<Result first take> China Taiping (966 HK, BUY) FY21 results missed on deteriorating P&C business and higher reserving
What’s new:
- China Taiping (966 HK, BUY) announced FY21 result which posted net profits of HK$11.0bn, up 5% y-o-y, representing 94% of our FY21F earnings estimate. VNB in FY21 achieved HK$9.1bn, up 4% y-o-y mainly on low base and ahead of our forecast.
Our views:
- The earnings miss was primarily due to the deteriorating underwriting performance of P&C business, which combined ratio further increased to 105.9%. As such, total claims up 32% y-o-y and substantially hurt earnings performance. The earnings miss was also due to higher liability reserving given the decline in 750-days yield curve
- Value of new business (VNB) stands at HK$9.1bn in FY21, up 4% y-o-y mainly on 1H20 low base and ahead with our forecast. Timely adjusted measures in terms of team, channel, products and services helped VNB performance regained strongly in FY21
- Due to rather strong market sentiment in FY21, Investment income up 24% y-o-y in FY21 to HK$58.2bn, with total investment yield remains at 5.4%. Fixed income investments remain primary in the portfolio (78% of total).
- Maintain BUY with TP of HKD16.5, where we apply 0.3x FY22F P/EV for China Taiping, 0.4x FY21F P/BV for all other businesses and a 15% conglomerate discount.
