The company disclosed premium data for January-March 2024. The growth rate of single-month car insurance and non-car insurance premiums improved month-on-month. COR may be under pressure due to the disaster in Q1. The company's insistence on high-quality development is unwavering, and the premium growth rate and underwriting profit are expected to achieve steady growth throughout the year.
The overall premium growth rate has improved markedly. The company achieved cumulative premium income of 173,977 billion yuan in January-March, an increase of 3.8% over the previous year. Among them, the car insurance business achieved premiums of 69.240 billion yuan, an increase of 1.9% over the previous year, and the non-car insurance business achieved premiums of 104.737 billion yuan, an increase of 5.0% over the previous year. Looking at a single month, in March, the company achieved premium revenue of 72,734 billion yuan, up 7.8% year on year. Among them, car insurance premiums increased 3.1% year on year, and non-car insurance premiums increased 10.4% year on year.
Fluctuations in car insurance premiums are mainly affected by the pace of car market sales around the Spring Festival. The growth rate of the company's car insurance premiums in March was 3.1%, +4.5pt month-on-month. It is expected to be affected by post-holiday consumption recovery due to Spring Festival factors. Domestic passenger car retail sales in the narrow sense of the term increased 6.2% year-on-year in March (previous value was -20.5%). Subsequent market attention to some new cars and expectations for the trade-in policy are expected to further stimulate automobile consumption enthusiasm, and the company's car insurance premiums are still expected to increase steadily by about 5% throughout the year. On the COR side, the recovery of social travel and the impact of the disaster in the first quarter are expected to put some pressure on payout rates, but regulations strictly control spending, and the cost rate is expected to continue to improve.
The growth rate of non-car insurance premiums has increased dramatically, and COR is expected to be under slight pressure. In March, the company's non-car insurance premiums increased 10.4% year-on-year, +12.1pt month-on-month. Looking at the breakdown, 1) Yijian Insurance (25.509 billion yuan, +10.1% year over year) growth rate accelerated month by month, mainly driven by the growth of commercial health insurance and accident insurance; 2) agricultural insurance (11.218 billion yuan, +14.7% year over year) growth rate improved significantly, which is expected to be due to some policy business pace adjustments at the beginning of the year; 3) liability insurance (5.658 billion yuan, +5.1% year over year), corporate financial insurance (19.72 billion yuan, +16.5% year over year) and guarantee insurance (842 million yuan, +27.2% year over year) also achieved a lower base growth. On the COR side, according to statistics from the Ministry of Emergency Management, the national natural disaster situation in the first quarter of 2024 was complex and serious. The low temperature, rain, snow and freezing disaster lasted a long time, had a wide range of effects, and disaster losses were heavy. Overall direct economic losses reached 23.76 billion yuan, which is at a high level in recent years. It is expected that the company's agricultural insurance, corporate financial insurance, engineering insurance, etc. payments will all be under pressure compared to the same period last year.
Investment advice: Maintain a “Highly Recommended” rating. Q1 premiums fluctuated due to Spring Festival factors, policy business pace adjustments, and the company's active strengthening of quality control, etc., but overall growth has remained steady. The increase in natural disasters and the resumption of vehicle travel are expected to put some pressure on COR. However, the company insists on high-quality development and continuous improvement of risk control capabilities, and operating efficiency is expected to continue to improve. The current valuation of the company corresponds to 0.82 times net assets at the end of 24, the target valuation is 1 times PB by the end of 24, and the target price is HK$12.4. It continues to be “highly recommended”.
Risk warning: increased market competition, changes in regulatory policies, natural disasters exceeding expectations, economic recovery falling short of expectations, weak automobile consumption.