Incident: Ping An of China announces 2023 results. Overall, the company's life insurance NBV growth rate is in line with expectations. Industrial insurance underwriting losses are still mainly dragged down by the guaranteed insurance business. Overall and comprehensive return on investment have increased, and overall operations are steady.
Overall performance: NBV growth was in line with expectations, and Q4 net profit was slightly lower than expected.
1) Profit and net assets. Net profit attributable 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. Net assets due to mother were $899 billion, +3.4% from the beginning of the year and -0.5% at the end of Q3.
2) Assuming adjustments and value growth. 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. The Group's EV was 1.39 trillion yuan, -2.4% YoY (under comparable caliber, Group EV and Life Insurance EV were +4.6% and +6.3%, respectively). Life insurance NBV was 31.1 billion yuan, +7.8% YoY (NBV +36.2% YoY under comparable caliber). Among the insurance and banking insurance channels, NBV was +40.3% and +77.7%, respectively. The NBV margin was 18.7%, or 23.7% if traced back to 2022, -0.4 pct.
Life insurance: New premiums have increased, and agent production capacity has increased dramatically.
1) Premium growth for new orders. New personal business orders were +52.2% YoY, new instalment payments for individual insurance were +27.9% YoY, and new banking insurance policies were +79.3% YoY.
2) The agent activity rate has increased, and the production capacity per capita has increased dramatically. The average number of monthly agents in 2023 was 356,000, -26% YoY; 347,000 agents at the end of the year, -22% YoY. 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. There were more than 15,000 community grid specialists, and the 13-month insurance policy continuation rate of the promotion city was +5.4pct compared to the same period last year.
Industrial insurance: Underwriting loss of 2.08 billion yuan, mainly hampered by the guarantee insurance business.
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 yuan (2022 underwriting profit of 1.08 billion yuan), mainly dragged down by the guaranteed insurance business.
Investment: Increased bond investments and reduced fixed deposit allocations have increased the overall and comprehensive return on investment.
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.
Investment advice: Overall, the company's life insurance NBV growth rate is in line with expectations. Industrial insurance contract losses are still mainly dragged down by the guarantee insurance business. The overall return on investment and comprehensive investment has increased, and the overall operation is steady. Considering the impact of market fluctuations on the investment side of life insurance companies, we adjusted the company's 2024-2026 EPS to 5.95 (previous forecast value was 7.33), 6.63 (previous forecast value was 7.99), and 7.71 (new forecast value), and the year-on-year growth rates were 26.5%, 11.5%, and 16.2%, respectively, to maintain the purchase rating.
Risk warning: The equity market has declined sharply, long-term risk-free returns have declined sharply, the growth rate of new premiums has not been as high as expected, and the results of life insurance reform have fallen short of expectations.