Performance review
2023 results are in line with our expectations
Ping An of China announced 2023 results: New Business Value (NBV) +7.8% YoY (assuming +36.2% YoY before adjustment); Comprehensive Financial Insurance Cost Ratio (CoR) +1.1ppt to 100.7% YoY; Group Operating Profit (OPAT)/Net Profit (OPAT)/Net Profit YoY, respectively, lower than our expectations and market expectations, mainly due to asset management business losses and credit insurance claims exceeding expectations. The company declared a dividend of 2.43 yuan per share, +0.4% year over year, in line with expectations.
Development trends
The growth rate of NBV is impressive, and the quality of business has further improved. In 2023, the company's NBV was +36.2% (the NBVs indicated in this section were all assumed to be the caliber before adjustment). Among them, agent/banking channel NBV was +40.3%/77.7%, respectively, mainly benefiting from the high savings insurance boom and the results of life insurance reforms. The value of each agent's new business surged 89.5% year over year, and per capita income was +39.2% to 9,813 yuan/month (including cross-sales); life insurance 13/25 month insurance policy continuation rate of +2.5/+6.8ppt reached 92.5.8%, 85.8% year-on-year Withdrawal rate YoY -0.01ppt reached 2.06%, and the quality of business improved.
Credit insurance has dragged down financial insurance coverage losses due to natural disasters. In 2023, the financial insurance business CoR was +1.1ppt to 100.7% year over year. If the impact of guarantee insurance was excluded, the overall financial insurance CoR was 98.4%; car insurance CoR was +1ppt to 97.7% year over year, and 96.6% after excluding the impact of natural disasters, which was the same as the previous year.
Considering changes in the economic situation, the company lowered the return on value-included investment/risk discount rate to 50/150 bps to 4.5%/9.5%, respectively. The total impact of the above hypothetical adjustments on life insurance/group EV was -10.7%/-6.7%, respectively, and the impact on the value of the new business in 2023 was -20.8%.
The dark clouds are also framed with gold. In 2023, Ping An Group OPAT/net profit was -19.7%/-22.8%, respectively, and the total OPAT/net profit of the three main businesses of life insurance/financial insurance/banking was -2.8%/-2.3%, and the performance was relatively steady; the total loss in asset management business of 20.75 billion yuan was a major drag. We expect that the net, total, and comprehensive investment return on insurance capital was -0.5/+0.6/+0.9ppt to 4.2%/3.0%/3.0%, of which the stock market Decline As a result, spread losses amounted to 512 billion yuan. Despite pressure on profits, the company declared a dividend of +0.4% to 2.43 yuan, and a dividend payout ratio of 37%, demonstrating confidence in future operations. Looking ahead, we believe that dark clouds are also on the edge. As depreciation pressure eases marginally and the equity market stabilizes, the company's profits are expected to bottom out and rise.
Profit forecasting and valuation
We kept 2024e EPS basically unchanged at RMB 7.2 per share, and introduced 2025e EPS at RMB 8.5 per share. The current A/H share price corresponds to 0.52x/0.39x 2024e P/EV. Maintaining Safety - A/H outperforms the industry rating and target price of HK$58.88/HK$51.11, corresponding to 0.73/0.55 2024ep/eV, with 40%/44% upside compared to the current stock price.
risks
The increase in premiums for new orders fell short of expectations; long-term interest rates fell sharply; capital markets fluctuated greatly; and policy and regulatory uncertainty.