Guosheng Securities: Give cPIC a buy rating

2021-10-31Ma Tingting, Zhao Yao of Guosheng Securities Co., Ltd. conducted a study on CPIC and released a research report "Life Insurance Reform Continues to Advance and Pay Attention to the Improvement Trend of Agent Quality", this report gives a buy rating to CPIC, and the current stock price is 27.4 yuan.

CPIC (601601)

Event: The company released the third quarter report of 2021, the first three quarters of the company achieved premium income of 301.460 billion yuan, YoY-0.3%; net profit attributable to the mother of 22.686 billion yuan, YoY +15.5%.

The growth of new life insurance orders in the single quarter is weak, and the team of agents continues to compact: CPIC Life Insurance achieved premium income of 181.796 billion yuan and YoY-2.4% in the first three quarters; of which new individual insurance orders were 26.302 billion yuan, YoY +3.6% (+18.5% in 21H), new orders paid in individual insurance periods were 22.569 billion yuan, YoY +15.8% (33.7% in 21H), and due to the decline in the policy continuation rate, Renewal premiums in the first three quarters were $137.542 billion, YoY-3.4%. Q3 single quarter, personal insurance new orders 3.715 billion yuan, YoY-40.6%, single quarter new policy premium negative growth is obvious, the number of agents, industry sales environment under pressure on the company's third quarter policy sales caused greater pressure. The company deepens the "long-distance flight action", promotes the upgrading of the marketing team to professionalization, specialization and digital transformation, compacts the number of teams, and will promote the implementation of the new basic law next year, focus on improving the incentive mechanism for high-performing personnel, and continue to pay attention to the improvement of the quality of agents in the follow-up.

The growth rate of non-automobile business has declined, car insurance premiums are still under pressure, and the Q4 trend is expected to be good: in terms of property and casualty insurance business, the company achieved insurance business revenue of 118.994 billion yuan, YoY +3.0%. Among them, the car insurance premium income was 66.522 billion yuan, YoY-8.0%, and the comprehensive reform of auto insurance led to a significant decline in the number of cases, resulting in continuous negative growth in auto insurance premiums. Non-auto insurance premium income of 52.472 billion yuan, YoY +21.4% (+28.6% on 21H), policy business and catastrophe are expected to make some non-auto insurance comprehensive cost ratios increase. Looking forward to Q4, with the comprehensive reform of automobile insurance for one year, the growth rate of premiums will gradually pick up, driving the trend of comprehensive cost ratio to improve.

Net profit growth rate fell slightly, investment yield performance is relatively stable: the first three quarters of the company achieved a net profit attributable to the mother of 22.686 billion yuan, YoY + 15.5%, of which Q3 single-quarter net profit of 5.382 billion yuan, YoY-0.5%, it is expected that the reserve increase mentioned last year's higher investment income base made the net profit growth rate slow down. In the third quarter, the company's total and net investment returns were 5.3% and 4.3%, respectively, a slight decrease of 0.20pt and 0.30pt year-on-year, respectively.

Investment advice: The company's new orders and agents in the third quarter are under pressure, and the pain of life insurance reform is inevitable; however, with the deepening of channel reform, the improvement of the quality of agents by the company's long-term flight plan and reform measures, we actively pay attention to the quality of agents in the later stage. It is estimated that the company's 21E and 22E net profit attributable to the mother will be 27.267 billion yuan and 33.061 billion yuan respectively, an increase of 10.9% and 21.2% year-on-year, and the P/EV valuation of 21E and 22E companies will be 0.51 times and 0.46 times, respectively, which is at a historically low level and maintain the "buy" rating.

Risk Warning: The effect of life insurance reform and transformation is not as expected; the sales of protection products are not as expected; the downside risk of long-end interest rates; the risk of large fluctuations in the equity market; and the risk of opening reds being less than expected.

A total of 21 institutions have given ratings in the last 90 days, 16 buy ratings and 5 overweight ratings; the average target price of institutions in the past 90 days has been 40.8; the Securities Star Valuation Analysis Tool shows that China Pacific Insurance (601601) good companies have rated 3 stars, good price ratings of 4 stars, and valuation comprehensive ratings of 3.5 stars.