Profit increased significantly in the 3rd quarter of 2024, slightly above the upper limit of the forecast range. In the first three quarters, Xinhua achieved a year-on-year increase of 116.7% in net profit to mother, slightly higher than the upper limit of the range previously predicted by the company (95-115%). On a quarterly basis, the profit for the third quarter was 9.6 billion yuan (RMB, same below), a sharp increase from the net loss for the same period last year, mainly benefiting from the recovery in stock investment income. The company had a net loss of 0.83 billion yuan in the fourth quarter of last year, and the profit performance for the full year of 2024 is expected to increase further compared to the previous three quarters.

The premium structure has been optimized, but it still relies on banking insurance channels. Premium income increased 1.9% year over year. The increase was mainly due to renewed premiums, but was partially offset by a year-on-year decline in premiums paid by bank guarantors. Premium payments of 10 years or more increased 21.3% year on year, accounting for 12.4% of new single instalment premiums, up 0.9 percentage points year on year. Bank insurance payments accounted for 63% of new single instalment premiums, a further increase over the first half of the year.

The new business value growth rate is leading the industry. The value of new business increased 79.2% year-on-year in the first three quarters. The growth rate was further higher than in the first half of the year, leading the industry in growth rate.

Investment returns have increased significantly, and the elasticity is higher than that of peers. Investment assets increased 19% from the beginning of the year. The annualized return on total investment was 6.8%, up 4.5 percentage points year on year, higher than peers. In terms of asset classification, FVOCI's share of investment increased. The share of FVOCI bonds in the third quarter increased significantly by 5.4 percentage points compared to the end of the second quarter, while the share of debt investment measured by amortized costs decreased by 3.2 percentage points; the share of transactional financial assets was 32.1%, down 1.0 percentage point from the end of the second quarter, and the share was still higher than that of peers. The company plans to increase the share of FVOCI investment and improve the stability of investment return performance.

Maintain a buy rating. The company's share of transactional financial assets is relatively higher than that of peers, and investment income and profits show relatively high volatility and elasticity, but the company's assets and liabilities side may face growth pressure on a high base in 2025. We raised our profit forecast and expect 2024 earnings to double on a low basis. Based on 0.65 times the 2025 net market ratio, we raised the company's target price from HK$20.5 to HK$30.5 to maintain the buy rating.