Description of the event
Ping An of China released its 2023 annual report. The company achieved net profit of 85.67 billion yuan, a year-on-year decrease of 22.8%; achieved a new business value of 31.08 billion yuan. According to previous assumptions and models, the comparable caliber calculated according to previous assumptions and models was 39.26 billion yuan, an increase of 36.2% over the previous year.
Incident comments
The asset management business was the main reason for the year-on-year decline in performance. For the full year of 2023, the company achieved a performance of 85.67 billion yuan, a year-on-year decrease of 22.8%. By business segment, the asset management line was mainly due to losses in securities, trusts, leasing and other businesses due to changes in the macro environment; in terms of investment, the return on total investment rose 0.6 pct to 3.0% year on year, and the return on net investment fell 0.5 pct to 4.2%, which is under pressure, but the performance is expected to be better than that of its peers. The company plans to pay an annual dividend of 2.43 yuan/share, which is slightly higher than last year's level. It should be noted that the core solvency of life insurance companies has declined markedly, which may affect dividend capacity to a certain extent in the future.
Excluding the impact of hypothetical adjustments, the value of the new business continued to grow rapidly. In 2023, life insurance and health insurance achieved a new business value of $31.08 billion, up 7.8% year on year (a comparable caliber of 36.2%). The growth rate declined. The main reason was that the long-term return on investment assumption with embedded value was lowered to 4.5% from the previous 5%, and the risk discount rate assumption was lowered to 9.5%. Although the hypothetical reduction may have slowed the rate of value growth, the reliability of embedded value has improved. Specifically, scale is still the main source of value growth. New policy premiums increased 38.9% year on year to 165.78 billion yuan; the value ratio of the new business fell from 24.1% in the same period last year to 23.7% (comparable caliber) in the current period, which is related to sales-side products that mainly focus on savings products. Looking forward to the future, considering that the industry has yet to complete supply-side transformation, it is expected that the increase in the overall value ratio will still be under great pressure, and the increase in new business value will still mainly come from savings products.
Individual insurance production capacity is leading, and the scale is stabilizing. At the end of 2023, the number of agents in individual insurance channels fell 22% from the beginning of the year to 347,000, down 3.6% from the third quarter, and continued to improve from the 3.7% drop in the third quarter. The team showed signs of stabilization. There was a marked increase in production capacity, and the value of new business per capita increased by 89.5% year on year, leading the industry. The company continues to promote high-quality team building and increase revenue and production capacity. It is expected that the number of agents will gradually stabilize, and continue to pay attention to agents' revenue and production capacity.
The growth rate of non-auto financial insurance is slowing down, and I am optimistic that the competitive landscape will continue to be optimized. Industrial insurance premiums reached 302.16 billion yuan for the whole year, an increase of 1.4% over the previous year, and the growth rate continued to decline compared to the third quarter. Among them, the continued deterioration in the year-on-year growth rate of non-car insurance is the main reason for the slowdown in financial insurance growth. The comprehensive cost ratio of financial insurance increased by 1.1 pct to 100.7% year on year, mainly affected by natural disasters such as typhoons and rainstorms and undercover insurance risks. The original premium income for guaranteed insurance in 2023 was only 665 million yuan, a sharp contraction of 97% year on year, and financing business was suspended in the fourth quarter, so future performance is expected to improve.
Focus on the main asset side in the short term and be optimistic about ecological advantages in the long term. The main contradictions in the industry are still asset-side factors, so we need to pay attention to long-term interest rates, equity markets, and real estate industry conditions. In a situation of marginal improvement, there is broad room for improvement.
In the medium to long term, the company continues to push forward channel reforms, emphasizes supply-side innovation, and is also deeply involved in healthcare and comprehensive finance businesses. It is expected that ecosystem advantages will help the company build future product and pricing barriers. Currently, the company's static PEV valuation is 0.55 times, in the bottom range, maintaining a “buy” rating.
Risk warning
1. Major adjustments to industry policies;
2. The equity market fluctuated greatly, and interest rates declined sharply.