China Merchants Securities released a research report stating that the current China Taiping (00966) stock price corresponds to a PEV of only 0.11 times in 2024, and it is expected to have a large potential for upward movement. The low valuation and low holding positions contrast with the high fundamentals and strong outlook, and the 'strongly recommended' rating is maintained. The company's interim report continues to show strong performance, with a significant improvement in investment income and gradual clearance of historical risks on the asset side. The growth rate of NBV on the liability side exceeds expectations, and it is expected to maintain a leading advantage for the whole year.

The main points of China Merchants Securities are as follows:

The growth rate of life insurance NBV exceeded expectations, and the value creation ability of silver insurance has significantly improved.

1) In 2024H1, the company achieved a life insurance NBV of 6.694 billion RMB, a year-on-year growth of +83.6% without repeating the base, and a year-on-year growth of +108.3% after repeating the comparable caliber. It is expected to be the best performance among listed insurance companies and is expected to lead the industry by a large margin for the whole year. NBV Margin is 24.6%, a year-on-year increase of 12.4 percentage points, mainly due to the combined impact of the convergence of banking and insurance reporting, optimization of product structure, and the downward adjustment of predetermined interest rates.

2) From a channel perspective, the first-year premium of individual life insurance increased by +11.7% year-on-year, NBV increased by +59.8% year-on-year, and NBV Margin increased by 8.9 percentage points to 27.5% year-on-year. The first-year NBV of bank-insurance long-term insurance increased by +303.7% year-on-year, and NBV Margin increased by 16.4 percentage points to 20.0% year-on-year.

3) The number of agents is 0.228 million, a net decrease of 0.007 million from the beginning of the year. The manpower scale is basically stable and is expected to rebound during the year. The monthly per capita regular premium is 23,415 RMB, a year-on-year increase of 62.5%, and the quality of the team has significantly improved.

4) The persistence rates of individual life insurance and bank-insurance are 98.8% and 98.6% at 13 months, and 95.1% and 97.8% at 25 months, respectively, consistently maintaining industry-leading excellent levels.

5) Life insurance EV is 243.5 billion RMB, an increase of 9.5% compared to the beginning of the year; contract service margin is 195.9 billion RMB, an increase of 2.8% compared to the beginning of the year.

Property insurance and reinsurance benefits continue to improve.

1) In the first half of 2024, the company's domestic property and casualty insurance achieved insurance service revenue of HKD 16.663 billion, a year-on-year increase of +3.5%. The original premium ratio of auto insurance and non-auto insurance is 55.4% and 44.6% respectively, and the business structure continues to optimize. The combined ratio is 97.0%, a decrease of 0.6 percentage points compared to the same period last year. 2) Reinsurance achieved insurance service revenue of HKD 4.333 billion, a year-on-year decrease of -11.9%. The proportion of life insurance and non-life insurance premiums are 24.7% and 75.3% respectively. The combined ratio is 96.7%, a decrease of 9.1 percentage points compared to the same period last year.

Equity investments significantly outperformed the market.

At the end of the second quarter, the group's investment assets amounted to HKD 1476.4 billion, an increase of 9.4% compared to the beginning of the year. OCI stock portfolio reached HKD 37.3 billion, a net increase of HKD 14.9 billion compared to the beginning of the year. The high dividend strategy stocks held performed well, driving the overall stock comprehensive investment return rate to 15.6%, and the annualized total investment return rate increased by +1.38 percentage points to 5.27% year-on-year. In the context of low interest rates, the company's non-annualized comprehensive investment return rate benefited from the bond bull market, increasing by +2.62 percentage points to 5.58% year-on-year. In addition, the company's investment in real estate debt financial products was approximately HKD 18.4 billion, accounting for 1.1% of total assets, a decrease of 0.3 percentage points compared to the end of last year. The financing subject has strong debt repayment ability.

Net income continues to grow by double digits.

In the first half of 2024, the company achieved a net profit attributable to the parent company of HKD 6.027 billion, a year-on-year increase of +15.4%. Among them, the performance of the insurance service business increased by +38.0% year-on-year, the net investment performance increased by +360.7% year-on-year, and the pre-tax profit increased by +110.7% year-on-year. However, the tax expenses increased significantly by HKD 7.227 billion year-on-year. The operating net profit growth rates of each business sector were +4.9% for life insurance, +100.3% for domestic property and casualty insurance, +74.5% for overseas property and casualty insurance, and +183.3% for asset management.