Description of the event
Xinhua Insurance released its 2023 annual report. The company achieved net profit of 8.71 billion yuan, a year-on-year decrease of 11.3% (a decrease of 59.5% after restatement); the value of new business was 3.02 billion yuan, an increase of 24.8% over the previous year (comparable caliber of 65.1%).
Incident comments
Asset-side performance dragged down performance growth. In 2023, Xinhua Insurance achieved net profit of 8.71 billion yuan, a year-on-year decrease of 59.5%. The pressure was high. Specifically, it was mainly dragged down by investment. Due to falling interest rates and equity market shocks, the company's total investment income fell 50.3% year on year to 22.25 billion yuan. Total and net return on investment fell 2.5 pct and 1.2 pct year on year respectively, and subsequent investment pressure increased.
The quality of business continues to improve, and the value of new business increases rapidly. In 2023, Xinhua Insurance achieved a new business value of 3.02 billion yuan, an increase of 24.8% over the previous year (a comparable caliber of 65.1%). Looking at the breakdown, the increase in the value ratio contributed greatly. Specifically, premiums for new policies increased 2.9% year on year to 44.63 billion yuan. It is worth noting that the payment structure continued to improve, the prepayment ratio increased markedly, and the share of settlement and short-term insurance declined; as reflected in the value ratio of the new business, the year-on-year increase of 1.2 pct (comparable caliber is 3.4 pct), which contributed significantly at a low base. In terms of business quality, the 13-month and 25-month continuation rates improved by 7.2pct, 1.2pct to 89.8% and 78.4%, respectively, reflecting continuous improvement in business quality over the past year.
The quality of individual insurance teams has improved markedly. Although the size of the agency team fell 21.3% from the beginning of the year to 155,000 people, a simple estimate is that the value of new business per capita increased by 59.4% year on year, driving the value of new business in individual insurance channels to increase 25.4% year on year, contributing to the main value increase. At the same time, due to a significant increase in production capacity, team revenue is also expected to improve significantly, which played a strong supporting role in the subsequent narrowing of the scale decline and the exhibition industry. In terms of banking insurance, the growth rate declined. The value of new business increased 17.6% year on year. The payment structure continued to improve, the premium payment rate declined year on year, and the share of new installment payments increased.
The pressure on investment returns increased, and the non-standard scale continued to shrink. Under the influence of stock market and interest rate shocks, the total return on investment fell 2.5 pct to 1.8%, and the net return on investment fell sharply by 1.2 pct to 3.4%. Among them, the sharp negative trading price spread of investment assets was the main reason, mainly due to transactional financial assets. Weak expected equity market performance was the core reason. In addition, interest dividends and dividend income also declined significantly. In terms of asset allocation, the ratio of bond allocation increased markedly, from 41.6% at the beginning of the year to 50.4%, the share allocation ratio increased by 0.8 pct, while funds decreased by 1.2 pct. Furthermore, the proportion of non-standard asset allocation continues to decline, with a pressure drop of 6.7 pct to 11.7% compared to 2022. There is some pressure on asset allocation in the future.
The focus is on recommending Xinhua Insurance, which is highly flexible. Currently, the main contradictions in the industry are concentrated on the asset side. As a pure life insurance company, Xinhua has the highest asset-side flexibility in the industry; on the debt side, sales expectations for savings products are relatively good, and the company's agents are leading the industry in improving production capacity. It is expected that the debt side will hardly be a drag. Maintaining a “buy” rating is recommended as a highly elastic asset.
Risk warning
1. Major adjustments to industry policies;
2. The equity market fluctuated greatly, and interest rates declined sharply.