Key points of investment:
[Event] China Taibao announced results for the first quarter of 2023:1) Operating revenue of 94.4 billion yuan, +19.4% year on year.
2) Guimu's net profit was 11.6 billion yuan, +27.4% year on year. 3) NBV reached 3.97 billion yuan, +16.6% year on year.
4) The mother's net assets were 248.4 billion yuan, +26.4% compared to the beginning of the year. 5) Weighted ROE was 4.9%, +0.2pct compared to the previous year.
The company began implementing the new accounting standards in 2023Q1. Insurance service performance achieved positive growth, and underwriting financial losses increased dramatically. 1) Insurance service revenue was 65.4 billion yuan, +6.9% year on year. Among them, Taibao Life Insurance achieved insurance service revenue of 22 billion yuan, a decrease of 5.5% over the previous year; Taibao Insurance achieved insurance service revenue of 43 billion yuan, an increase of 14.1% over the previous year. 2) The performance of insurance services (income from insurance services - insurance service costs - apportionment of premiums+amortization of insurance service expenses) was 9.52 billion yuan, +8.2% over the same period last year. 3) The insured financial loss (representing the capital cost of the insurance policy) was -205 billion yuan, +55.6% year on year.
Life insurance: NBV achieved positive growth, and manpower indicators showed a steady recovery. 1) Premium: The premiums for new individual insurance policies were $12.3 billion, or -6.0% year-on-year; of that amount, $8.44 billion was paid on time, +4.2% year-on-year. The premiums for new banking insurance channels were $11.1 billion, or -17.1% year on year; of that amount, $2.91 billion was paid on time, +399.1% year on year. We believe that the negative increase in premiums for new orders in the banking insurance channel stemmed from the higher base for the same period last year, but the sharp increase in prepaid premiums reflects a significant improvement in the quality of business. 2) Manpower: The size of the core team stabilized, the proportion of core manpower increased year-on-year, and the monthly first-year commission income of core manpower and monthly pre-tax income of core manpower increased significantly year-on-year. We believe that the sharp improvement in core human resources indicators represents the gradual realization of the results of the agent channel reform. We are optimistic that the company's human indicators will continue to rise steadily. 3) As “Operation Changhang” continues to advance, the quality of Taibao Life Insurance agents continues to improve. It is expected that the personal insurance channel will soon achieve positive growth in premiums for new orders, and the banking insurance channel will continue to be a new performance growth point.
Industrial insurance: The non-vehicle business has grown dramatically, and the comprehensive cost ratio continues to improve. 1) The comprehensive cost rate was 98.4%, -1.2 pct over the previous year. Mainly, the company continues to strengthen quality control and promote cost optimization over the same period last year. 2) Premium: Industrial insurance achieved original premium income of 57.5 billion yuan, +16.8% year on year. Among them, auto insurance premiums were 25.9 billion yuan, +6.0% year on year; non-car insurance premiums were 316 billion yuan, +27.4% year on year.
Investment: Affected by the rise in the equity market, the return on total investment increased year-on-year. 1) The Group's investment assets reached 2079.5 billion yuan, +6.3% compared to the beginning of the year. 2) The return on unannualized net investment was 0.8%, -0.2pct year on year; the return on unannualized total investment was 1.4%, +0.4pct year on year. We believe that the increase in the return on total investment mainly benefited from the rise in the equity market.
The valuation is still low, and the “better than the market” rating. We are optimistic that the company will focus on the main value line and operate steadily. “Operation Changhang” will promote the in-depth transformation of the personal insurance sector, the agent channel will continue to deepen the “three modernizations and five most” transformation, the property insurance sector will continue to strengthen quality control, and costs will be optimized year-on-year. It is expected that, along with macroeconomic improvements, a recovery in insurance consumer demand will also facilitate the recovery of premiums in the industry. As of April 27, 2023, the company's stock price corresponds to 2023E PEV0.5x. We gave the company 0.6-0.7 times the 2023 PEV, a reasonable value range of 35.84-41.81 yuan, a “better than the market” rating.
Risk warning: Long-term interest rates are trending downward; new premium growth falls short of expectations.