China Pacific Insurance

Transcription

1 Relative Value (%) Equity Research April 25, 2014 China Pacific Insurance All ahead of expectation Results Review Maintain BUY results higher than expectation CPIC reported its handsome results, with net profit of Rmb3.2bn (Rmb0.35/sh) up 44.3% YoY and net assets of Rmb103.2bn (Rmb11.39/sh) up 4.3% QoQ. Agency FYP, the key driver of NBV, grew 43.8% YoY. All were ahead of market expectation. Trends to watch Earnings beat on strong premium growth and better cost control. CPIC s 1Q net profit was up 44.3% YoY (27% of our FY14 forecast), due to strong life premium growth of 25.2% and better cost control (e.g. administration expense ratio 11.2% in vs. 13.0% in ). NBV may beat on strong agency FYP growth of 43.8% YoY. Agency FYP in grew by 43.8% YoY despite high base effect, leading the life industry recovery, which shows CPIC s two-focus strategy keeps paying off. We expect CPIC to deliver double-digit NBV growth for FY14. More color will be added after the open day CPIC will hold this May to discuss agency business. P&C premium growth slowed due to quality control. CPIC P&C premium grew 13.2% YoY in ; 2.9ppt lower than industry growth, mainly due to quality control in our view. We expect CPIC to enhance underwriting discipline this year after its aggressive In addition, we expect its combined ratio to be 100.5% for FY14. The only negative point came from increasing surrenders. CPIC s surrenders grew 37.2% YoY in, with a surrender ratio of 5.8%, 1ppt higher than that in the same period last year. We believe it was mostly from bancassurance and it will be manageable due to its successful business transformation. Earnings revisions We keep our higher-than-consensus NBV forecast unchanged, but we think there is still upside potential. Valuation and recommendation CPIC-A/H is now trading at 0.9/1.1x 2014E P/Life-EV, a very undemanding valuation, on the back of its strong NBV growth prospects. We reiterate BUY rating. Ticker SH HK Last close Rmb16.37 HK$25.00 CICC target Rmb26.86 HK$ wk price range Rmb20.46~14.94 HK$33.50~22.45 Market cap (bn) Rmb158 HK$197 Daily value (mn) Rmb HK$ Shares outstanding (mn) 6,287 2,775 Free float (%) Daily volume (mn sh) Business sector Insurance HK HSCEI 80 Apr-2013 Jul-2013 Oct-2013 Jan-2014 Apr-2014 (Rmb mn) 2012A 2013A 2014E 2015E Revenue 167, , , ,166 (+/-) 7.7% 14.8% 9.6% 13.3% Net profit 5,077 9,261 11,644 12,556 (+/-) -38.9% 82.4% 25.7% 7.8% EPS BPS DPS EVPS P/E P/B P/EV per share Dividend yield 1.7% 1.8% 2.1% 2.4% ROAA 0.8% 1.3% 1.5% 1.5% ROAE 5.9% 9.5% 11.2% 11.0% Source: Bloomberg, company data, CICC Research Shengbo TANG [email protected] SFC CE Ref: AYT154 Yu ZHANG [email protected]

2 Figure 1: Fast growth with high quality in agency business 50% 45% CPIC Life premium YoY growth rate 44.1% 8,000 7,000 (Rmb,mn) Agency FYP 7,257 40% 35% 30% 25% 25.2% 6,000 5,000 4,000 5, % 15% 10% 5% 0% 13.8% Life premium FYP Renewable business 3,000 2,000 1,000 0 Figure 2: P&C premium growth benefits from the development of new channel business YoY growth of CPIC P&C insurance 16% 14% 12% 10% 8% 6% 4% 2% 13.2% 15.0% 8.4% 5,000 4,800 4,600 4,400 4,200 4,000 3,800 (Rmb,mn) 19.6% +16.7% 20.2% 19% 0% P&C insurance Auto insurance Non-auto insurance 3,600 19% P&C insurance premium from new channel As % of total P&C insurance premium Figure 3: Increasing surrenders 8,000 7,000 6,000 5,000 Surrenders (Rmb mn) 37.2% 5,172 7, % 5.0% 4.0% 4.8% Surrender ratio 1.0% 5.8% 4, % 3, % 2,000 1, % 0 0.0% 2

