Event: Ping An Insurance realized 118.7 billion yuan (YoY+9%) in operating profit, 81.6 billion yuan (YoY-21%) in net profit and 35.2 billion yuan (YoY-18%) in new business value in the first three quarters of 2021.

We believe that the core focus of the three quarterly reports in 2021 is: (1) New orders are still under pressure in the third quarter, and NBV growth has declined further. Affected by weak sales of protection products, shedding of individual insurance teams, and tighter supervision, the company's new insurance orders fell 4.5% year-on-year in the first three quarters from 35.7% to 30.7% Margin, pushing NBV down 17.8% from the same period last year (H1 NBV YOY-11.7%). (2) the size of the insurance team has been reduced to 710000, and the pain of channel optimization continues. The number of agents shrank to 710000 from 880,000, down 33 per cent from the same period last year. (3) the marginal influence of car comprehensive reform is weakened, and the comprehensive cost rate is optimized compared with the same period last year. Affected by the decline in non-car insurance premium income (YOY-21%), the property insurance premium income in the first three quarters was YOY- 9% (H1YOYMui 7%), of which the car insurance premium YOY-8%; property insurance comprehensive cost rate reached 97.3% (YOY-1.8pct.). (4) the total rate of return on investment is 3.7%, and the credit risk of real estate enterprises is alleviated. Due to increased volatility in the equity market, the company's investment income + fair change fell 24% in the first three quarters compared with the same period last year, and the total investment yield was 3.7% (H1GOR 3.5%). Following the first half of the year, the cumulative impairment of Huaxia Happiness is 35.9 billion yuan, the proportion of impairment is 60%, the company Q3 has no further impairment, and the overall life insurance exposure to real estate risk remains at 5%.

The pain of life insurance transformation continues, and the pressure of a good start continues unabated. The company's life insurance realized premium income of 392 billion yuan (YoY-4%) and contributed operating profit of 73.7 billion yuan (YoY-2%) in the first three quarters. Of this total, the premium income in the third quarter was 103.1 billion yuan (YoY-2%) and the operating profit was 23.5 billion yuan (YoY-2%). Affected by the weak sales of new orders and the decline in the proportion of indemnificatory types, NBV fell by 18% in the first three quarters. (1) the number of agents has dropped to 710000, and "excellent +" agents have been cultivated. Affected by the company's initiative to clear the void, lack of strength, and other aspects, by the end of the third quarter, the size of the agent team has dropped to 710000 (YOY-33%), and the size of the individual insurance team is expected to bottom out. In addition, the company actively promotes the construction of "excellent +" agent team to improve the team quality and retention rate. (2) the sales of guarantee products are faced with bottlenecks, and the value rate of products is declining. Affected by the relatively weak sales of indemnificatory products and shrinking ranks, the proportion of savings products with low value rate increased, resulting in a year-on-year decline in overall NBV Margin (5pct). To 31%. The company Q3 launches Sheng Shifu and Royal Happiness products to replace Ping an Fu and improve the cost performance and protection scope of the products, which is expected to improve the current situation of the sales of security products. (3) there is still great pressure from a good start. Under the influence of stricter regulation, branch sprint for year-round assessment targets, and dilution of the strategy of getting off to a good start, we expect this year to get off to a good start in early November, and the overall pace and intensity will be slower than last year. In addition, due to a shrinking workforce and a relatively high base in the first quarter of last year, there is still a lot of pressure to get off to a good start in 2022.

Property insurance premiums are under short-term pressure, and the comprehensive cost rate is gradually optimized. In the first three quarters of 2021, the company's property insurance realized premium income of 199.3 billion yuan (YoY-9%) and operating profit of 13.3 billion yuan, an increase of 20% over the same period last year. In the first three quarters, car insurance premiums fell by 8% compared with the same period last year, and the marginal impact of car comprehensive reform on car insurance premiums gradually weakened (H1VR 7%). On the other hand, non-car insurance premiums fell 21% year-on-year, which was dragged down by warranty insurance, liability insurance and last year's base, which led to an expansion of the decline in premium growth in the third quarter. In the first three quarters, the comprehensive cost rate of property insurance business reached 97.3% (YoY-1.8pct.), and the comprehensive cost rate was optimized.

The volatility of equity is a drag on net profit, and the risk of real estate enterprises has weakened. Benefiting from the volatility of the equity market and other factors, the company's total / net return on investment reached 3.7% and 4.2% (YoY-1.5pct./-0.3pct.) respectively, showing a marginal improvement compared with the medium report. Among them, due to the high base due to the strength of the Q3 equity market last year, the Q3 investment income + fair change fell 47% this year compared with the same period last year, dragging down the net profit growth rate by-21% (H1VMI 16%). Following the cumulative impairment of 35.9 billion yuan for Huaxia Happiness in the first half of the year, the proportion of impairment reached 60%, and the company Q3 did not further address its impairment. At present, the overall life insurance exposure to real estate risk remains at 5%, and the impact on the credit risk of real estate enterprises has been weakened.

Investment advice: maintain a buy-An investment rating. We believe that short-term liabilities are subject to the overall macro environment, stricter supervision, and the pressure of corporate transformation is not reduced, the transformation of life insurance is still in labor pains, the pressure of a good start next year is not reduced, and we continue to pay attention to life insurance reform. The short-term marginal change of the asset side has become the core focus of the market in the short term, and the reduction of the credit risk of real estate enterprises in the market will help to improve the marginal valuation level of the company. We estimate that the EPS of Ping An Insurance from 2020 to 2022 will be 7.0,8.6,9.9 yuan respectively, corresponding to 0.65 times of P/EV in 2021. The 6-month target price will be 75 yuan to maintain the buy-A rating.

Risk tips: epidemic rebound, equity market fluctuations, reform results are not as expected, regulatory policy uncertainty, a sharp decline in premium income, and so on.