20210330-招银国际-中国太保-02601.HK-Fostering_new_growth_drivers_4页_761kb

CMB International Securities | Equity Research | Company Update Summary

Core Content Overview

This document provides an equity research update on China Pacific Insurance (2601 HK), focusing on its financial performance in 2020, strategic initiatives for long-term growth, and valuation analysis. The report highlights both the positives and negatives of the company's results, evaluates its market position, and provides investment recommendations.

Financial Performance Highlights

2020 Results

• GWP (Gross Written Premiums): Increased by 4.2% YoY to RMB362bn, with Life Insurance declining 0.3% and P&C (Property & Casualty) rising 11.2%.
• Net Profit: Declined 11.4% YoY to RMB24.58bn, primarily due to changes in tax policies and increased insurance reserves.
• Group Embedded Value: Rose 16% YoY to RMB459.32bn.
• Operating Profit: Increased 11.7% to RMB31.14bn, excluding short-term volatility and one-off items.
• P&C Underwriting Profitability: Maintained profitability, with a combined ratio of 99%, slightly up from 98.3% in 2019 and better than the industry average.
• Auto Insurance: Combined ratio remained stable at 97.9%.
• Life Insurance: NBV (New Business Value) declined 27.5% YoY to RMB17.8bn, and NBV margin dropped 4.4ppt to 38.9%.
• Persistence Ratios: Declined sharply to 85.7% (13-month) and 85.1% (25-month), reflecting the impact of the pandemic on life insurance sales.

Valuation

• Current Price: HK$31.50
• Target Price: HK$39.21 (up +24.5% from previous target)
• P/EV (Price-to-Enterprise Value): Trading at 0.5x for FY21E and 0.45x for FY22E, with an attractive yield above 5%.
• P/B (Price-to-Book): At 1.33x for FY20A and 0.91x for FY23E.
• ROE (Return on Equity): Maintained at 12.96% for FY23E, indicating stable profitability.

Strategic Initiatives for Long-Term Growth

1. Healthy China Initiative: Deepening participation to drive growth in health insurance.
2. Technology Deployment: Advancing innovation and digital transformation.
3. Corporate Governance: Optimizing shareholder structure through GDR (Global Depositary Receipts) to improve governance.
4. Leadership Change: Appointed Mr. John CAI, former CEO of AIA China, as CEO of CPIC Life, expected to enhance sales agent force and overall performance.

Key Financial Metrics (FY19A to FY23E)

Gross Written Premiums (GWP)

• FY19A: RMB347,517mn
• FY20A: RMB362,064mn (+4.2% YoY)
• FY21E: RMB378,388mn (+4.5% YoY)
• FY22E: RMB401,670mn (+6.2% YoY)
• FY23E: RMB423,736mn (+5.5% YoY)

Total Income

• FY19A: RMB382,682mn
• FY20A: RMB418,964mn (+9.5% YoY)
• FY21E: RMB421,245mn (+0.5% YoY)
• FY22E: RMB448,841mn (+6.6% YoY)
• FY23E: RMB475,861mn (+6.0% YoY)

Net Profit

• FY19A: RMB27,741mn
• FY20A: RMB24,584mn (-11.4% YoY)
• FY21E: RMB27,648mn (+12.5% YoY)
• FY22E: RMB30,598mn (+10.7% YoY)
• FY23E: RMB33,554mn (+9.7% YoY)

EPS (Earnings Per Share)

• FY19A: RMB3.06
• FY20A: RMB2.63
• FY21E: RMB2.96
• FY22E: RMB3.27
• FY23E: RMB3.59

Dividend Payout Ratio

• Increased to 50.9%, including RMB1.2 per share cash dividend and RMB0.1 per share special dividend for the 30th anniversary.

Investment Recommendation

• Ratings: BUY (maintained)
• Reasoning: CPIC remains a top pick in the insurance sector due to its resilience, strategic initiatives, and attractive valuation metrics.
• Valuation Basis: Updated to YE21, with a target price of HK$39.21.

Market and Shareholder Data

• Market Cap: HK$401,324mn
• Avg 3 mths t/o: HK$699.01mn
• 52w High/Low: HK$42.75 / HK$20.1
• Total Issued Shares: 9,620mn
• Shareholding Structure:
  • Shenergy (Group): 13.79%
  • Fortune Investment: 13.35%

Share Performance (3-mths)

• Absolute: +4.7%
• Relative: +0.3%

Analyst and Disclaimer

• Analyst: Wenjie Ding, PhD

• Analyst Certification: Confirms that the views expressed reflect personal opinions and are not influenced by compensation or conflicts of interest.

• Important Disclosures: CMBIS does not provide personalized investment advice and recommends independent evaluation. The report is not an offer to buy or sell securities.

• Ratings Definitions:

  • BUY: Potential return of over 15% in 12 months
  • HOLD: Potential return of +15% to -10%
  • SELL: Potential loss of over 10%
  • NOT RATED: No rating provided
  • OUTPERFORM: Industry expected to outperform the market
  • MARKET-PERFORM: Industry expected to perform in-line
  • UNDERPERFORM: Industry expected to underperform the market

• Legal and Distribution Restrictions:

  • UK: Only for persons under Article 19(5) or Article 49(2)(a) to (d)
  • US: Only for "major US institutional investors"
  • Singapore: Distributed by CMBI (Singapore) Pte. Limited, an exempt financial adviser

• Auditor: PwC

• Company Structure:

  • CMBIS: Wholly owned subsidiary of CMB International Capital Corporation Limited
  • Parent Company: A subsidiary of China Merchants Bank