Incident: China Financial Insurance released its 2023 annual report and 2024 quarterly report. The original premium revenue for 2023 was 515.807 billion yuan, +6.3% year over year; insurance service revenue was 457.203 billion yuan, +7.7% year over year; net profit to mother was 24.585 billion yuan, -15.70% year over year. 24Q1 achieved insurance service revenue of 113.843 billion yuan, +5.9% year-on-year, and net profit to mother of 5.871 billion yuan, or -38.25% year-on-year. The 2023 cash dividend was 0.489 yuan/share, +2.3% year-on-year, and the dividend ratio reached more than 40%.
Non-car insurance is growing rapidly, and the business structure is constantly being optimized. In 2023, the original premium income was 515.807 billion yuan, +6.3% year-on-year, and the annual premium scale exceeded 500 billion yuan. Insurance service revenue was 457.203 billion yuan, +7.7% year-on-year, with a market share of 32.5%, and the leading position in the industry is stable. In terms of structure, the auto insurance business grew steadily, achieving insurance service revenue of 282.17 billion yuan, +5.3% year over year; non-car insurance business achieved high growth, with insurance service revenue of 175.086 billion yuan, +11.9% year over year, accounting for +1.4pct of revenue. Looking at specific types of insurance, the scale of business such as motor vehicle insurance, agricultural insurance, accident injury and health insurance grew, and insurance service revenue was +5.3%, +10.6%, and +23.8% year-on-year. Thanks to the company's efforts to actively adjust the business structure, business development is more balanced, and the business structure tends to be optimized. 24Q1 continued the trend of insurance service revenue growth, achieving insurance service revenue of 113.843 billion yuan, +6.5% year over year, business structure remained stable, car insurance +6.5% year over year, and non-car insurance +4.9% year over year.
Underwriting profit fluctuates, and comprehensive cost ratio optimization for multiple insurance types. In 2023, the company's underwriting profit was 10.189 billion yuan, or -29.1%. Among them, auto insurance underwriting profit fluctuated significantly, 41.1%, mainly affected by rising traffic travel recovery insurance rates, typhoons, torrential rain disasters, etc.; agricultural insurance business was affected by typhoons, torrential rain, etc., insured profit -16.1% year-on-year; accident injury and health insurance business turned losses into profits; loss of liability insurance and corporate property insurance decreased; and +55.3% year-on-year under a low base.
The company's comprehensive cost ratio was 97.8%, +1.2pct year on year, of which the comprehensive cost rate for car insurance was 96.9%, +2.4pct; the comprehensive cost ratio of non-car insurance was 99.1%, of which agricultural insurance, accident and health insurance, liability insurance, corporate property insurance, and other insurance comprehensive cost rates were 95.8%, 97.7%, 107.0%, 103.8%, and 95.5%, respectively, +1.4pct, -2.8pct, -2.1pct, -1.2pct. The company promotes cost reduction and efficiency through refined risk control management, and various non-car insurance types have achieved comprehensive cost rate optimization.
24Q1 was hampered by disasters such as low temperatures, rain, snow and freezing, and increased traffic travel. Net profit from 24Q1 to mother was 5.871 billion yuan, -38.25% year-on-year, and the comprehensive cost ratio reached 97.9%.
Total investment assets grew steadily, and investment in the first quarter was under pressure in the short term. Under the new guidelines, total investment assets in 2023 were 60.711 billion yuan, +4.3% year on year, total investment income of 20.807 billion yuan, -1.6% year on year, and total return on investment of 3.5%. The overall investment portfolio is dominated by fixed income products, accounting for 58.2% of total investment, and equity investments accounting for 26.4%. The investment benefit performance is steady. The company adheres to a long-term and steady investment philosophy, strictly controls risks, and continuously optimizes the investment asset portfolio. In 2023, fixed income investments will optimally allocate non-standard debt products, increase the size allocation of bonds, and increase the allocation of equity funds and perpetual bonds for equity investments. 24Q1 was affected by the market and the investment side was under short-term pressure. The rise in bond market value due to falling interest rates hedged the impact of fluctuations in income from most equity investments. Under the new standards, 24Q1 investment income was -35.71% year-on-year, achieving an annualized total return on investment of 0.8%.
Investment advice: China Financial Insurance performed well in 2023. The business structure was continuously optimized. Although underwriting profits fluctuated, the leading position stabilized and improved as the comprehensive cost ratio of multiple types of insurance declined.
We expect a year-on-year increase of 15.58%/10.56%/8.78% in 2024-2026, and EPS of 1.28/1.41/1.54 yuan/share. PE corresponding to the closing price of HK$10.08 on June 5 was 7.32/6.62/6.09 times. Maintain a “buy” rating.
Risk warning: changes in regulatory policies, intensification of natural disasters, and fluctuations in the equity market beyond expectations