20221031-招银国际-中国太保-02601.HK-VNB_growth_turned_positive_in_3Q22_5页_925kb

CPIC (2601 HK) Summary

Core Content Overview

China Pacific Insurance (Group) Company (CPIC) reported improved performance in the third quarter of 2022 (3Q22), marking a significant turnaround in its business momentum. The company's VNB (Value New Business) growth turned positive to 2.5% YoY, reversing the 45.3% YoY decline seen in the first half of 2022 (1H22). This improvement was driven by the proactive upgrade of its agency model, which enhanced agency productivity and stabilized the scale of high-performing agents.

Key Performance Metrics

• Agency FYP (First-Year Premiums): Grew by 24.7% YoY in 3Q22
• Agency FYRP (First-Year Regular Premiums): Increased by 37.5% YoY in 3Q22
• Group Net Profit: Rose by 30% YoY in 3Q22, outperforming listed peers
• P&C Combined Ratio: Improved by 1.9ppt YoY to 97.8%, outperforming both Ping An and PICC P&C
• 13-Month Persistency Ratio: Rebounded to 88.0% in 9M22, indicating a recovery in business quality

Main Points

• VNB Growth Recovery:

  • VNB growth turned positive in 3Q22, narrowing the accumulative decline to 37.8% YoY in 9M22
  • Agency FYP and FYRP showed strong growth, up from significant declines in previous quarters
  • Bancassurance and group FYP growth remained robust in 3Q22

• P&C Performance:

  • The combined ratio improved to 97.8%, with a 0.6ppt YoY reduction in loss ratio and a 1.3ppt YoY decline in expense ratio
  • Underwriting margin expanded by approximately 1.5ppt YoY, attributed to:
    1. Reduced natural catastrophe losses
    2. Improved auto insurance profitability due to fewer loss events during the pandemic
    3. More disciplined expense management in non-auto lines
  • Auto and non-auto premiums grew by 7.6% YoY and 20.7% YoY, respectively, both outperforming the industry average

• Valuation and Outlook:

  • CPIC-H is trading at 0.2x P/EV FY23E and 0.4x P/BV FY23E, indicating a historical trough valuation
  • The analyst reiterates a BUY rating, expecting the recovery of life new business momentum to continue into 4Q22 and 2023
  • The sequential improvement in VNB growth is anticipated to support share price performance
  • Target price is HK$25.19, with an upside of 105.1% from the current price of HK$12.28

Financial Highlights (Selected)

Shareholding and Stock Data

• Market Cap: HK$34,077.0 million
• Average 3-Month Turnover (HK$ million): 15.3
• 52-Week High/Low (HK$): 25.50 / 12.20
• Total Issued Shares (mn): 2,775.0
• Share Performance:
  • 1-Month: -14.1%
  • 3-Month: -28.1%
  • 6-Month: -28.9%

Key Financial Ratios

• P/E Ratio (FY23E): 0.4x
• P/BV Ratio (FY23E): 0.4x
• Dividend Yield (FY23E): 9.0%
• ROA (FY23E): 1.2%
• ROE (FY23E): 11.3%

Analyst Rating and Recommendations

• CMBIG Rating: BUY
• Target Price: HK$25.19
• Up/Downside: 105.1%

Shareholding Structure

• China Baowu Steel Group: 14.1%
• Shenergy (Group): 13.8%

Auditor

• Auditor: PwC

Disclaimer

• This report is for informational purposes only and does not constitute investment advice
• CMBIGM does not provide individually tailored investment advice
• Past performance is not indicative of future results
• The value of investments may fluctuate and is not guaranteed
• Recipients are advised to consult a professional financial advisor before making investment decisions