[Incident] Ping An of China released its 2023 annual report: 1) Net profit to mother was 85.7 billion yuan, or -22.8% year-on-year, of which Q4 lost 1.9 billion yuan in a single quarter, compared with a profit of 18.2 billion yuan for the same period last year. 2) Operating profit attributable to parent was RMB 118 billion, -20.5% YoY. Excluding the impact of hypothetical changes, it was -19.7% YoY. 3) Net assets returned to mother of 899 billion yuan, +3.4% compared to the beginning of the year and -0.5% at the end of Q3.
The operating profit of the core business is stable overall, and the asset management sector has large losses. The operating profit of the life insurance/financial insurance/banking/technology sector was -3%/-11%/+2%/-65%, respectively, while the asset management sector lost 20.7 billion yuan. The profit for the same period last year was 2.3 billion yuan, mainly due to rising credit risk and capital market fluctuations, and the company's revaluation of some asset projects.
The dividend rate has increased dramatically, and the dividend per share has been rising steadily. The company's dividend in 2023 was 2.43 yuan per share, up 0.4% year on year, and total dividends increased for 12 consecutive years. The dividend rates calculated based on operating profit attributable to mother and net profit to mother (including repurchases) were 37.3% and 51.4%, respectively, +7.8pct and -2.2pct year-on-year. As of the close of trading on March 22, the dividend rates for the company's A and H shares were 6.0% and 8.1%, respectively.
The 2023 actuarial assumptions adjustments had a one-time impact on several indicators. 1) The company lowered the long-term return on investment assumption and risk discount rate assumption from 5% and 11% to 4.5% and 9.5%, respectively, which had an impact on EV, NBV, and operating profit evaluation results. 2) At the end of 2023, the Group's EV was 1.39 trillion yuan, -2.4% YoY. Under comparable standards, Group EVs and life insurance EVs were +4.6% and +6.3%, respectively. 3) Life insurance NBV was $31.1 billion, +7.8% year over year. Under comparable standards, NBV was +36.2% year-on-year. Among them, insurance and banking insurance channels NBV were +40.3% and +77.7%, respectively. The NBV margin was 18.7%, or 23.7% if traced back to 2022, -0.5pct year over year.
Life insurance: Production capacity per agent has been greatly increased, and multiple channels have been fully rolled out. 1) New personal business orders +52.2% YoY, new instalment payments for individual insurance +27.9% YoY, and +79.3% YoY for new banking insurance policies. 2) The average number of monthly agents in 2023 was 356,000, -26% year over year; 347,000 agents at the end of the year, -22% year over year. The agent activity rate was 53.3%, +2.5pct year on year; monthly income per capita was +39.2% year over year, and NBV per capita was +89.5% year over year. 3) Multiple channels are fully rolled out. Bank Insurance has a talented team of more than 2,500 people, which is about 1.5 times that of the beginning of the year. There are more than 15,000 community grid specialists, which is about 1.9 times that of the beginning of the year. The 13-month insurance policy continuation rate in the promotion city is +5.4 pct compared to the same period. 4) The marginal balance of life insurance contract services was -6.1% compared to the beginning of the year due to the slowdown in expected interest growth, differences in policy withdrawal differences and adjustments in non-economic assumptions.
Industrial insurance: Still hampered by the guarantee insurance business, with an overall underwriting loss of 2.08 billion yuan. 1) Industrial insurance premiums were +1.4% compared to the same period.
Auto insurance, non-car insurance, and eHealth insurance annual premiums were +6.2%, -11.2%, and -1.2%, respectively. Among them, health insurance grew the fastest, +37% compared to the same period last year, while guarantee insurance shrank sharply, to -97%. 2) Comprehensive cost rate 100.7%, +1.1 pct year on year, payout rate 71.5%, +0.2 pct year on year, cost rate 29.2%, +0.9 pct year on year. The comprehensive cost rates for car insurance and guarantee insurance are 97.7% and 131.1%, respectively. 3) Annual underwriting loss of $2.08 billion (2022 underwriting profit of $1.08 billion).
Investment: Investment in bonds has been greatly increased, and the return on overall and comprehensive investment has increased. 1) The total investment at the end of 2023 reached 4.7 trillion, +9.0% year-on-year. Among them, bonds accounted for +3.5 pct to 58.1% year over year, term deposits -1.0 pct to 4.4% year over year, while stocks and funds were 11.5%, which was basically stable. 2) Net return on investment 4.2%, -0.5pct year on year; return on total investment 3.0%, +0.6pct year on year; comprehensive return on investment 3.6%, +0.9pct year on year.
The valuation is still low, and the rating is “superior to the market”. We are optimistic that the results of the company's life insurance reform will be gradually released, the team quality will continue to improve, the comprehensive financial advantage+healthcare ecosystem layout will enable long-term performance growth, and at the same time, stable dividend returns will increase investment value. As of March 22, 2024, the company's stock price corresponds to 2024E PEV 0.50x.
We gave 0.65-0.7 times 2024E PEV, a reasonable value range of 53.20-57.29 yuan, and a “superior to the market” rating.
Risk warning: Long-term interest rates are trending downward; new premium growth falls short of expectations.