Incident: The company revealed 2023 results, which exceeded expectations. The company's net profit for 23 years was 22.8 billion yuan/yoy -10.2%, of which 4Q23 net profit was 2.27 billion yuan/yoy 105%; dividend per share 0.156 yuan/yoy -6%; financial insurance COR 97.6%/yoy+0.9pct/ qoq-0.3pct, better than expected (forward-looking COR 98.4%), underwriting profit of 111 billion yuan/yoy -22.1%; personal insurance NBV (same assumption) 6.49 billion yuan/yoy +105%, better than expected (Forward-looking forecast yoy +41%).
Profits and dividends are in line with expectations, and the level of solvency is rising steadily. Net profit of 23 billion yuan/yoy -10.2%. The decline in profit is mainly due to increased impact of equity market fluctuations under the new standards, with fair value of equity -10.2 billion yuan (4.1 billion yuan in the same period of the previous year); due to the market environment, the company's total/net return on investment was 3.3% /4.5%, yoy-1.3 pct/ -0.6 pct; dividend per share for 23 years was 0.156 yuan/yoy -6%, dividends and dividends remained stable at 31%; of these, China Financial Insurance's dividend per share was basically stable; of these, China Financial Insurance's dividend per share is $480.9 /yoy +2.3%, dividend rate 44%, better than net profit decline (yoy -15.6%). The Group's insurance service revenue was 503.9 billion yuan/yoy +7.5%. Group/financial insurance/health insurance core solvency ratios were 194%/209%/150%, yoy+4pct/+7pct/+56pct, with steady long-term operation.
The financial insurance channel structure continued to be optimized, and COR improved sequentially due to the impact of the disaster. In '23, the company's financial insurance premium/financial insurance service revenue was 515.8 billion yuan/457.2 billion yuan, yoy +6.3%/+7.7%. Among them, direct sales channels and professional agency channels accounted for 29.6% /22.6% of premiums, yoy+0.4pct/+1.8pct, and the channel structure continued to be optimized. In '23, the COR of People's Insurance Insurance was 97.6%, +0.9 pct/-0.3 pct year-on-year, respectively. The main reason for the impact of disasters such as the 3Q23 typhoon and torrential rain worsened year-on-year, but after the impact of the 4Q23 disaster was eliminated, the company's COR gradually improved from month to month.
1) Auto insurance is still a major contributor to underwriting profits. In '23, the company's car insurance COR 96.9% /yoy+2.4pct, of which the payout rate and expense ratio were 70.4% /26.5%, yoy+2.1pct/+0.3pct, which is expected to be mainly due to increased travel rate and the impact of the disaster; car insurance underwriting profit of 8.63 billion yuan/yoy-41%, accounting for 85% of total underwriting profit, is still the core type of insurance for debt-side profits. Due to frequent major disasters, the company's auto insurance reserve withdrawal ratio increased by 0.2 pct over the same period last year, and the long-term profit contribution is stable.
2) Non-car insurance achieves underwriting profits, and is expected to continue to be profitable under structural optimization. Thanks to improved profitability of insurance types such as agricultural insurance (COR 94% /yoy-0.7pct, China accounting standards), COR 97.7% /yoy-2.8pct, liability insurance (COR 107% /yoy-2.1pct), and corporate financial insurance (COR 103.8% /yoy-0.4pct), non-car insurance returned to the profit range; non-car insurance COR 98.6% /yoy-1.7pct (estimated value); underwriting profit of 2.45 billion yuan (same period last year - 420 million yuan) .
Non-car insurance is expected to maintain COR within 100% as the company continues to optimize its business structure and promote risk reduction efforts.
The EV assumption is that the impact of the adjustment is limited, and the growth rate of personal insurance NBV has exceeded expectations. Hypothetical adjustments: The company adjusted EV-related assumptions at the end of '23: in terms of return on investment, dividend insurance and universal insurance were lowered from 5% to 4.75%, traditional insurance was lowered from 5% to 4.5%; risk discount rate was lowered from 10% to 9%; the hypothesis adjustment reduced personal insurance NBV and EV by 15.2% and 3.8% respectively in '22. NBV performance: After retroactive adjustment of 22-year data, the 23-year NBV of People's Insurance Life Insurance NBV was 3.66 billion yuan/yoy+69.6%, and the total NBV of NBV was 6.49 billion yuan/yoy+105%. Among them, personal insurance banking insurance and individual insurance channel NBV increased by 347% and 63% respectively, mainly due to the increase in NBVM.
Life insurance profits turned losses into profits, and the structure and quality of the personal insurance business continued to be optimized. In '23, People's Insurance Life Insurance achieved net profit of 3 million yuan (same period last year - 1.28 billion yuan), reversing year-on-year losses. It is expected mainly due to continuous improvement in product and business quality. Among them, Life Insurance's term premium yoy was +37%, accounting for an increase of 4.3 pct, and the 13/25 month continuation rate increased by 9.5 pct/+7.2 pct; China Health Insurance Premium Yoy was +34.1%, accounting for an increase of 5.2 pct, and the 13/25 month continuation rate increased by 2.1 pct/+1.9 pct, and the business structure and quality continued to be optimized.
Investment advice: Maintain the company's “Highly Recommended” rating. The company's dividends and profits were pressured by market fluctuations and catastrophes in '23, but as the market environment warms, the financial disaster weakens, and the life insurance product structure is optimized, the company's profit level is expected to continue to rise. It is expected that NBV and net profit will maintain double-digit growth in 24, and COR will remain flat year over year. Net profit for 24-26 is estimated at 262, 295, and 32.6 billion yuan, with year-on-year growth rates of +15%, +13%, and +10%; 24-26 NBV of 77, 84, 9.2 billion yuan, +18%, +10%, and +9% year-on-year respectively; COR 98%, 97.9%, and 97.8% for 24-26. The current closing price corresponds to 24E-26E dynamic P/B, 0.86 times, 0.79 times, and 0.72 times, respectively.
Risk warning: 1) Policy implementation falls short of expectations; 2) Major disasters such as typhoons and torrential rains are frequent; 3) equity market fluctuations and credit risk is exposed.