中国太保(601601)2022年年报点评:战略睿智 稳健进化

China Taibao (601601) 2022 Annual Report Review: Strategic Wisdom and Steady Evolution

中信證券 ·  03/28  · Researches

The company has already gone through the most difficult period, and new business value has taken the lead in starting a new growth cycle, mainly due to changes in the external environment. Among them, high-end customer demand and banking insurance channels have great potential to grow. The company's life insurance transformation has brought about a significant improvement in team quality, but there is still a long way to go for team growth; the future is talent competition.

China Taibao's main financial indicators for 2022 were basically in line with expectations. Among them, life insurance performance improved markedly in the second half of the year, and the financial insurance business slightly exceeded expectations. In 2022, the company achieved Guimu's operating profit of 40.115 billion yuan, +13.5% year on year; Guimu achieved net profit of 24.609 billion yuan, -8.3% year on year. The deviation between net profit and operating profit is mainly due to short-term investment fluctuations of 6.8 billion yuan and changes in assessment assumptions of 8.9 billion yuan. In terms of life insurance, new business value was 9.205 billion yuan in 2022, or -31.4% year on year; of these, new business value was 3.609 billion yuan in the second half of the year, +13.5% year on year; new business value reached 1,657 billion yuan in the fourth quarter, +29.8% year on year. In terms of financial insurance, the company led the industry in terms of premium growth and underwriting profitability in 2022. The annual premium growth rate was 11.6%, higher than its main competitors China Insurance (+8.3%) and Ping An of China (+10.4%), achieving a comprehensive cost ratio of 97.3% throughout the year, superior to its major peers. In January-January 2023, Taibao Insurance's premium revenue was +18.5% year-on-year, continuing to lead the industry (China Insurance +9.2% and Ping An of China +5.1% during the same period).

How do you view the resumption of growth in China's Taibao NBV? Mainly due to changes in the external environment. The company has gone through the most difficult period and has taken the lead in starting a new growth cycle. The value of the company's new business increased 13.5% year-on-year in the second half of 2022, and is expected to maintain the leading growth trend in the first quarter of 2023. On the one hand, the growth stemmed from changes in the industry cycle and market conditions, as reflected in the fact that the industry has gone through a difficult period of three years. The base is low enough. At the same time, high-end customer demand and banking insurance channels are starting a new cycle; on the other hand, the growth stemmed from changes in the external macro environment, especially from the gradual stabilization of real estate after policy adjustments, immediate demand and the restoration of the life service industry, offline social networking of agents, and the return of scenarios to normal. From the company's own perspective, under the strong leadership of Cai Qiang, general manager of Taibao Life Insurance, the company adheres to the long-term principle, implements high-quality human resources development, and cleans up a large number of ineffective manpower.

The company's average insurance marketer fell 47% in 2022 to 240,000 at the end of 2022; at the same time, the company's activity rate increased to 63%, which is at the highest level in the industry.

How to evaluate Taibao's life insurance transformation in China? The future is a competition for talents, and there is still a long way to go. We believe that at present, China's life insurance industry is entering a new stage of development. On the one hand, supply-side small and medium-sized companies and low-quality manpower have been significantly eliminated; on the other hand, middle and high-end customers, especially high-end customers, have huge demand potential. At the same time, the pan-financial management market pattern is being rewritten after the new asset management regulations. This is a historical opportunity for outstanding companies and entrepreneurs. However, life insurance companies are generally constrained by institutional constraints, talent constraints, and traditional inertia, and lack the right direction of action from an internal perspective. Taibao actively changed the institutional mechanism, set up the Evergreen Plan, brought in external talents, and promoted the construction of an old-age care and medical ecosystem for the future, with certain results. The future focus of the life insurance industry is still talent competition. In particular, life insurance sales require a large number of elite talents. How to expand after refinement is a difficult challenge, and it is necessary to focus on quality employee growth and retention rates. Looking at mature overseas markets, insurance sales, like financial advising, is a good career. It can attract college students and social elites to join. How to increase the attractiveness of insurance sales careers under China's special current situation is the key to future talent competition. From the perspective of peers, Ping An of China is making a useful experiment by recruiting sales elites through banks and recruiting college students through labor contracts. We look forward to Taibao's further exploration based on future talent competition.

How do you view China's Taibao's long-term strategy? Lead strategically, move forward steadily, slow is fast. As one of the best financial companies in Shanghai, China Taibao has always adhered to sound genes to drive the company's continuous evolution. Looking at peers, AIA, Taikang Insurance, and Ping An of China have always been industry benchmarks; companies are increasingly targeting AIA in terms of team refinement; in terms of building ecology, similar to the Taikang model, community construction for the elderly has already been rolled out across the country; while Ping An is exploring more in terms of comprehensive finance, which is currently difficult for Taibao to target.

Facing the future, market changes are not linear; companies are compatible; slow is fast. Once major opportunities arise in the industry, companies are expected to share in the growth of the industry. Overall, although the company is not an aggressively innovating company, considering the current operating environment of life insurance, the company's strategy is wise.

Risk factors: The stock market fell sharply; long-term interest rates declined; demand for life insurance continued to be sluggish; the company's life insurance business reform progressed less than expected.

Investment advice: Strategic wisdom, steady evolution, and maintenance of the company's A/H share “increase” rating. Corporate life insurance has already passed the most difficult stage and has taken the lead in starting a new growth cycle. The life insurance transformation has brought about significant improvements in team quality, but future team growth is essentially talent competition, and there is still a long way to go. The company's strategy is smart, evolves steadily, and adapts to the current environment. From the perspective of the capital market, there is a large deviation between the company's net profit and operating profit. It is expected that the company will improve and continue to grow this year; at the same time, it is expected that the company will establish dividend rules based on operating profit in order to establish long-term market expectations. We expect the company's NBV growth rate to be around 8% this year. Referring to the company's annual report, the company's 2023/2024 BPS forecast was adjusted accordingly to 25.9/28.0 yuan (previous forecast of 26.8/29.0 yuan), introducing the 2025 BPS forecast of 30.2 yuan. We expect the company's ROE in 2023 to return to the historical normal level of around 12%-13%, so referring to the company's average valuation over the past three years (1.2 PB for A shares, 0.9 x PB for H shares), the valuation of the company's A shares of 1.2x PB in 2023, corresponding to the target price of A shares of 31 yuan, maintaining the “increase in holdings” rating; giving H shares a 0.9 xPB valuation in 2023, corresponding to the target price of H shares at HK$27, maintaining the “increase in holdings” rating.

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