Key investment points

On November 8, 2024, the company held the 2024 Investor Open Day in Beijing to introduce the company's innovative initiatives in vehicle insurance management and the results achieved in the NEV insurance business to the market under the theme of “Exploration and Practice of High-Quality Development of New Energy Vehicle Insurance”.

The NEV penetration rate continues to rise, and NEV insurance will be the focus of subsequent comprehensive vehicle insurance reform in 2020-2023. China's NEV sales volume increased from 1.11 million units to 7.75 million units, with a compound annual growth rate of 91%, far higher than 4% of the overall narrow sense of passenger vehicles. In terms of car ownership, in 2020-2023, China's NEV fleet increased from 4.92 million to 20.41 million, and its share of total motor vehicle ownership increased from 1.8% to 6.1%. As of 2024H1, the share of NEV ownership in total motor vehicle ownership quickly rose to 7.2%. As the penetration rate of new energy vehicles continues to increase, the development of new energy vehicle insurance has also become the focus of social attention.

In recent years, due to the high rate and high payout rate of NEV insurance, NEVs have faced problems such as “difficult and expensive to insure”. In order to promote the high-quality development of NEV insurance, in April 2024, the Financial Insurance Department of the General Financial Supervisory Authority issued the “Notice Concerning the Work Related to Promoting the High-Quality Development of NEV Vehicle Insurance (Draft for Comments)” to expand the scope of independent pricing factors for NEV commercial vehicle insurance and encourage the industry to research and launch “basic+change” combined insurance products. At the same time, the new “National Ten Rules” of insurance also proposed “focusing on commercial insurance for new energy vehicles and deepening comprehensive car insurance reform.” It is expected that the profitability of NEV insurance will improve in the future, driven by favorable policies.

The company is firmly promoting the transformation and upgrading of NEV insurance. NEV Insurance COR is expected to improve based on the pricing advantages, channel advantages, claims advantages, risk reduction advantages, and integration advantages that the company has already formed in vehicle insurance management. The company has achieved certain results in the development of new energy vehicle insurance. In terms of market share, 9M2024's NEV commercial insurance market share reached 35.45%, an increase of 1.49PCT over the previous year; judging from the number of customers served, the company has served more than 22 million NEV customers; judging from the profit performance, the company's NEV overall COR is superior to the industry. Looking forward to the future, in order to promote the development of the NEV industry, the company proposes to establish a new “car+everything” business model that penetrates the entire life cycle of car insurance and covers all customer service scenarios to achieve full-process risk management and service from “1 policy - 1 vehicle - 1 person - 1 family”, and shape new momentum, new models and new advantages for development. We expect that as the company continues to promote the transformation and upgrading of NEV insurance, the profitability of the company's NEV insurance is expected to continue to improve, which in turn will promote the long-term improvement of the company's overall COR.

Investment advice: maintaining China's financial insurance “buy” rating

Considering that the company's new energy vehicle insurance COR is superior to the industry and that the company continues to strengthen risk management and control, the company's car insurance COR is expected to continue to improve. The recovery in the combined equity market is expected to drive a positive year-on-year increase in investment income. We expect the company's net profit to be 33.9/35.7/39.8 billion in 2024-2026, respectively, with corresponding growth rates of 38%/6%/11%, respectively.

Given the company's scarce business model and high ROE, we maintain a “buy” rating.

Risk warning: natural disasters exceed expectations; market competition intensifies; capital market fluctuates greatly