Event: on October 27, 2021, Ping An Insurance released a report on the third quarter of 2021: Ping An Insurance achieved operating income of 904.63 billion yuan (YOY-1.4%), net profit of 81.64 billion yuan (YOY-20.8%), operating profit of 118.74 billion yuan (YOY+9.2%) in the first three quarters of 2021, and an annualized operating ROE of 20.3%, down 0.6 percentage points from the same period last year.
Comments:
Life insurance: reform continues to advance, agents clear, NBV short-term pressure, but capacity growth increases.
(1) the decline of agents is accelerated. The company continues to promote agent channel reform. As of September 30, 2021, the number of personal life insurance sales agents was 706000, down 32.6% from the same period last year, or 9.3% more than 2021H1. In terms of the number of shedding people, a total of 320000 people fell in the first three quarters, of which 170000 people fell in the third quarter. The company is promoting new management by implementing high-quality personnel recruitment and training programs, and gradually increasing the proportion of high-quality new personnel. it is expected that with the completion of the emptying of low-quality agents, the overall quality of the agent team will be significantly improved.
(2) both FYP and NBVM declined, and NBV was under short-term pressure. Affected by the accelerated shedding of agents, the first-year premium used by the company to calculate the value of new business fell 4.5% to 114.75 billion yuan in the first three quarters of 2021 compared with the same period last year, which is 8.2 percentage points lower than that of 2021H1. It is expected that due to the weak sales of high-value businesses such as long-term indemnificatory products, the value rate of new business in the first three quarters fell 5.0 percentage points year-on-year to 30.7%. The decline in FYP and NBVM caused the company's new business value to fall 17.8% year-on-year to 35.24 billion yuan in the first three quarters, an increase of 6.0% compared with 2021H1. However, in a single quarter, the year-on-year growth rate of new business value 2021Q3 was 8.8% higher than that of 2021Q2.
(3) the growth rate of per capita FYP and per capita NBV increased. As the shedding rate of agents is faster than the decline rate of FYP and NBV, the per capita FYP and per capita NBV of companies in the first three quarters of 2021 are 16.2 million yuan per person (YOY+41.8%) and 50,000 yuan per person respectively (YOY+41.8%) and 50,000 yuan per person (YOY+22.1%), respectively, increasing by 6.6% and 7.0% respectively compared with 2021H1, and the reform results are gradually showing.
(4) the operating profit of life insurance business decreased by 2.3% compared with the same period last year. Affected by the decline in the growth rate of new orders, the fluctuation of the policy continuation rate, and the low compensation rate under the epidemic in the same period last year, the company's life insurance business operating profit in the first three quarters of this year was 73.68 billion yuan, down 2.3% from the same period last year. As a result, the growth rate of the company's homed operating profit was slightly 0.9% lower than that of 2021H1.
We believe that the company is currently in the deep water area of life insurance channel reform, but with the accelerated shedding of low-productivity agents and the recruitment and cultivation of new high-quality agents, it is only a matter of time before the reform results appear for the long-term development of the company.
Property insurance: the premium is under short-term pressure, but the comprehensive cost rate is optimized.
(1) short-term pressure on premiums. In the first three quarters of 2021, affected by the decline in premium rates under the pressure of comprehensive car insurance reform, the company's car insurance premium income was 135.47 billion yuan, down 7.9% from the same period last year. Non-car insurance (excluding health insurance) premium income was 47.17 billion yuan, down 7.9% from the same period last year. Due to frequent natural disasters since the second half of this year, the company's accident and health insurance premium income increased by 31.7% to 16.71 billion yuan compared with the same period last year, but due to its relatively low base, the company's property insurance premium income still fell by 9.2% to 199.34 billion yuan.
(2) the comprehensive cost rate decreased by 1.8 percentage points. Under the pressure of reform, the company continues to strengthen the application of science and technology, promote customer management online, improve the service system, optimize business quality and achieve cost reduction and efficiency at the same time. In the first three quarters of 2021, the comprehensive cost rate decreased by 1.8 percentage points to 97.3%.
Investment: the investment end is under temporary pressure, and the net profit of returning home has declined. As of September 30, 2021, the company's investment reached 3.9 trillion yuan, an increase of about 3% over the beginning of the year. The net investment income in the first three quarters of 2021 was 122.41 billion yuan, an increase of 5.7% over the same period last year. Due to the influence of the company's impairment of Huaxia happiness-related investment assets and other adjustments, the company's total investment income fell 23.8% to 103.56 billion yuan compared with the same period last year, and the annualized total investment return rate dropped 1.5 percentage points to 3.7% compared with the same period last year. The group's return net profit fell 20.8% to 81.64 billion yuan compared with the same period last year. Among them, the company's provision for Huaxia happiness-related investment assets did not change significantly in the third quarter, and it is expected that with the gradual implementation of Huaxia Happiness debt repayment plan, the pressure on the investment side of the company will be released.
Bank: steady growth in operation and continuous optimization of asset quality. In the first three quarters of 2021, Ping an Bank achieved an operating income of 127.19 billion yuan, an increase of 9.1% over the same period last year; a net profit of 29.14 billion yuan, an increase of 30.1% over the same period last year; the net interest margin in the first three quarters only decreased by 7bp to 2.81%; the average cost rate of absorbing deposits decreased by 0.22% to 2.05%. Deposit costs continued to be optimized, and overall operating growth was steady. By the end of September 2021, the non-performing loan ratio of Ping an Bank was 1.05%, down 0.13 percentage points from the beginning of the year, and the provision coverage ratio increased by 66.95 percentage points to 268.35% from the beginning of the year.
Comprehensive finance: net profit of asset management business increased by 42.1% compared with the same period last year. In the first three quarters of 2021, the company's asset management business achieved a total net profit of 13.159 billion yuan, an increase of 42.1 percent over the same period last year. Among them, Ping an Trust optimized its business structure. By the end of September 2021, the scale of entrusted assets management increased by 18.3% to 462.8 billion yuan compared with the beginning of the year, and the proportion of actively managed assets continued to increase to 71.4%. Among them, the scale of investment asset management increased by 68.5% compared with the beginning of the year; ping an Securities accelerated the transformation of wealth management, and net profit in the first three quarters increased by 17.7% to 2.93 billion yuan compared with the same period last year, maintaining steady growth.
Profit forecast and rating: the company is accelerating the promotion of agent emptiness, NBV short-term pressure but per capita production capacity growth, with the continuous progress of reform and the gradual improvement of agent quality, the superposition company actively promotes science and technology empowerment, layout of healthy ecological construction and pension industry chain construction, we think it is only a matter of time before the reform results appear. Considering that there is no significant change in the company's provision for Huaxia happiness-related investment assets in the third quarter, we maintain the company's 2021-2023 homing net profit forecast of 143560,177.8 billion yuan. At present, the company's share price corresponds to the company's 21-year PEV of 0.63 and 0.60, maintaining the "buy" rating of A & B H shares.
Risk hints: the economic recovery is not as good as expected; policy reforms are not advancing as expected; and long-end interest rates are falling faster than expected.
Summary of company profit forecast and valuation