\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) China Pacific Insurance (Group) Co.Ltd(601601) 601)
China Pacific Insurance (Group) Co.Ltd(601601) released the annual report of 2021. During the reporting period, the company achieved an operating revenue of 440643 billion yuan, a year-on-year increase of 4.4%; The net profit attributable to the parent company was 26.834 billion yuan, a year-on-year increase of 9.2%. The value of new business was 13.412 billion yuan, a year-on-year decrease of 24.8%; The embedded value at the end of the period was 498309 billion yuan, an increase of 8.5% over the end of 2020.
During the reporting period, the company maintained steady operation in the face of changes in the industry development environment, and its operating revenue and net profit increased year-on-year. Among them, the income from life insurance business was 211685 billion yuan, a year-on-year decrease of 0.1%; The income from property insurance business was 154611 billion yuan, a year-on-year increase of 3.3%. However, the value ratio of new life insurance business decreased significantly by 15.4 percentage points year-on-year, reducing the value of new business by 24.8%, and then reducing the growth rate of embedded value to single digits.
The value chain is facing reconstruction, and the company’s life insurance business needs to be broken. In the case of repeated outbreaks for a long time, the growth rate of macro-economy and residents’ disposable income bear downward risks. Insurance products as optional consumer goods also encounter the problem of “consumption degradation”. During the reporting period, the company’s product structure, pricing and sales strategy are facing adjustment, and the overall value attribute is declining. In addition, in the process of continuously clearing up the agent, the increase in staff was less than expected, and the monthly average number of agents decreased from 749000 in 2020 to 525000 in 2021, a decrease of nearly 30%. The rapid loss of agents also significantly reduced the policy continuation rate, which decreased by 5.4pct and 6.4pct respectively in 13 and 25 months, which affected the growth rate of embedded value. At present, how to increase staff quickly and effectively and how to balance the relationship between premium scale and value are still urgent problems to be solved.
The long voyage action has been continuously promoted, and multiple measures have been taken to promote the “long voyage” of the company. Under the circumstance that the general environment of the industry cannot be changed in the short term, the company has adopted a number of reform measures to boost the performance and value growth of life insurance. In terms of channel reform, the company uses financial technology means to promote the agent channel reform with professionalization, specialization and digitization. Through the “core” basic law and professional sales platform, the company introduces professional and systematic training to enable the marketing team, create high-capacity core personnel and realize the overall upgrading of the agent team; Through the implementation of the three value strategies of value outlets, value products and high-quality teams, we will effectively layout regions and channels, and help bancassurance channel premium income grow by leaps and bounds. At the same time, taking advantage of the policy, the company has built a high-quality elderly care community “Taibao home” around the elderly care needs of residents. At present, the three product lines of “Taibao home” have been fully implemented, which can effectively match the elderly care needs of multi-level and multi-age groups, and is assisted by the “Taibao blueprint” health management service. It is expected that with the continuous extension and expansion of the insurance and health care industry chain, it will help the company’s life insurance business return to the fast lane of growth.
Investment suggestion: consistent with the industry situation, the company has also continued to face the problem of declining premium growth and stalling value growth since 2020. It is expected that under the epidemic, the value growth and premium growth of the company’s new business will continue to be under pressure in the short term. However, the company continues to promote business and channel reform, improve efficiency through financial technology empowerment, reduce costs and provide accurate services, which is expected to gradually reverse the current adverse situation. In addition, the company is expected to provide a new “engine” for performance growth and build a new growth pole of life insurance by building a health care industry chain and exploring large-scale health industry investment in cooperation with international investment institutions, so as to build a development paradigm of health industry ecosystem. On the whole, we are still optimistic about the long-term development prospects of the company, so we maintain the “recommended” rating. The current valuation of the company is only 0.39x22evps, which has high medium and long-term investment value. It is recommended to actively allocate. The target price for the year is 34.8 yuan, corresponding to 0.6x22evps.
Risk tips: macroeconomic downside risk, policy risk, market risk and liquidity risk.
