Key points of investment
Performance Overview
2024Q1, China Ping An's net profit of 36.709 billion yuan, -4.3% year on year; operating profit to parent was 38.709 billion yuan, -3% year on year; weighted average ROE (non-annualized) of 4.1%, down 0.2 pc year on year; life insurance NBV 12.89 billion yuan, comparable caliber +20.7% year on year; comprehensive cost ratio of industrial insurance was 99.6%, +0.9 pc year on year; performance was in line with expectations.
Core Concerns
1. Profit: Life insurance and banking increased slightly, and other businesses declined
2024Q1, net profit attributable to the mother of life insurance, industrial insurance, banking, asset management, and technology businesses was 251.46, 38.74, 86.54, 9.1, and -0.59 billion yuan respectively. Life insurance and banking were relatively stable, with profits increasing slightly, +0.7% and +2.3%, respectively. Industrial insurance and asset management were -14.3% and -30.3% year-on-year respectively. It is speculated that the technology business experienced losses, mainly affected by Lukin's business.
2. Life insurance: Increased value ratio, driving rapid NBV growth
(1) NBV: 2024Q1, life insurance NBV maintained a relatively rapid year-on-year growth rate, reaching +20.7%. Looking at the driving factors, the increase in the value ratio of the new business is the core driving factor. It increased by 6.5 pc to 22.8% year on year, and premiums for new orders were 56.628 billion yuan, or -13.6% year over year.
(2) Team: At the end of 2024Q1, the number of agents was 333,000, down 4% from the beginning of the year, but production capacity increased dramatically. NBV per capita was +56.4% year over year. The proportion of “excellent +” in the new manpower increased by 11 pc over the same period last year, and the team quality continued to improve.
(3) Outlook: The number of Ping An agents is gradually stabilizing, and the comprehensive strength of multiple channels such as banking insurance and community grids is increasing. However, considering the high base in the second quarter of last year, the NBV growth rate is expected to slow marginally in 2024Q2.
3. Industrial insurance: A slight increase in premiums and an increase in the comprehensive cost ratio
2024Q1, the original premium income of production insurance was 79.076 billion yuan, with a comprehensive cost ratio of 99.6%, and +0.9pc; in terms of premiums, auto insurance, non-car insurance reached 517.98, 181.88, and 9.09 billion yuan, respectively, +3.5%, -9.7%, and +34.1% year on year; the increase in cost rates was mainly affected by blizzard disasters, travel recovery, and increased insurance claims. If warranty insurance is excluded, the overall cost ratio is 98.4%.
Looking ahead to 2024Q2, benefiting from the implementation of various automobile consumption policies, the growth rate of industrial insurance premiums is expected to be stable. As the pressure on the guarantee insurance business continues to drop, the cost rate is expected to improve marginally.
4. Insurance investment: increase in scale and decrease in return on investment
At the end of 2024Q1, the scale of insurance capital investment exceeded 4.93 trillion yuan, +4.4% compared to the beginning of the year; the net return on investment was 3% (-0.1pc year on year), and the comprehensive return on investment was 3.1%; the real estate investment balance was 206.435 billion yuan, accounting for 4.2%. Most of these were property investments with stable returns, accounting for 79.8% of real estate investments.
Profit forecasting and valuation
Ping An of China implements a “three-step” strategy, moving from sustainable cost advantage to financial growth → comprehensive development, with a clear path and future performance or continuous improvement. The net profit of Ping An of China is expected to grow 13.2%/21.6%/22.2% year-on-year in 2024-2026. The current price corresponds to the 2024-2026 PEV 0.5/0.48/0.46 times.
The 2024 Group was given 0.7 times PEV, corresponding to a target price of 55.54 yuan/share, maintaining a “buy” rating.
Risk warning
Reforms have been slow, the economic environment has deteriorated, real estate risks have expanded, long-term interest rates have declined sharply, and the stock market has fluctuated sharply.