Core views
The company's NBV for the first quarter was +20.7% YoY, and operating profit to parent was -3.0% YoY. Overall performance was better than expected. Among them, the three core businesses of life insurance and health insurance, property insurance, and banking resumed growth, and the total operating profit of the three businesses was +0.3% year-on-year. The year-on-year increase in NBV is mainly driven by NBVM optimization. NBVM optimization is expected to be mainly due to the “integrated reporting and banking” policy of banking insurance channels, reduction in scheduled interest rates, and product structure optimization. Ping An Life Insurance continues to deepen its transformation, comprehensively build multi-channel specialized sales capabilities, and continue to improve channel quality. A high-quality channel system helps promote the optimization of the company's product structure and NBV growth, and is optimistic about the company's long-term investment value.
occurrences
Ping An of China discloses results for the first quarter of 2024
The company's operating profit for the first quarter of 2024 was -3.0% year-on-year to 38.709 billion yuan; life insurance and health insurance business NBV +20.7% year-on-year to 12.890 billion yuan; financial insurance business insurance service revenue +5.7% year-on-year, and comprehensive cost ratio +0.9 pct to 99.6% year over year; annualized net return on investment -0.1 pct to 3.0% year on year, and the annualized comprehensive return on investment was 3.1%.
Brief review
1. Overall performance: stable operating profit performance
Operating profit attributable to parent in the first quarter was -3.0% year-on-year to 38.709 billion yuan, mainly due to property insurance business, asset management business and technology business operating profits of -14.3%, -30.3%, and -129.1% year-on-year, to 3.874 billion yuan, 910 million yuan, and -202 million yuan, respectively.
Net profit attributable to mother was -4.3% year-on-year in the first quarter to 36.7 billion yuan.
2. Life insurance and health insurance business: Value ratio optimization led to NBV +20.7% YoY in the first quarter, NBV +20.7% YoY to $12.890 billion. The high increase in NBV was mainly driven by new business value ratio optimization. The first-year premium used to calculate NBV in the first quarter was -13.6% to 56.628 billion yuan. It is expected that premiums for new banking insurance channel policies have declined mainly due to the “integration of reporting and banking” policy for banking insurance channels. NBVM in the first quarter was +6.5 pct year-on-year. The main reasons are expected: 1) the “integrated reporting and banking” policy of the banking insurance channel drives the optimization of the banking insurance channel NBVM; 2) the scheduled interest rate declined compared to the same period last year. 3) Product structure optimization.
By channel: 1) In terms of agent channels, management quality was optimized, team production capacity continued to increase, and entrances to increase staff were continuously improved. The value of new business per person in 2024Q was +56.4%, and the proportion of “excellent +” in the new manpower was +11.0 pct year over year. As of the end of 24Q1, the number of personal life insurance sales agents was 333,000, -4.0% compared to the end of '23 and -17.6% year-on-year. 2) In terms of banking insurance channels, we continue to deepen the exclusive agency model with Ping An Bank, and at the same time expand channels for high-quality external cooperative banks, promote standardization of branch operations, and continuously improve operating efficiency. 3) In terms of community gridding, Ping An Life Insurance continues to promote the community grid business model, focus on continuing customer management, strictly implement the 4-sell model of “in-depth service first, then recommend as needed”, and implemented digital management, with remarkable operating results. By the end of 24Q1, the retention rate of surviving customers in grid promotion cities had increased by 2.5 pct over the same period last year.
3. Financial insurance business: Affected by the Blizzard disaster and travel recovery, the comprehensive cost ratio showed an upward revenue side: in the first quarter, insurance service revenue was +5.7% to 80.627 billion yuan, and the original insurance premium income was +2.8% YoY to 79.076 billion yuan. Among them, car insurance, non-car insurance, and eHealth Insurance were +3.5%, -9.7%, and +34.1%, respectively, to 51.798 billion yuan, 18.188 billion yuan, and 9.090 billion yuan.
Cost side: In the first quarter, the comprehensive cost rate was +0.9 pct to 99.6% year-on-year, mainly affected by the blizzard disaster and travel recovery in the early Spring Festival. The blizzard disaster increased the comprehensive cost rate by 2.0 pct this quarter. In addition, guarantee insurance also has a certain impact on the overall comprehensive cost ratio. After excluding guarantee insurance, the overall comprehensive cost ratio is 98.4%.
4. Asset side: In the context of declining long-term interest rates, the return on net investment fell slightly year-on-year, and the annualized net return on investment of the company's insurance fund portfolio in the first quarter was -0.1 pct to 3.0% year on year. It is expected that the return on newly allocated fixed income assets declined mainly due to the decline in long-term interest rates, lowering the overall net return on investment. The company's annualized comprehensive return on investment in the first quarter was 3.1%.
5. Other business: The overall performance of the banking business is steady
In terms of banking business, in the first quarter, net profit was +2.3% year over year to 14.932 billion yuan, and net interest margin (annualized) was -0.62 pct year over year to 2.01%. In terms of retail business, as of the end of 24Q1, retail customer assets (AUM) were managed at 40,82,712 billion yuan, +1.3% from the beginning of the year; the number of retail customers was 125.843 million, including 1,406,600 wealth customers, +2.1% compared to the beginning of the year; and personal deposit balance was 1255,081 billion yuan, +3.9% from the beginning of the year.
In terms of asset quality, Ping An Bank drives operating cost reduction and efficiency through digital transformation, strengthens asset quality control, and increases efforts to clear and dispose of non-performing assets. By the end of 24Q1, Ping An Bank's non-performing loan ratio was 1.07%, +0.01pct compared to the beginning of the year; the provision coverage rate was 261.66%, and the risk compensation capacity remained good.
Asset management and technology business operating profits for the first quarter were -30.3% and -129.1% year-on-year to 910 million yuan and -202 million yuan, respectively.
Investment advice: The core business resumed growth. I am optimistic about the company's long-term investment value. The company's operating profit returned to parent in the first quarter was better than expected. The three core businesses of life insurance and health insurance, property insurance, and banking resumed growth. The total operating profit of the three businesses was +0.3% year-on-year. Ping An Life Insurance continues to deepen its transformation, comprehensively build multi-channel specialized sales capabilities, and continue to improve channel quality.
A high-quality channel system helps drive the company's product structure optimization and NBV growth. The company's NBV growth rate for 2024/2025/2026 is expected to be 13.4%/13.6%/14.7%, respectively, giving the company a target price of 57.9 yuan for the next 6 months, corresponding to a PEV of 0.7 times in 2024, maintaining a “buy” rating.
Risk warning:
Debt-side reforms fall short of expectations: Currently, the company's life insurance business continues to deepen its transformation. If the quality of the company's agent team falls short of expectations, it may affect the company's new business value.
Long-term interest rates fall beyond expectations: If long-term interest rates decline more than expected, it will adversely affect the company's investment income.
A sharp decline in the equity market: If there is a sharp decline in the equity market, it will adversely affect the company's return on investment.
The recovery in residents' demand for insured products continues to fall far short of expectations: the new business value rate for insured products is generally high. If residents' demand for such products continues to be sluggish, it may have a negative impact on the company's new business value growth.