Taibao, China (601601): On the Right Path, Persevere in Doing the Right Thing

興業證券 ·  04/11  · Researches

Two firm transformations, gradually clarifying the value-centered business philosophy. 1) In 1991-2010, during the start-up period, the enterprise system was improved and the main insurance business was focused. Implement management system reforms and business innovation to gradually embark on a standardized and orderly development path; introduce foreign capital and listed financing to enhance capital strength and business vitality. During this period, the development position of financial groups with insurance as their core business was clarified. 2) 2011-2017: Transformation 1.0, life insurance focuses on term payments and individual insurance. Vigorously develop high-value personal insurance term payment services, and gradually reduce or even stop banking insurance services. In 2011-2017, the average number of agents per month increased from 290,000 to 870,000; individual insurance payments accounted for more than 90% of new instalments. 3) 2018 to date:

Transforming 2.0+ Changhang, life insurance focuses on value and empowerment. At the beginning of the industry adjustment in 2018, transformation 2.0 was the first to be initiated. At the end of 2021 2.0, focusing on life insurance transformation and issuing the Changhang Action Plan, former AIA China CEO Cai Qiang joined to fully implement the long-term principle. The core was to build a “three modernization and five greatest” professional marketing team, restart the “Value Banking Insurance” channel, and build a “Golden Triangle” product service system. The early stages of the reform experienced pain. The results began to be seen in the second half of '22, and there was a clear trend of marginal improvement in many core indicators. In '22, the per capita production capacity of individual insurance core manpower was +31.7% year on year, FYC per capita was +10.3% year on year, and Q3 and Q4 single-quarter NBV were +2.5% and +29.8%, respectively.

Strategic forwarding+sound operation+good governance to protect high-quality development. 1) Forward-looking layout to maintain strategic strength.

At every stage, we carry out a strategic layout that is ahead of the development of the industry, maintain strategic strength, cooperate with strong measures to promote the achievement of goals, and we can always “stick to doing the right thing on the right path”. 2) Steady operation with potential for development. The debt side, which focuses on business quality and cost control, has performed excellently in indicators such as premium continuation rate, debt-side cost ratio, and unit cost output value; on the asset side, the scale of total invested assets has increased steadily in recent years, the allocation of major asset categories has been steady, and long-term investment returns have performed brilliantly. 3) Good governance stimulates organizational vitality. On the one hand, the decentralized equity structure gives management plenty of room to freely play, which is conducive to improving the company's operating efficiency and execution; on the other hand, the issuance of GDR introduced foreign investors, and the internationalization and diversification of management injected vitality into corporate governance.

A reversal in debt boosts valuation performance, and transformation has the potential to enhance value space. On the short-term debt side, considering a low base plus stable team size, improved quality+product restructuring, NBV in '23 is expected to correct year-on-year and lead the industry. The potential for long-term transformation is unleashed, and steady growth in value can be expected. At present, the results of the “Phase I Project” of Operation Changhang have been shown. In the next stage, it is expected that the “second phase of the project” will begin. There are two key directions: one is to upgrade the organizational management model to stimulate the vitality of the organization; the second is to deepen the transformation in terms of product service capabilities based on customer needs. Looking back at the past, the most difficult period of reform is over; looking ahead, the transformation is expected to bring about a steady increase in the number of group customers, while NBV's return to expansion will drive steady EV growth. Currently, PEV is at the bottom of history, and there is still plenty of room for repair, giving it a “buy” rating.

Risk warning: The equity market has fluctuated greatly, interest rates have declined sharply, regulations have become stricter, and the transformation progress has fallen short of expectations

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