China Taiping announced 1H19 results on 28 Aug, which was better on RMB basis compared to that on HK$ basis due to exchange rate fluctuations. Overall speaking, results was mixed. While underwriting business showed weakness, investment performance was relatively robust. The Group achieved GWP of RMB 1.2bn, up 13.2% YoY. Net profit increased 29.5% to HK$ 6.74bn thanks to i) tax savings after adopting new tax-deduction policies and ii) enhanced net investment income. Group EV rose 12.2% YoY to HK$ 43.57 per share.
- Results negatives. 1) Life NBV growth missed, posting 9.5% YoY decline on RMB basis. This was due to i) margin For individual business, NBV margin was 26.4%, down 3.5ppt from a year earlier; and ii) FYRP of individual channel declined 4.5% YoY to RMB 17.1bn. Number of individual agents decreased 41.4k, or 8.1% to 471,611 over 1H19. Disappointingly, number of high productivity agents also declined and other metrics of agent team building recorded mixed trends, adding to uncertainties in 2H19. 2) Combined ratio of TPI climbed 0.3ppt YoY to 99.8%, though still maintained underwriting profitability. Expense ratio rose 3.5ppt. 3) Motor insurance slowed down, of which premium growth was negative on HK$ basis due to regulatory and macro headwinds.
- Results positives. 1) Life premium growth (of TPL) exceeded major peers at 11.3% on RMB basis (vs. China Life +4.9%, Ping An +9.7%, CPIC +5.6%, NCI 9.0%). Renewal premiums increased 15.2% YoY thanks to advancing persistency ratios, offsetting weak FYP growth (+0.6%). 2) Bancassurance transformation deepened, with FYRP increasing 31.4% YoY. 3) Outstanding investment performance boosted net profit. The Company has enhanced strategic asset allocation. Net investment income rose 20.8% YoY to HK$15bn, among which dividend income was HK$1.55bn, up 26.1% YoY. 4) Technology and operation platforms to empower business.
- Cut TP to HK$26.14. We turn more cautious about 2H19 outlook given lackluster life underwriting and agent team activities. P&C business will also be under pressure. We lower NBV estimate for the whole year. We also cut our TP to HK$26.14 to reflect these changes. The stock is currently trading at 0.41x FY19E P/EV at historical low. Valuation is undemanding. Maintain BUY.
