VNB 增长加速 ； NP 同比转正

VNB growth accelerated; NP turned positive YoY Target PriceHK$24.80(Previous TPHK$29.72)Up/Downside37.8%Current PriceHK$18.00 CPIC turned to positive VNB growth by +30.7% YoY in 1Q24, outpacing peers i.e.China Life / Ping An +26.3%/+20.7% YoY in the corresponding period (link/link).The strong VNB momentum was driven by margin expansion to an est.15.8%,+3.7pct YoY (CMBI est), and a slight increase in FYP by 0.4% YoY to RMB32.8bn(Fig.3). The Group’s net profit to S/Hgrew by +1.1% YoY to RMB 11.8bn in 1Q24,surpassingpeers being the first among listedCN insurersto realize positive netprofit growth. We see the insurer’s life underwriting focus reverted back to agencywith the agency FYRP/FYSP +25.4%/+44.5% in 1Q24,whereas in 4Q23 was-3.6%/-53.6% YoY. These enhanced the rally in agency FYP by +31.3% YoY toRMB16.1bn, shifting from a-21% decline in 4Q23. Bancassurance was anotherstory,still consuming impacts on the tightened oversight since last fall. Thechannel’s FYP was-21.8% YoY in 1Q24, although narrowed from a-54.6% declinein 4Q23(Fig3). We view the improved first-quarter print a head of steam built-upupon the proceedingChanghang Transformation, which has been initiated in 2022.We think the regulatory impact on bancassurance will gradually fade out after thelacklustre 4Q23 & 1Q23 prints. ForP&C, CoR dropped by-0.4pct to 98%, withpremium rise driven by non-auto segment. We stay overweight onthe insurer’sresilience and think the effective chg. ofChanghangcould deliver strong efficiencygains over quarters. We adjust our TP to HK$24.8, implying 0.4x FY24E P/EV.Life focus back to agency; banca to face high base in 2Q24.Despite the Nika MA(852) 3900 0805nikama@cmbi.com.hk Miao ZHANG(852) 3761 8910zhangmiao@cmbi.com.hk bancassurance FYP cut by-21.8% YoY, the insurer managed to lifting total FYPby +0.4% YoY to RMB32.8bn, outweighing listed peers i.e. China Life/Ping AnLife/New China Life’s 1Q24 FYP was down by-4.4%/-13.6%/-45.0% YoY. Theuptickwas driven by a shift of focus back to agency, where the channel’sFYRP/FYSP +25.4%/+44.5% YoY in 1Q24, pulling an FYP increase by +31.3%(Fig.3). VNB achieved better-than-expected growth by +30.7% to RMB 5.2bn,partially thanks to contracted proportions of bancassurance sales. We estimatethe margin (FYP basis) rose to 15.8%, +3.7pct YoY in 1Q24. Given a high baseof bancassurance biz since 2Q23, we think CPIC may persist on strengtheningagent productivity and group insurance to balance out growth.Looking ahead,we expect more upside on the insurer’s marginexpansiongiven progressiveadvancement onChanghang,whichaddressed on quality growth and stabilizedcontributions from bancassurance as regulatory impact gradually bottomed out. 1Q24 net profit turnaround; eyes on investment.The insurer showed resilientprofitability as the Group’s net profit to S/H +1.1% YoY to RMB11.8bn in 1Q24,suggesting a turnaround after declines for three consecutive quarters since 2Q23(Fig.2). The print topped main peers as China Life /Ping An/New China Life stillentangled with a net profit decline by-9.3%/-4.3%/-28.6% YoY respectively in1Q24. Net investment results slid by-26.1% YoY due to drops in net interestincome(-5.9%) and investment income turning from RMB1.1bn gain in 1Q23 toRMB1.5bn loss in 1Q24, offsetting the fair value gain of +23.8%. Auditor: PwC Recent reports: 1.Ping An (2318 HK)-1Q24 NBV beat;Life OPAT y/y turned positive, Apr.25,2024 (link)2.China Life(2628HK)–Highest VNBgrowthin years;net profit declinenarrowed on track, May 2, 2024 (link)3.China Insurance–1Q24 listed lifeinsurers’growthdwindled;P&Crebounded in 3M24 driven by non-auto, Apr.22, 2024 (link) New TP at HK24.8.The stock is trading at FY24E 0.3x P/EV and 0.6x P/BV.Weadjust our TP based on SOTP,with LifeEVreflectingonsensitivitychangesunder the new actuarial assumptions (@9%, 4.5%) by end-23 (Fig.1).MaintainBUY. New price target implies0.4x FY24E P/EV and 0.84x FY24E P/BV(Fig.1). Reratingrationale SOTP forCPIC Group incl. appraisal value for CPIC Life and P/B-ROE for CPIC P&C.In ourprevious model, we adopted appraisal value approach to derive previous stock’sprice targetatHK$29.72.Concerning theadoption of new EV economic assumptions forCPIC Life and amounting investment uncertainties under IFRS 9 & 17 new accountingstandards, weintend to revalue the stock based on SOTPfor CPIC Group,from which 1)CPIC Life isvaluedthrough appraisal valueapproach reflecting the sensitivity movementon value in-force(VIF)to embedded value (EV),and value of new business (VNB)undernew EV assumptions; 2) CPICP&Cis valued byP/B-ROEapproach based on GordonGrowth, with implied FY24E P/BV at 0.71x;and 3)Others are measured on a basis of 0.7xFY24E bookvalue.We apply a conglomerate discount by 10% to valuation.(Fig.1) Economic assumptionschange:The insurer guided down the long-term investmentreturn to 4.5% from 5.0%, and the risk discount rate to 9.0%, from previous 11%, by end2023. Ournew TP ends at HK$24.8, which implies0.40x FY24E P/EV and 0.84x