The investment side is a drag on the negative growth of net profit, while the growth rate of operating profit has slowed down. In the first three quarters of 2021, the group's net profit was 81.638 billion yuan, down 20.8% from the same period last year; in the third quarter, it was 23.633 billion yuan, down 31.2% from the same period last year. The main reasons are: 1) fluctuations in the capital market led to a decline in short-term investment income in life insurance and health insurance business, and 2) downward changes in the discount rate led to an increase in reserves. Excluding the impact of short-term fluctuations, the group's parent operating profit in the first three quarters was 118.737 billion yuan, + 9.2% year-on-year, and 36.901 billion yuan in the third quarter, + 7.3% year-on-year, slowing down from the first half of the year.
NBV and NBV margin are under pressure, and the reform of agent channel is deepening. In the first three quarters of 2021, life insurance and health insurance business NBV352.37 billion yuan, down 17.8% compared with the same period last year. Margin35.7%, dropped 5.0pps compared with the same period last year, mainly due to changes in product structure and weak sales of indemnificatory products. As for agents, as of the 21Q3 individual insurance scale, the manpower has dropped to 706000, and the continued reduction in the manpower scale is also one of the reasons for the hindrance in the sale of high-value insurance policies. However, as the rate of decline in the premiums of new individual insurance policies is lower than the decline in the manpower scale, we expect the per capita production capacity of agents to increase slightly, and the results of life insurance reform have been shown.
The company is deeply engaged in serious illness protection and high-end pension market, and "insurance plus" is expected to bring a new breakthrough for the growth of life insurance business. According to the market demand, the company continues to promote the innovation of insurance products and continue to focus on the diversified insurance needs of customers. At the end of the third quarter, the company further optimized and upgraded "safe enjoy RUN" to provide customers with a more professional and comprehensive health service scenario management program. In terms of pension services, the company released "High-end Health 2.0" in the third quarter, focusing on the common pain points of pension customers and building a targeted solution system for health care services.
The scale of property insurance premiums is still under pressure, the comprehensive cost rate continues to be optimized, and the growth of operating profit is in line with expectations.
In the first three quarters of 2021, the scale of property insurance premiums remained under pressure in the short term, falling 9.2% year on year as a whole. In terms of insurance types: car insurance premiums are-7.9% year-on-year, car insurance scale continues to grow negatively under the influence of comprehensive car reform, non-vehicle insurance premiums have dropped sharply by 21.0% year-on-year, and mental health insurance premiums have increased by 31.7% compared with the same period last year. The comprehensive cost rate of property insurance is-1.8% to 97.3% compared with the same period last year, the effect of cost structure optimization is remarkable, the operating profit is + 20.2% to 13.283 billion yuan compared with the same period last year, and the overall profit performance of property insurance is in line with expectations.
Profit forecast and investment advice: in the short term, both sides of the company are still under pressure, and it is expected that the opening bonus will have a limited effect on the debt side. We downgrade the company's profit forecast. We estimate that the EPS for 2021-2023 will be 6.23 EPS 7.24 picks 9.33 yuan, corresponding to PE 8.29 picks 7.13 picks up to 5.53 times, and EVPS to 79.64 picks 88.38 picks 99.44 yuan. The corresponding PEV is 0.65 pound 0.58 pound (corresponding to the closing price of 51.65 yuan on October 27, 2021). The current valuation is low, taking into account the company's advantages in channel reform, product innovation and other aspects, maintain the "overweight" rating.
Risk factors: lower-than-expected life insurance reform, lower-than-expected growth in new orders, and higher-than-expected long-end interest rates