| 作者： | Felix LUO,Laurel ZHU |
| 时间： | 2020年08月24日 |
| 重要性： | 一般报告 |
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| 阅读权限： | 该文章钻石卡、金卡、银卡客户可阅读全文 |
| 摘要： | Report title:CPIC (2601 HK) - NBV down 24.8% yoy; maintain BUY on valuation Analyst:Felix LUO,Laurel ZHU Report type:Company Date:20200824 [Summary] ■ NBV down 24.8% yoy in 1H20; Operating profit up 28.1% yoy in 1H20 ■ Management suggests continuing operating profit growth for life businesses and rising auto insurance combined ratio ■ Valuation undemanding; Maintain BUY NBV down 24.8% yoy in 1H20; first-year commission per agent dropped 1) 1H20 operating profit totaled ~RMB17.4bn, up ~28.1% yoy. 1H20 shareholder’s net profit dropped 12% yoy and total comprehensive income dropped 24.1% yoy in 1H20, partly attributable to a one-off favorable tax policy in 1H19. 2) The Company’s number of agent force decreased by ~3% HoH, in line with its strategy (CPIC earlier emphasized it would focus on upgrading agency force, rather than increasing its number of agents). Agent channel first year regular premium (FYRP) decreased by 35.3% yoy in 1H20, vs. down 37.7% yoy in 1Q20, suggesting a continued weak performance in the 2nd quarter of 2020. Monthly average first-year commission per agent dropped by 31.3% yoy, broadly in line with the performance in agent channel FYRP. It is mildly concerning that COVID-19 has disrupted CPIC’s agent force development in 1H20. 3) Life NBV decreased by 24.8% yoy in 1H20, suggesting improved NBV margin of agent channel regular products. However, aggregate NBV margin declined (figure 1) due to increased single premium products in 1H20. 4) For the P&C segment, auto premiums’ growth remained flat (increased 4.0% yoy in 1H20). Combined ratio of auto insurance improved to 97.8% in 1H20 from 97.9% in 2019 (98.4% in 1H19). In summary, CPIC’s 1H20 results were hampered by the COVID-19 but are broadly in line with markets’ expectation. Management discussion On operating profits of life insurance: despite growth of residual margin slowed down in 1H20, management believes that operating profit will keep positive growth in the next few years as overall business quality will be improving. On life NBV margin: management suggests that NBV margin of protection products such as long-term critical illness products might be under pressure due to market competition. On agent performance: management indicates that agent performance has improved in July-August, vs. 1H20. On marketization of auto insurance: The key principles of the marketization of auto insurance are “reducing pricing, increasing protection, and improving service quality”. Management expects declining per-car premiums and rising auto insurance combined ratios due to increased competition. Valuation undemanding; Maintain BUY CPIC is trading at ~0.46x 20E P/EV, or ~1.0 x 20E P/B, ~6% below the historical low P/EV valuation before COVID-19. Our test further shows, if we assume CPIC’s entire value-in-force (VIF) is zero on the market’s concern that life insurers’ VIF assumptions will not be met (e.g., long-term investment yield of 5% for CPIC), CPIC’s P/EV ratio still falls marginally short of 1x, implying most of the risks concerning assumptions have been priced in. We revised down 20E NBV by ~7% and Life EV by ~1% on weak sales recovery and capital market volatility. We maintain our BUY rating on CPIC’s undemanding valuation. We maintain our EV multiple-based TP at HKD32.5, equivalent to 0.62x 20E P/EV, representing a ~47% discount to its historical average P/EV of ~1.18x, or equivalent to ~1.35x 20E P/B. Key catalysts: a good capital market, higher-than-expected NBV growth; Key downside risks: an adverse capital market, lower-than-expected NBV growth, a declining 750D-MA government bond yield. |
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