Incident Overview
On April 29, 2024, Xinhua Insurance released its 2024 quarterly report: 2024Q1, the company achieved operating income of 26.479 billion yuan, -8.7% year on year; realized net profit of 4.942 billion yuan, -28.6% year on year; the company's weighted average ROE was 4.97%, down 0.89pct year on year; EPS was 1.58 yuan, -28.8% year over year.
Analytical judgment:
New premiums are being dragged down by the integration of banking insurance reporting banks, and agent channels are growing strongly.
With 2024Q1, the company achieved original insurance premium revenue of 57.193 billion yuan, -11.7% year-on-year, including 10.91 billion yuan in new premiums, or -45% year-on-year, mainly due to a sharp drop of 81.4% in premiums paid for new policies. By channel, the new banking insurance channel contracted, with premium revenue for new futures contracts falling from 78.3% in 2023Q1 to 52.0% of the total long-term insurance policy premiums. We believe that the contraction of the company's new banking insurance policies was mainly affected by the consolidation of industry reporting and banking, while the company relied heavily on banking insurance channels. The proportion of the new bank insurance policy premiums in the total long-term insurance policy dropped from 78.3% in 2023Q1 to 52.0% in 2024Q1. New agent channel orders have continued to grow, and the structure has also improved. Among them, premium revenue for new prepaid orders was 5,093 billion yuan, +23% year over year, accounting for +26.2pct to 47.1% of new long-term insurance orders. We expect to support NBV growth in the first quarter.
The overall return on investment is at a healthy level.
In terms of the size of investment assets, as of the end of 2024Q1, the company's investment assets were 1,366.69 billion yuan, +10.7% year-on-year. In terms of investment income, 2024Q1, the company's annualized net return on investment was 6.7%, +1pct year on year, and the annualized total return on investment was 4.6%, -0.6 pct year on year. The overall level is healthy. Among them, the slight decline in return on total investment may be affected by the good performance of equity investment in the same period in 2023 and the continued decline in long-term bond interest rates.
Investment advice
Considering the strong growth of the company's agent business and the overall investment income, we maintain our previous profit forecast. We expect revenue for 2024-2026 to be 767/817/86.6 billion yuan; 2024-2026 net profit to mother of 117/140/15.9 billion yuan, respectively; and corresponding EPS of 3.76/4.48/5.09 yuan, respectively. The PEVs corresponding to the closing price of 31.62 yuan on April 29, 2024 were 0.36/0.34/0.31, respectively, maintaining the “buy” rating.
Risk warning
Channel transformation falls short of expectations; equity market shocks; risk of a sharp decline in interest rates.