机构:招银国际
研究员:Nika MA
Enlarged EV sensitivity based on revised-down key assumptions. FY24 NBV grew 28.8% YoY on a like-for-like basis, broadly in line; and retreated 8.2% YoY on a reported basis as the insurer once again lowered the actuarial assumptions of 1) LT investment return by 50bps from 4.5% to 4.0%; and 2) risk discount rate (RDR) by 100bps/200bps to 8.5%/7.5% for traditional/non- traditional insurance products (prev. 9.5%). We notice the insurer’s sensitivity on interest rates in fact enlarged per renewed disclosure, as another 50bps LT investment return and RDR cut would drag NBV/L&H EV/Group EV by 26%/13%/8% (vs FY23: -19%/-10%/-6%). This could be attributable to a rich legacy of traditional policies, whose written premiums made up 33% of total by FY24, +6pct YoY, in our view. Looking ahead, we expect the transition to par could consistently benefit, lowering the cost of liability and EV sensitivity.
Life OPAT awaits longer time to turnaround. L&H OPAT was down 1.9% YoY to RMB 97bn in FY24 on a like-for-like basis; and was down 7.7% YoY based on the end-FY23 EV assumptions. Although the decline was largely trimmed (FY23: -9.0% YoY), the result fell short of our view which we expect it to back to growth within the year. CSM release was down 4.9% YoY to RMB71.1bn, as the base retreated 4.8% YoY to RMB 802bn on a stable rate of 9%. CSM balance was down 5%/6% YoY/HoH to RMB 731bn, as CSM release (RMB 71.1bn) outstripped new business CSM (RMB 35.4bn) and interest accretion (RMB 24.1bn). Changes in financial risks of VFA contracts recorded a negative shock at RMB 4.8bn, due to downward interest rates.
CoR improvement bolstered P&C OPAT growth. P&C insurance revenue grew 4.7%/5.5% YoY in FY24/2H24. CoR improved 2.3pct YoY (0.5pct/1.9pct decrease in loss/expense ratio) to 98.3% in FY24 (vs FY23: 100.7%), lifting UW profit to RMB 5.5bn in FY24 from a loss of RMB 2.1bn in FY23. 2H CoR was 98.8% (CMBI est), -4.4pct YoY, thanks to the turnaround of guarantee insurance (2H CoR: 91.3%, -65pct/-16pct YoY/ HoH) despite increased NAT CAT claims. Auto CoR deteriorated 0.4pct to 98.1% in FY24, stable in 2H24. P&C OPAT surged 68% YoY to RMB 15bn, comprising 12% of Group OPAT.
Valuation: The insurer is trading at FY25E 0.55x P/EV and 0.8x P/B, with >6% yield and 13% 3-yr forward ROE. Looking ahead, we are positive on the changes in business mix and a projected outlook for sustainable profitability. Considering investment volatilities and steady insurance results, we revise up FY25-27E EPS estimates by 0.5%/2%/2.5% to RMB 7.55/8.01/8.59. Maintain BUY, with TP unchanged at HK$65.1, implying FY25E 0.8x Group P/EV and 1.0x P/B.