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中国财险(2328.HK)2024利润预喜:增长20%至40%

China Financial Insurance (2328.HK) 2024 profit forecast: 20% to 40% increase

HTSC ·  Jan 24

The company announced a pre-increase in 2024 results: net profit due to mother is expected to increase 20% to 40% year-on-year in 2024, in line with our expectations of 36.3%. The company's total investment income increased significantly year-on-year in 2024. We believe that high investment performance is the main reason for the company's profit growth. In 2024, the company's premiums increased 4.3% year on year, and the overall scale of the insurance business continued to grow steadily. Maintain a “buy” rating.

High performance growth or mainly driven by investment growth

According to the company announcement, total investment income increased significantly year-on-year in 2024. Affected by the rise in the stock market at the end of September '24, the company's 3Q24 investment income increased sharply, and the total return on investment for the first three quarters increased by 1.7 pcts to 4.4% year-on-year (unannualized). Driven by the investment side, the company's net profit for the first three quarters was +38% year-on-year. According to the company's pre-performance increase announcement, China Financial Insurance's net profit for the single quarter of 4Q24 was about 2.75-7.67 billion yuan, compared to 4.31 billion yuan for the same period in '23. We believe that the company's insurance business may grow steadily in the fourth quarter of 2024 (according to the announcement, premiums +3.3% year over year), and investment income may fluctuate somewhat.

Secondary Equity Investment Preference Fund and FVOCI Shares

The equity investment ratio of China's financial insurance in the secondary market is relatively low among listed peers, and they prefer investment funds. Most stocks are included in the FVOCI category. As of 1H24, the investment ratios of funds, FVOCI shares, and FVTPL shares held by China Financial Insurance were 5.2%, 4.9%, and 1.3%, respectively. The company's net profit growth level in the first three quarters was low among listed insurance companies, or is related to the company's low FVTPL share allocation ratio. Fluctuations in the fair value of FVOCI shares do not affect profits. FVTPL shares, which directly affect profits, have a lower investment ratio, or are the reason why the company's profits are less affected by the stock market.

Auto insurance and non-car insurance premiums continue to grow

According to the premium income announcement, the company's total premiums increased 4.3% year on year in 2024, with non-car insurance growing slightly higher than car insurance (4.6% and 4.1%). The increase in non-auto insurance premiums was mainly driven by eHealth Insurance, Liability Insurance, and Corporate Property Insurance. The premium growth rates in 2024 were 9.7%, 9.9%, and 2.0%, respectively. Judging from the underwriting performance, 1-3Q24's auto insurance underwriting performance improved, with COR falling 0.6 pcts to 96.8% year over year; the non-car insurance business was affected by the torrential rain and typhoon disaster. The COR for the first three quarters was 100.5%, showing underwriting losses. Considering that the probability of a major disaster in the fourth quarter is generally low, we expect no car insurance or return to underwriting profits for the full year 2024. We expect the 2024/2025 car insurance COR to be 96.9%/96.9%, respectively, and the non-car insurance COR will be 99.9%/98.8%, respectively.

Profit forecasting and valuation

We kept the 24/25/26 EPS forecast unchanged at RMB1.51/1.44/1.56, maintained a target price of HK$13.6 based on the DCF valuation method, and maintained a “buy”.

Risk warning: Premium growth has slowed sharply, underwriting performance has deteriorated significantly, and investment losses have occurred.

The translation is provided by third-party software.


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