3 Figure 4: Quarterly results summary Financial Statements Analysis (Rmb,mn) 13Q1 13Q2 13Q3 13Q4 14Q1 YoY (%) QoQ (%) Operating revenues 53,165 50,903 45,560 43,509 63, % 46.5% Gross w ritten premiums 51,421 47,241 39,788 38,473 61, % 60.9% Net premiums earned 45,865 41,880 37,404 34,476 55, % 60.9% Investment income 7,060 8,776 7,880 8,577 7, % -9.0% Other income % 0.0% Operating expenses -50,065-47,115-42,065-42,024-59, % 41.1% Surrenders -5,172-4,521-5,202-4,888-7, % 45.2% Surrneder ratio -4.8% -4.4% -4.4% -4.4% -5.8% -1.0% -1.4% Net claims and policyholders' benefits -11,559-12,967-12,346-15,043-14, % -5.9% Net provision for insurance contract reserves -19,969-16,497-12,088-8,881-20, % 132.1% Policyholder dividends ,085-1, % -18.9% Policyholders' benefits and net claims -37,668-34,829-30,721-30,041-42, % 42.7% Underwriting and acquisition costs -4,949-4,223-3,748-3,732-6, % 65.4% As % of gross written premiums -9.6% -8.9% -9.4% -9.7% -10.0% -0.3% -0.3% Administrative Expenses -5,948-6,078-5,970-6,916-6, % -10.1% As % of net earned premiums -13.0% -14.5% -16.0% -20.1% -11.2% 1.8% 8.9% Other expenses -1,500-1,985-1,626-1,335-4, % 203.0% Operating profit 3,100 3,788 3,495 1,485 4, % 198.0% Profit before income tax 3,114 3,814 3,508 1,478 4, % 200.3% Less: Income tax , % 312.6% Net profit 2,258 3,288 2,656 1,193 3, % 173.4% Net Profit Attributable to Parent Company's Shareholders 2,225 3,239 2,617 1,180 3, % 172.1% Total Assets 699, , , , , % 7.9% Total liabilities 598, , , , , % 8.4% Shareholders equity 100,928 97, , , , % 4.3% Equity Attributable to Parent Company's Shareholders 99,482 96, ,837 98, , % 4.3% EPS (Rmb) % 172.9% BVPS (Rmb) % 4.3% Investment Assets Analysis (Rmb,mn) 13Q1 13Q2 13Q3 13Q4 14Q1 As % Cash and cash equivalent 26,764 26,938 19,433 16,561 23, % Trading securities 2,206 1,954 2,356 4,926 6, % Securities purchased under agreements to resell 40 1, ,394 2, % Policy loans 6,206 6,873 7,643 8,444 9, % Term deposits 167, , , , , % Available-for-sale financial assets 139, , , , , % Held-to-maturity financial assets 251, , , , , % Investments classified as loans and receivables 37,733 38,532 40,953 41,320 50, % Investment in associates & joint ventures % Restricted statutory deposits 3,600 3,600 3,600 3,600 5, % Investement property 6,318 6,888 6,850 6,795 6, % Total investment assests 641, , , , , % 3

4 Figure 5: Valuation table (diluted) Company name Closing price (Rmb/HK$) Target price (Rmb/HK$) Upside potential EPS BPS Group EV/shr NBV/shr ROAE(%) A 13A 14E 15E 12A 13A 14E 15E 12A 13A 14E 15E 12A 13A 14E 15E 12A 13A 14E 15E H-share Ping An H Share % CPIC H Share % CTIH % China Life H Share % PICC Group % PICC P&C % n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a Simple Average A-share Ping An A Share % CPIC A Share % China Life A Share % Simple Average Company name Market Cap. Shares (Rmb/HK$ mn) outstanding A/H premium PE (X) PB (X) Group P/EV NBM Life business P/EV 12A 13A 14E 15E 12A 13A 14E 15E 12A 13A 14E 15E 12A 13A 14E 15E 12A 13A 14E 15E H-share Ping An H Share 465,865 7, (1.8) (5.2) CPIC H Share 226,550 9, (0.7) CTIH 31,056 2, (5.2) (5.3) (6.9) China Life H Share 586,493 28, PICC Group 128,545 42, (1.3) (5.9) PICC P&C 143,932 13, n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Simple Average (0.8) (3.7) A-share Ping An A Share 312,846 7,916-14% (0.9) (4.2) (7.1) CPIC A Share 148,345 9,062-16% (1.7) (3.3) China Life A Share 393,162 28,265-14% (2.0) Simple Average (1.9) (4.1) Source: Company data, Bloomberg, CICC Research Note: Based on the closing price on April 24 4

