20240506-招银国际-中国太保-02601.HK-VNB_growth_accelerated__NP_turned_positive_YoY_7页_1mb

CPIC (2601 HK) reports positive financial performance and strategic shifts in its operations, with key highlights in the 1Q24 fiscal results. The company's Voluntary New Business (VNB) grew by 30.7% YoY, outpacing peer insurers like China Life and Ping An. The growth in VNB is primarily due to improved margins, estimated at 15.8%, and a strategic realignment toward agency channels in life insurance. Gross Written Premiums for the property and casualty division increased by 8.6%, driven by non-auto segments, while the Combined Ratio improved slightly.

The insurer's Net Profit attributable to shareholders increased by 1.1% YoY to RMB 11.8 billion, marking a turnaround from three consecutive quarters of decline since Q2 2023. This performance outperformed peers like China Life and Ping An, who saw net profit declines. The net investment results slid due to reduced investment income.

For valuation, the target price has been adjusted to HK$24.8, reflecting a 0.4x FY24E P/EV and 0.84x P/BV. Regulatory impacts, particularly from tightened oversight on bancassurance, are expected to fade after recent weak results. The Changhang Transformation initiative is seen as a catalyst for future efficiency gains and earnings resilience, though the stock currently carries a 37.8% downside from its previous target.

Key metrics:

• Agency channel rebounded with FYP/FYSP growth of +25.4% and +44.5% YoY.
• Bancassurance FYP declined by -21.8% YoY, but the overall FYP increased due to agency channel strength.
• P&C solvency ratios remain robust, with a core ratio of 98.0%.
• Valuation sensitivity lowers due to revised long-term investment return and risk discount rate assumptions.

The stock is rated BUY, reflecting capacity for recovery and efficiency improvements from ongoing reforms.