Main points of investment
Our point of view: Ping An Insurance is the leading domestic comprehensive financial company, promoting the middle and high-end life insurance market and life insurance reform, and the buyback plan is carried out as scheduled; Huaxia Happiness 219.2 billion yuan financial debt repayment plan was introduced to reduce the market's concern about the company's investment risk exposure; however, in the short term, there is still some pressure on the construction of the company's agent team and the value of the new industry.
At the current low valuation, we maintain the company's "buy" rating and target price of HK $89.90. From 2021 to 2023, the embedded value per share of the group corresponding to the company's target price is 0.92,0.83,0.74 times respectively, which investors are advised to pay attention to.
Increase in operating profit: 1), profit: 2021Q1-3, the company's revenue is-1.1% compared with the same period last year, and the net profit is-20.8% compared with the same period last year; if you exclude the impairment provision of RMB 35.9 billion for Huaxia Happiness from H1 (there is no significant change in the provision for Q3 in a single quarter), the profit in the first three quarters is-0.6% compared with the same period last year. In the same period, the company's parent operating profit was + 9.2% to 118.74 billion yuan compared with the same period last year. 2), ROE:2021Q1-3 annualized operating ROE of 20.3%, year-on-year-0.6pcts, but still at a high level in the industry. 3), buyback: examined and approved on August 26, 2021, by the end of 2021Q3, the cumulative repurchase amount of the company's A shares is about 2.87 billion yuan (including transaction fees), and all the repurchased shares will be used in the employee stock ownership plan.
Agent team shrinks, NBV pressure: 1), agent contraction: by the end of 2021Q3, the company had 706000 personal life insurance agents, up from-31.0% at the beginning of the year and-19.5% at the end of the first half of the year. 2), NBV pressure: 2021Q1-3, the first-year premium used by the company to calculate NBV is-4.5% year on year, and NBVM year-on-year-5.0pcts to 30.7%, resulting in NBV year-on-year-17.8% to 35.24 billion yuan. The NBV of 2021Q1, Q2 and Q3 in a single quarter were 189.8, 84.1 and 7.85 billion yuan respectively, which were + 15.4%,-42.3% and-33.5% respectively compared with the same period last year. Among them, the increase in the value of Q1 new business was due to a good start and the old serious illness insurance sales window made the company's new premiums + 23.1% compared with the same period last year. The decline in the value of new business of Q2 and Q3 is due to the decline of new single premiums and NBVM. The reason is that in the post-epidemic era, the release of consumer demand for life insurance among mass customers lags behind, it is more difficult to sell products protected by ordinary agents, and it takes time for the company to build a team of high-quality agents.
Property insurance premiums decreased, but underwriting profit margins increased: 1), premium: 2021Q1-3, the company's original property insurance premiums were-9.2% to 199.34 billion yuan compared with the same period last year; among them, car insurance, non-car insurance (excluding health insurance) and Italian health insurance were-7.9%,-21.0% and + 31.7% respectively compared with the same period last year. First, all premiums fell after the car insurance reform, and second, the company took the initiative to adjust the guarantee insurance. 2), comprehensive cost rate: the overall COR of 2021Q1-3 is from-1.8pcts to 97.3% compared with the same period last year, that is, the underwriting profit margin is from + 1.8pcts to 2.7% compared with the same period last year, partly due to the decline in the rate of car insurance expenses. The company expects to pay more than 3.4 billion yuan in compensation for the flood in Henan.
Customers of the integrated financial platform: as of the end of 2021Q3, the number of individual customers of the company exceeded 225 million, up from + 3.1% at the beginning of the year. 39.0% of the individual customers held multiple subsidiary contracts at the same time, and the average number of group customers was 2.78. 2021Q1-3 added 25.25 million individual customers, of which 34.6% came from group Internet users.
Decline in investment income: as of the end of 2021Q3, the investment portfolio of the company's insurance funds was about 3.9 trillion yuan, an increase of about 3% over the beginning of the year. 2021Q1-3, the company's net investment return is-0.3pcts to 4.2% compared with the same period last year, the total investment return is from-1.5pcts to 3.7%, and the total investment income is from-23.8% to 103.56 billion yuan compared with the same period last year, due to capital market fluctuations and impairment of investment assets. Company Q1 and Q2 respectively impaired Huaxia Happiness by 182 yuan and 17.7 billion yuan, totaling 35.9 billion yuan. On September 30, Huaxia Happy 219.2 billion yuan financial debt liquidation plan was introduced, which reduced the market's concern about the risk exposure of insurance companies, especially Ping An Insurance real estate investment.
Risk tips: fluctuations in the capital market; insurance premium growth is not up to expectations; industry policy changes; operational risks caused by the entry of foreign capital.