\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) China Pacific Insurance (Group) Co.Ltd(601601) 601)
Event: the company disclosed its performance in 2021: it achieved a net profit of 26.834 billion yuan, a year-on-year increase of 9.2%; The operating profit reached 35.346 billion yuan, with a year-on-year increase of 13.5%. The difference between the net profit and the operating profit is due to the short-term investment fluctuation (- 2.297 billion yuan, the impact of the assumption that the actual investment income of life insurance business is 5% higher than the long-term expected investment income) and the impact of the change of evaluation assumptions (+ 10.966 billion yuan, the after tax impact of the decrease of pre tax profit of 14.621 billion yuan based on the change of accounting estimates). The company plans to pay a dividend of 1 yuan per share, corresponding to a cash dividend rate of 35.9%, down from 50.9% in the previous year.
Key investment points
The growth rate of operating profit of life insurance is better than that of peers, and the growth of NBV continues to be under pressure. In 2021, the NBV of the company reached 13.412 billion yuan, with a year-on-year decrease of 24.8% (of which the year-on-year growth rates in the first and second half of the year were – 8.9% and – 51.9% respectively). In terms of attribution, the annualized Xinbao increased by 24.4% year-on-year; The value ratio of new business decreased by 15.4 PCT. To 23.5% year-on-year. The company achieved an operating profit of 28.265 billion yuan, an increase of 9.2% year-on-year (of which the year-on-year growth rates in the first and second half of the year were 6.7% and 11.9% respectively. Although the remaining margin declined slightly in the second half of the year, the acceleration of operating profit growth benefited from the positive deviation contribution driven by more solid business quality). The company made every effort to promote the professional, professional and digital transformation of agents, and the quality of the team was improved. Although the average monthly insurance marketer decreased by 29.9% to 525000 people year-on-year, the average monthly FYP of the team reached 4638 yuan, an increase of 42.3% year-on-year; The average monthly FYC reached 791 yuan, a year-on-year increase of 16.3%. Looking forward to 2022, guided by the “core” basic law, the company will further improve its business objectives of core manpower and core human capacity. At the same time, the company will further diversify its bancassurance channels as soon as possible, and practice the “product + service” Golden Triangle system around the three core needs of health, wealth and pension. Affected by the spread of the epidemic throughout the country since the beginning of 2022, we expect the company’s NBV year-on-year growth rate to be high before and low after 2022, and there is still double-digit downward pressure throughout the year.
The comprehensive cost rate of property insurance improved against the trend in the second half of the year, and roe was in the leading position in the industry. In 2021, CPIC property insurance realized an insurance business income of 152643 billion yuan, a year-on-year increase of 3.3%; The comprehensive cost ratio was 99.0%, which was flat year-on-year (99.3% and 98.7% in the first and second half of the year respectively), of which the comprehensive compensation ratio was 69.6%, with a year-on-year increase of 8.2 percentage points, and the comprehensive expense ratio was 29.4%, with a year-on-year decrease of 8.2 percentage points. The viscosity of auto insurance customers continued to improve, and cor increased by 0.8 percentage points year-on-year to 98.7% (99.0% and 98.4% respectively in the first and second half of the year, and improved month on month in the second half of the year under the impact of typhoon 7.20, highlighting the business heritage). Non auto insurance has turned losses into profits (COR is 99.5%), and the quality of emerging business areas such as health insurance, liability insurance and agricultural insurance has improved and maintained rapid growth, which is significantly better than that of the same industry. In 2021, CPIC property insurance realized a net profit of 6.352 billion yuan, with a year-on-year increase of 21.9% and a corresponding roe of 13.5%. It is in an absolutely leading position in the industry, thanks to the growth of investment income and the effective control of expenses. Looking forward to 2022, we expect that the property insurance sector will benefit from the decline of auto insurance accident rate, the year-on-year growth rate of underwriting performance will remain stable, and roe is expected to stabilize at 13%.
The investment performance is relatively stable. At the end of the period, the group’s venture capital investment assets were 1812069 billion yuan, an increase of 10.0% over the end of 2020; The net / total return on investment was 4.5% / 5.7% respectively, with a year-on-year decrease of 0.2/0.2 PCT; The growth rate of net investment assets was 5.4%, with a year-on-year decrease of 2.0 PCT, which was caused by the decrease of floating profit of available for sale financial assets (from RMB 12.909 billion in 2020 to RMB – 3.6 billion). Affected by this, the group’s attributable comprehensive income fell by 28.9% to RMB 24.149 billion in 2021. At the end of the period, equity investment accounted for 21.2%, an increase of 2.4 PCT compared with the end of 2020, of which core equity accounted for 11.1%, an increase of 0.9 PCT compared with the contrarian trend at the end of 2020.
The growth of embedded value slows down, but it is still better than that of peers. In 2021, the year-on-year growth rates of life insurance and group eV of the company were 10.3% and 8.5% respectively (of which the month on month growth rate in the second half was 6.0% and 5.0% respectively), and the roev of life insurance was 11.6%. The growth of embedded value was negatively dragged down by the slowdown of new business value growth and various deviations, but it was still better than the peers, mainly due to the combined drag of operation deviation and investment deviation. At the beginning of the period, the growth rate of life insurance EV was 1.9%, which was still better than the peers, indicating that the business quality was relatively solid, We expect that the group’s EV will remain around 9% in 2022, slightly higher than that of peers.
Profit forecast and investment rating: the company’s 2021 annual report basically meets market expectations, but the cash dividend rate is slightly lower than expected. We are concerned about the recovery of life insurance NBV in the second half of the year. We expect the net profit of the company from 2022 to 2024 to be 29.8 billion yuan, 33.7 billion yuan and 36.1 billion yuan, with a year-on-year growth rate of 11.0%, 13.2% and 7.0% (the original forecast from 2022 to 2023 was 32.9 billion yuan and 41.6 billion yuan). As of March 25, 2022, the company’s share price corresponds to 0.41, 0.37 and 0.34 times of P / EV from 2022 to 2024 respectively. The share price has overreacted to pessimistic expectations and maintained the “buy” rating.
Risk tips: 1) the implementation of life insurance “long voyage action” plan is lower than expected; 2) Sharp fluctuations in the equity market dragged down investment performance.