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6 Beijing Shanghai Hong Kong Corporation Limited 28 th Floor, China World Office 2 1 Jianguomenwai Avenue Beijing , P.R. China Tel: (86-10) Fax: (86-10) Corporation Limited Shanghai Branch 32 nd Floor Azia Center 1233 Lujiazui Ring Road Shanghai , P.R. China Tel: (86-21) Fax: (86-21) Corporation (Hong Kong) Limited 29 th Floor, One International Finance Centre 1 Harbour View Street Central, Hong Kong Tel: (852) Fax: (852) Singapore Corporation (Singapore) Pte. Limited #39-04, 6 Battery Road Singapore Tel: (65) Fax: (65) United Kingdom Corporation (UK) Limited Level 25, 125 Old Broad Street London EC2N 1AR, United Kingdom Tel: (44-20) Fax: (44-20) Beijing Jianguomenwai Avenue Branch Shanghai Middle Huaihai Road Branch Shenzhen Fuhuayilu Branch 1 st Floor, Capital Tower 6A Jianguomenwai Avenue 398 Huaihai Road (M) Shanghai , P.R. China Rooms 107 & 201, Annex Building Shenzhen Duty Free Commercial Tower Beijing , P.R. China Tel: (86-21) Fuhua 1 st Road, Futian District Tel: (86-10) Fax: (86-21) Shenzhen , P.R. China Fax: (86-10) Tel: (86-755) Fax: (86-755) Hangzhou Jiaogong Road Branch Nanjing Zhongshan Road (North) Branch Guangzhou Tianhe Road Branch 1 st Floor, Euro American Center 18 Jiaogong Road Hangzhou , P.R. China 2 nd Floor, Greenland Plaza 1 Zhongshan Road (North) Nanjing , P.R. China 40 th Floor, Teemtower 208 Tianhe Road Guangzhou , P.R. China Tel: (86-571) Tel: (86-25) Tel: (86-20) Fax: (86-571) Fax: (86-25) Fax: (86-20) Chengdu Binjiang Road (East) Branch Xiamen Lianyue Road Branch Qingdao Middle Hongkong Road Branch 1 st & 16 th Floors, Shangri-La Center Block 9B, Binjiang Road (East) Chengdu , P.R. China 4 th Floor, Office Building, Paragon Center 1 Lianyue Road, Siming District Xiamen , P.R. China 11 th Floor, Shangri-La Center Block 9, Hongkong Road (M), South District Qingdao , P.R. China Tel: (86-28) Tel: (86-592) Tel: (86-532) Fax: (86-28) Fax: (86-592) Fax: (86-532) Wuhan Jiefang Road Branch Chongqing Honghu Road (West) Branch Changsha Chezhan Road (North) Branch 4 th Floor, New World Centre Tower 634 Jiefang Road, Qiaokou District Wuhan , P.R. China 1 st & 10 th Floors, Ourui Lanjue Center Block 9, Honghu Road (W), New North District Chongqing , P.R. China 3 rd Floor, Annex Building, Securities Tower 459 Chezhan Road (North), Furong District Changsha , P.R. China Tel: (86-27) Tel: (86-23) Tel: (86-731) Fax: (86-27) Fax: (86-23) Fax: (86-731) Foshan Jihua 5 th Road Branch Tianjin Nanjing Road Branch Dalian Jinma Road Branch 12 th Floor, Trend International Business Building 2 Jihua 5 th Road, Chancheng District Foshan , P.R. China 10 th Floor, Tianjin Global Trading Center 219 Nanjing Road, Heping District Tianjin , P.R. China 128B Jinma Road Economic-Technological Development Area Dalian , P.R. China Tel: (86-757) Tel: (86-22) Tel: (86-411) Fax: (86-757) Fax: (86-22) Fax: (86-411) Ningbo Yangfan Road Branch 11 th Floor, Building Five, 999 Yangfan Road Hi-tech Industrial Development Zone Ningbo , P.R. China Tel: (86-574) Fax: (86-574)