Resume coverage with new TP at HK$15. China Taiping reported robust full- year results with net profit rising 36.2% YoY to HK$8.43bn, 10%/11% lower than our and Bloomberg consensus. The drag was mainly due to an approx. six-fold increase of income tax charges (+5.8x YoY) for the sake of prudence under the transition to IFRS17. Pre-tax profit surged 90% YoY to HK$22bn, broadly in line. DPS was HK$0.35, up 16.7% YoY, slower in pace than that of the bottom-line, causing the payout down 3.1pct to 16.9% (FY23: 20.1%). NBV soared 90% YoY to HK$14.3bn on a like-for-like basis (LFL) and up 21.2% YoY on an actual basis, as the insurer as well revised down the EV actuarial assumptions of 1) long-term investment return by 50bps to 4.0% (from 4.5%), in line with peers; and 2) risk discount rate (RDR) by 50bps to 8.5% (from 9.0%). Margin expansions were outstanding across major channels bolstering total NBV margin up 17pct like-for- like to 32.5% in FY24. TPI’s combined ratio was 98.1%(-0.3pct), supporting the net profit of domestic P&C to soar 831% YoY to HK$804mn, making up 6.3% of the total (vs FY23: 0.8%). Looking ahead, we are positive about TPL’s resilient NBV growth on the back of an improved product mix and contributing to solid financials. Resume coverage with BUY and new TP is derived at HK$15 based on SOTP.
NBV outshined; solid NB CSM turned life CSM to positive growth. TPL’s NBV soared 90% YoY to HK$14.3bn like-for-like, driven by hikes of agency and bancassurance NBV up by 42%/400% YoY (LFL) to HK$8.7bn/5.0bn in FY24. On an actual basis, NBV rose to HK$9.1bn, up 21.2% YoY (vs Ping An: - 8%/AIA: +20%). This outshined NBV increase was underpinned by enhanced NBV margin to 32.5%, up 16.6pct YoY based on the end-FY23 assumptions. Agency margin increased 10.4pct like-for-like to 32.6%, and bancassurance margin achieved above five-fold to 32.6%, thanks to expense rate control and promotion of value-based products. EV assumption chg. led NBV/Life EV/Group EV down 36%/26%/24%. Per sensitivity, another 50bps cut in LT investment return and RDR could fluctuate EV/NBV by 55%/129%. New business CSM was up 19.1% YoY to HK$19.7bn, bringing a positive change to TPL’s CSM release (+0.1%, vs FY23: -6.0%) to HK$17.5bn, and growing life insurance revenue by 4.7% YoY to HK$64.5bn. Life CSM was back in growth trajectory, up 0.5% YoY, driven by strong new biz momentum. We project FY25 NBV to rise 11% YoY with upside for margin enhancement.
　　P&C net profit hike; steady CoR optimization. TPI’s CoR was 98.1% in FY24, down 0.3pct YoY. Insurance revenue grew 2.3% YoY to HK$33bn, strengthening insurance service results up 19.7% YoY to HK$629mn. Net investment results were HK$740mn (FY23: -HK$187mn), contributing to a 8.3x YoY surge of P&C net profit, which made up 6.3% of the Group’s total (FY23: 0.8%). NEV premiums rose 35.4% YoY, which we expect to see higher penetrations. Overseas P&C CoR stayed stable at 89.7% (vs FY23: 89.6%).
　　Optimized equity structure with mix of FVOCI stocks up to 36.6%. Total investment income surged 98.2% YoY to HK$66.5bn, with yield up 1.9pct to 4.57%, driven by 1) net investment income of HK$50.3bn, +12% YoY; and 2) a turnaround of realized/unrealized investment gains at HK$16.2bn (vs FY23: -HK$11.4bn). Equity structure was further optimized with the mix of FVOCI stocks hiking to 36.6% in FY24 (vs FY23: 19.8%). We estimate the adjusted comprehensive investment yield (CMBI est), netting of changes in fair value of FVOCI debt amounted to HK$77.6bn, to be 5.0% in FY24, stable vs FY23. In FY25, we expect the insurer to persist in investing high-dividend strategy.
　　Valuation. The stock is trading at FY25E 0.11x P/EV and 0.53x P/B, with avg. 3-yr forward ROE at >13%. We resume coverage with BUY, with TP derived from SOTP at HK$15.0, taking into account of 1) 0.27x implied P/EV for TPL; 2) 0.32x P/B for P&C insurance (both domestic and overseas); 3) 0.47x P/B for Reinsurance; and 4) 1.0x P/B for Corporate and others. The new TP implies FY25E 0.14x Group P/EV and 0.7x P/B, with 29% upside.