Incident: The company disclosed 2023 results, which were in line with expectations. Net profit of 8.7 billion yuan/yoy -59.5% (comparable caliber) was achieved in '23, and the value of the new business was 3 billion yuan under the new caliber, compared to -24.4% before the hypothetical adjustment, +65% for NBV (comparable caliber) yoy in '23; included value of 25.5 billion yuan at the end of the period. The company's net and total return on investment in '23 was 3.4%/1.8%, respectively, -1.2pct/-2.5pct year-on-year, respectively.
The company paid 0.85 yuan/yoy -21.3% per share for 23 years, with a dividend rate of 30.1%.
Market fluctuations affect investment-side performance; the company lowered the return on investment by 50 bps to 4.5%, and lowered the risk discount rate by 200 bps to 9%. Under the new assumption, NBV reached 3 billion yuan in 23 years, -24.4% compared to before adjustment; comparable caliber was NBV 4 billion yuan/yoy +65% in 23 years; the new hypothesis included a value of 25.5 billion yuan at the end of next year. The company's investment and profits were under phased pressure in '23, mainly affected by market fluctuations. In that year, the profit and loss from the trading price difference of investment assets was 12.5 billion yuan, and the profit and loss from changes in fair value was 5.9 billion yuan. The company's share base is higher than that of its peers. If the market recovers in the future, it will also have greater investment return flexibility.
Premium structure improvement and business quality improvement. In '23, the company achieved premium income of 165.9 billion yuan/yoy +1.7%, and premium payment of 23.5 billion yuan/yoy +32% for the first year of long-term insurance, of which 2.89 billion yuan/yoy +12.7% was paid for the ten-year term or more.
Individual insurance channels: Long-term insurance premiums of 11.7 billion yuan/yoy +9.7% for the first year, with an interim premium of 11.1 billion yuan/yoy +9.8%. At the end of the year, the number of agents was 155,000 people/yoy -21.3%, and the average monthly production capacity per capita was 6,294 yuan/yoy +94.4%. The agent optimization effect was remarkable, and efficiency was greatly improved.
Banking insurance channel: Long-term insurance premiums of 12.4 billion yuan/yoy +60.5%, a record high; renewal premiums of 18.7 billion yuan/yoy +18.1%, premium payment of 16.6 billion yuan/yoy -18%, and the premium structure has been greatly optimized.
Product structure: Traditional insurance premium income of 80.8 billion yuan/yoy +62.2%, with long-term insurance premiums of 39.2 billion yuan/yoy +171.5%; traditional, dividend/health products accounted for 48.7%/17.9%/32.8%, respectively, +18.2pct/-15.2pct/-2.7pct, respectively. The main reason is the increase in the popularity of lifelong life products.
Business quality: Continued rate of 89.8%/yoy+7.2pct in January '23; continuation rate of 78.4%/yoy+1.2pct in January '23, annual withdrawal rate of 1.9%, same as the previous year.
The scale of investment assets grew steadily, and yields declined year-on-year. The company's investment assets in '23 were 1.34 trillion yuan/yoy +15.4%, of which bonds accounted for 50.4%/yoy+8.8pct, and the total share base accounted for 14.2%/yoy-0.4pct. The company's net and total return on investment in '23 was 3.4%/1.8%, respectively, -1.2pct/-2.5pct year-on-year, respectively.
Investment advice: Maintain the company's “Highly Recommended” rating. Debt side: The agent team continues to be optimized, efficiency has been greatly improved, and business quality has been steadily improved. It is expected that 24 years will continue to benefit from the concentration of heads brought about by the integration of banking insurance channels and reporting. Asset side: The scale of investment is growing steadily, and the share base share is higher than that of peers. It is expected that the future will bring greater investment income flexibility as the market recovers. Net profit for 24-26 is estimated at 124,143,16 billion yuan, with year-on-year growth rates of +42%, +16%, and +11%, respectively; NBV of 36, 4, 4.4 billion yuan in 24-26, +17.6%, and +9.9% year-on-year respectively. The current closing price corresponding to 24E-26E dynamic P/EV is 0.35 times, 0.34 times, and 0.32 times, respectively.
Risk warning: 1) Policy implementation falls short of expectations; 2) The number of agents has declined sharply; 3) equity market fluctuations, and credit risk is exposed.