Incident: The company disclosed its 2023 annual report and achieved net profit of 8.7 billion yuan (YoY -11.3%) for the whole year, original premium income of 165.9 billion yuan (YoY +1.7%), and a new business value of 3 billion yuan (YoY +65.1%, comparable caliber). Influenced by factors such as fertilization calculations, the implied value reached 25.5 billion yuan (YoY -2.0%) by the end of 2023.
NBV is leading the industry in high growth. The company achieved original premium revenue of 165.9 billion yuan (YoY +1.7%) in 2023, accelerated the optimization of the business structure, and focused on term delivery business, including 40.9 billion yuan (YoY +5.4%) for the first year of long-term insurance; 23.5 billion yuan (YoY +31.8%) for the first year of long-term insurance. Benefiting from the increase in the share of prepaid premiums, the value rate of the company's overall product and new business increased slightly, from 5.5% in 2022 to 8.9% in 2023. Influenced by a sharp rise in volume and price driven by the popularity of savings products, the company achieved a new business value of 3 billion yuan (YoY +65.1%, comparable caliber) in 2023.
Focusing on value improvement of futures contracts, agent production capacity increased significantly. In terms of individual insurance channels, the company adheres to the “diversification, long-term, high value” transformation strategy. The number of individual insurance agents dropped to 155,000, with an average monthly qualified workforce of 27,000; the average monthly per capita comprehensive production capacity was 6,294 yuan (YoY +94.4%). As the transformation of the team continues to advance, the company's qualified production capacity is expected to improve further. In terms of banking insurance channels, the share of new single instalment payments increased significantly. The first-year long-term insurance premiums were +60.5% year-on-year to 12.4 billion yuan, increasing the value contribution of the banking insurance channel.
The return on investment declined markedly, and the share of bonds increased markedly. At the end of 2023, the company's investment assets reached 1.34 trillion yuan (YoY +15.4%). Affected by declining ten-year treasury bond yields and large capital market fluctuations, etc., the company achieved a total return on investment of 1.8% (YOY-2.5pct) and a net return on investment of 3.4% (YOY-1.2pct) in 2023. In terms of structure, bond investment accounted for +8.8 pct to 50.4% year over year, and equity investment accounted for -0.4 pct to 14.2% year over year. Among them, the size of non-standard assets was 156.9 billion yuan, compared with 64.2 billion yuan at the end of the previous year, accounting for 11.7% of the investment (YOY-6.7pct).
EVs declined 2.0% year over year due to changes in fertilization assumptions and investment fluctuations. In 2023, the company carefully lowered the long-term return on investment assumption for non-investment-linked accounts used for value assessment to 4.5% and the risk discount rate to 9.0%, causing the impact of changes in economic assumptions to reach -13.3 billion yuan, dragging down EV to 5.2% at the beginning of the period. Furthermore, due to weak investment performance, the economic experience gap reached -14.3 billion yuan, which in turn led to the company's internal value reaching 25.5 billion yuan (YoY -2.0%) by the end of 2023.
Investment advice: Maintain a buy-A investment rating. We expect the company's 2024-2026 EPS to be 3.84 yuan, 3.86 yuan, and 4.31 yuan, respectively, and will be given 0.42x2024 P/EV, corresponding to a 6-month target price of 35.41 yuan.
Risk warning: large fluctuations in the equity market, uncertainty in regulatory policies, continuing decline in the number of agents, etc.