking insurance channel insists on value as the core. It is expected that the NBV growth rate will still be higher than that of major peers throughout 2024.

2. Industrial insurance: COR remains stable

Cumulative of 2024Q1-3, Taibao Insurance's original premiums were 159.819 billion yuan, or +7.7% year over year. Among them, auto insurance and non-car insurance premiums were +3.3% and +12.2% year on year, respectively; COR was 98.7%, which was the same year on year, in line with expectations.

3. Investment: Significant increase in investment income

At the end of 2024Q3, Taibao's investment assets were 2.58 trillion yuan, up 14.9% from the end of the previous year; the net return on investment and total return on investment were 2.9% and 4.7%, respectively, -0.1 pt and +2.3 pt, respectively. Taibao actively allocated long-term fixed income assets, lengthened the duration of assets, and strengthened the active management of equity investments. Thanks to the rise in the stock market, Taibao investment income increased dramatically, and drove the company's profits to increase dramatically.

Profit forecasting and valuation

China's Taibao has anchored high-quality development. The second phase of the transformation of Changhang is advancing in depth, development momentum is increasing, and business performance is improving positively. In view of the sharp increase in investment income, we raised Taibao's annual profit. We expect Taibao's net profit to grow 65.5%/11.6%/19.8% year-on-year in 2024-2026. The current price corresponds to the 2024-2026 PEV 0.61/0.55/0.50 times PEV. The target price was 48.49 yuan, corresponding to 0.8 times the Group's PEV in 2024, maintaining the “buy” rating.

Risk warning

Progress in reforms has been slow, the economic environment has deteriorated, long-term interest rates have declined sharply, and capital markets have fluctuated sharply.