CHINA TAIPING(HK:00966)2024-03-27 16:00Investment Rating - The report assigns an "Outperform" rating to China Taiping Insurance Holdings with a target price of HK$9.26 [2][20]. Core Insights - China Taiping Insurance Holdings reported a net profit attributable to shareholders of HK$6.19 billion for 2023, representing a year-on-year increase of 44.1%. The second half of 2023 saw a net profit of HK$0.97 billion, marking a return to profitability [3][15]. - The company's net assets stood at HK$79 billion, down 5.9% from the beginning of the year, with a return on equity (ROE) of 8.5%, up 1.2 percentage points year-on-year [3][15]. - The report highlights a strategic adjustment in long-term investment return assumptions and risk discount rates, impacting the embedded value (EV) and new business value (NBV) [16]. Summary by Sections Financial Performance - The group’s EV at the end of 2023 was HK$203.1 billion, a 2.5% increase year-on-year. On a comparable basis, the group and life EVs grew by 9.1% and 8.2% respectively [16]. - Taiping Life's NBV reached HK$7.51 billion, a slight increase of 0.7% year-on-year, but on a comparable basis, it grew by 26.0% [16][17]. - The NBV margin was reported at 15.9%, with individual insurance and bancassurance margins at 22.2% and 5.9% respectively [16]. Life Insurance Segment - New premiums for Taiping Life increased by 24.3% year-on-year, with individual long-term first-year premiums at HK$20 billion, up 13.3% [17]. - Bancassurance long-term first-year premiums surged by 45.5% to HK$16.9 billion, indicating a growing share of this channel [17]. - The report notes a significant reduction in the agent workforce, down 40.0% from the start of the year, but anticipates stabilization and recovery in 2024 [17]. Property & Casualty Segment - All divisions within the property and casualty segment remained profitable, with a combined ratio of 98.4%, an increase of 1.2 percentage points year-on-year [18]. - Original premium income for Taiping P&C was HK$33.4 billion, reflecting a year-on-year growth of 1.4% [18]. Investment Strategy - The group’s investment assets grew to HK$1,349.5 billion, a 14.9% increase from the start of the year, with a focus on optimizing the investment structure by increasing bond allocations [19]. - Total investment profit reached HK$33.6 billion, a significant year-on-year increase of 138.8% [19]. - The report attributes the rise in synthetic fund cost rate to strong performance in high-dividend stocks and a decline in domestic interest rates [19]. Valuation - The current stock price corresponds to just 0.1x the 2024E price-to-embedded value (PEV), indicating potential undervaluation [20]. - The report maintains a target PEV of 0.15x for 2024E, reflecting a cautious outlook on the company's valuation [20].