20170830-德意志银行-新华保险-01336.HK-1H17 - Key takeaways from analyst meeting.pdf

Deutsche Bank Markets Research Rating Buy Asia Hong Kong Banking/Finance Life Insurance Company NCI Alert Date 30 August 2017 Company Update 1H17-Key takeaways from analyst meeting Reuters Bloomberg Exchange Ticker 1336.HK 1336 HK HSI 1336 _ Deutsche Bank AG/Hong Kong The views expressed above accurately reflect the personal views of the authors about the subject companies and its(their)securities.The authors have not and will not receive any compensation for providing a specific recommendation or view.Deutsche Bank does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters,Bloomberg and other vendors.FOR OTHER IMPORTANT DISCLOSURES PLEASE VISIT http:/ MCI(P)083/04/2017.Price at 29 Aug 2017(HKD)52.45 Price target-12mth(HKD)69.10 52-week range(HKD)55.10-31.25 HANG SENG INDEX 27,765 Esther Chwei Research Analyst(+852)2203 6200 Lexie Zhou Research Analyst(+852)2203 6180 Stock data Market Cap(HKDm)54,239 Market Cap(USDm)6,932 Shares outstanding(m)3,119.5 Major Shareholders Central Huijin(31.26%)Free float(%)45 Avg daily value traded(USDm)51.2 Source:Deutsche Bank Key data FYE 12/31 2016A 2017E 2018E Group EV(CNYm)129,450 152,030 180,632 VNB(CNYm)10,449 13,661 17,306 Net Profit 4,942 5,932 8,069 Source:Deutsche Bank Stay focused on quality growth We attended NCIs analyst meeting this morning.Management reiterated their commitment to reform and are happy with what they have achieved so far.Management tone was optimistic about quality growth going forward and expect premium to turn positive in 2018E.Key takeaways are as follows:On the business outlook,On the business outlook,the company aims for positive volume growth in 2018E as it has built up sufficient renewal premium to drive overall premium growth,and will no longer depend on single premium to drive growth going forward.However,they only expect mild growth given their focus on quality long-term business which tend to have lower premium per case.The company continues to lengthen its premium payment term and targets 10Y+premium policies to account for 85%of its total regular premium,which should drive margin expansion.In terms of profits,inv spread is still a key contributor and it will take some time for protection spread to grow.The company has seen significant improvement in expense overrun of its savings products since 2016(mostly bancassurance)and should reach breakeven sooner than previously expected(Rmb1bn sales in 2017 and Rmb2bn in 2018.Besides health-related products,the company is also exploring pension products,which is still rare in China but should have great growth potential in the era of aging population.On agency,On agency,the company reiterated its differentiated approach to focus on quality with three“highs”guidelines.It achieved performing ratio(performing agents/total)of 48%currently,higher than industry avg of 35%yet lower than industry best of 70%.It aims for 50-60%performing ratio in 2-3 years,and 50%12M retention rate(vs.industry avg of 30%).Key focus in 2H17E will be the training of managers(targets of 10k).On CIRC regulation No.134On CIRC regulation No.134,management expects this to lower the attractiveness of savings policies compared to ST bank WMPs,hence will likely result in negative FYP growth for the industry especially private insurers.The impact on listed life players including NCI should be fairly limited.Distributed on:30/08/2017 08:21:39 GMT0bed7b6cf11c