Incident: China Taibao released its performance report for the first quarter of 2023. In the first quarter of 2023, the company achieved insurance service revenue of 65.39 billion yuan, an increase of 6.9% over the previous year; achieved operating income of 94.386 billion yuan, an increase of 19.4% over the previous year; and achieved net profit of 11.626 billion yuan, an increase of 27.4% over the previous year.
Comment:
The transformation of life insurance “Changhang” has achieved remarkable results, with a year-on-year increase in NBV. In 2023, China Taibao further consolidated the “Changhang” transformation achievements, promoted the “core” model from “model transformation” to “model formation”, and advanced the transformation in depth. (1) In the first quarter of 2023, Taibao Life Insurance's NBV reached 3,971 billion yuan, a year-on-year increase of 16.6%. (2) The size of the core team gradually stabilized, achieving 8.443 billion yuan of new insurance payments through agent channels in the first quarter, an increase of 4.2% over the previous year. The 13-month policy retention rate for personal life insurance customers was 95.9%, an increase of 6.8 percentage points over the previous year, and the quality of business improved markedly. (3) The diversified channel layout continues to be consolidated. In the first quarter, the amount of new insurance payouts in banking insurance channels was 2,906 billion yuan, a sharp increase of 399.1% over the previous year.
The comprehensive cost ratio of industrial insurance continues to improve. In the first quarter of 2023, Taibao Insurance achieved original insurance premium income of 57.543 billion yuan, an increase of 16.8% over the previous year. Taibao Insurance grasped the development opportunities of new energy vehicles and increased the retention of high-quality customers. The original insurance premium revenue of auto insurance in the first quarter was 25.897 billion yuan, an increase of 6.0% over the previous year; non-car insurance focused on national strategy and policy orientation, innovating the supply of products and services to continuously enhance the development momentum of emerging markets. In the first quarter, the original insurance premium revenue of non-car insurance was 31,646 billion yuan, an increase of 27.4% over the previous year. The comprehensive underwriting cost ratio was 98.4%, down 1.2 percentage points from the previous year.
Investment returns have generally remained steady. Since this year, credit spreads have narrowed, and treasury bond yields have risen slightly. The equity market rose, and the Shanghai Stock Exchange and the SME Board were stronger than the Shanghai and Shenzhen 300. The company insists on maintaining basic stability in the allocation of major asset classes based on debt characteristics, actively allocating long-term fixed income assets, extending asset periods, and at the same time flexibly allocating tactical assets, actively seizing market opportunities, and maintaining basically stable investment returns. The Group invested assets of 2,0795.46 billion yuan, an increase of 6.3% over the end of 2022. In the first quarter of 2023, the net return on investment of the company's invested assets was 0.8%, down 0.2 percentage points from the previous year; the return on total investment was 1.4%, up 0.4 percentage points from the previous year.
Investment advice: Maintain China's Taibao “buy” rating. We expect China Taibao's revenue growth rates to be 9.11% and 9.18% respectively in 2023-2024, and net profit growth rates of 19.14% and 15.19%, and the inclusive value of each share is 59.41 yuan and 64.76 yuan. The PEV corresponding to the current stock price is 0.53 and 0.48 times.
Risk warning: The risk that premium growth will decline due to loss of agents exceeding expectations, production capacity increases falling short of expectations, and banking insurance channel development falling short of expectations; the risk that asset-side investment returns will fall beyond expectations due to a rapid decline in long-term interest rates; the risk that continued tightening of regulatory policies will make it more difficult to sell new insurance policies.