According to the 2023 annual report recently released by China's Taiping (00966), after a period of adjustments, the company's performance showed clear signs of recovery. Net profit to mother reached HK$6.19 billion, an increase of 44.1% over the previous year. The China Merchants Securities non-bank analyst team commented that its performance far exceeded market expectations.
Looking at the business sector, the life insurance business, as the core of China Taiping, accounts for 92% of net operating profit. The new business value (NBV) of the life insurance business reached 8.515 billion yuan, an increase of 27.8% over the previous year. This growth trend was outstanding among peers. China Merchants Securities emphasized that a good start in 2024 is progressing smoothly, and the 24Q1NBV growth rate is expected to exceed 100%.
China Merchants Securities also stated that in 2023, China Taiping lowered the long-term investment return and risk discount rate assumptions to 4.5% and 9%, respectively, which is lower than the previous assumptions (5% and 11%). Although this adjustment has had a negative impact on life insurance NBV and embedded value (EV), the company has maintained good profitability through sound business strategies and effective risk management.
Notably, premiums for new orders increased 24.3% year over year. Among them, first-year premiums for individual insurance and long-term bank insurance increased by 18.7% and 52.4%, respectively, showing that the company's efforts in product innovation and market expansion have paid off. At the same time, although the number of agents decreased by 40% year on year, monthly premiums per person increased by 5.3%. This change reflects “the accelerated clearance of underperforming agents and a gradual improvement in team quality.”
China Merchants Securities pointed out that in terms of solvency, the comprehensive solvency ratio of life insurance is 284%, a significant increase of 90 pt from the beginning of the year. The core solvency ratio is also expected to improve significantly. On the one hand, it is due to the company issuing 11 billion perpetual bonds in December for external blood supplementation, and on the other hand, due to the reclassification of some financial assets in the solvency system corresponding to the old financial standards from holding maturing HTM to AFS for sale.
In the financial insurance business, insurance service revenue increased 7.9% year-on-year, and the domestic comprehensive cost ratio was 98.4%, indicating that the company has made positive progress in controlling costs and improving efficiency. Auto insurance and non-car insurance accounted for 62% and 38% of the original premiums, respectively, and the business structure is more balanced.
Furthermore, the investment sector remains steady. At the end of the performance period, China Taiping's investment assets reached HK$1,349.5 billion, an increase of 14.9% over the previous year. The comprehensive return on investment was 5.01%, an increase of 2.66 percentage points over the previous year.