Company Introduction

New China Insurance (NCI or the Group) was founded in Beijing in Sep 1996, which is one of the largest insurers in China now. NCI were listed in A+H Shares in 2011, and currently it owns over 50,000 employees and 1,500 branches nationwide. According to the records of premiums incomes from CIRC, as at the end of Nov 2012, NCI was the third largest Life insurer in China.

Summary

-According to the data from CIRC, the premium incomes of NCI achieved to RMB92.219 billion, increased slightly by 3.89% y-y in Nov 2012, which was better than the performance of the industry with the growth rate of 3.54% during the same period although the Group's growth rate appeared to decrease month by month;

-According to 3Q report, the Group's total assets increased significantly by 24.5% to RMB481.358 billion compared to the end of 2011, equivalent to BVPS of RMB11.05, 10.1% higher than that of 2011;

-Accumulated net profits of NCI recorded to RMB2.324 billion, raised 2.42% y-y, better than the peers, while China Life recorded the loss of RMB2.2 billion and CPIC's net profits dropped 59% y-y approximately;

-However, we noted one of main reasons that NCI gained the better profit performance was the realization of deferred tax of assets with the amount of RMB444 million. Ignoring such accounting treatment, NCI's profits before tax would decrease by 26.41% y-y, consistent with market trend;

-On the other hand, there was a news that CSRC would approve domestic insurance companies to open retail fund management business in future, which may cause insurers` incomes to go up, and investment incomes would rebound obviously benefited from improvement of market environment. Therefore we expect NCI's profits would increase significantly in the next two years. The Group's net profits would rise 10% y-y approximately to RMB3.081 in 2012 with the EPS of RMB0.99;

-In summary, we hold optimistic views for NCI's future performance, and estimate the 12-month target price to HK$37.08, around 15.30% higher than the latest closing price, equivalent to 2013P/E18.7x and P/B2.3x respectively. Maintain Buy rating.

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