Description of the event
Ping An of China released its 2024 quarterly report. The company achieved net profit of 36.71 billion yuan, a year-on-year decrease of 4.3%; achieved a new business value of 12.89 billion yuan, a year-on-year increase of 20.7% on a comparable scale.
Incident comments
Market fluctuations may be the main reason for the decline in profits. On the investment side, the total return on investment was not disclosed in the current period. The return on net investment fell 0.1 pct to 3.0% year on year. The main reason may be that interest rates continue to decline, the yield on new fixed income allocations has declined, and the pressure on asset allocation has increased in the future. Judging from the income statement, non-bank revenue, investment income, and profit and loss from changes in fair value totaled 56.71 billion yuan in the current period, a year-on-year decrease of 3.3%. Among them, investment income changed from positive to negative. Fluctuations in the equity market may be the main reason.
The value of the new business is growing well. New business value of 12.89 billion yuan was achieved in the first quarter of 2024, with a year-on-year growth rate of 20.7% on a comparable scale. Looking at the breakdown, the improvement in the value ratio of the new business is the main source of value growth in the current period: the new policy premium fell 13.6% year on year to 56.63 billion yuan; the new business value ratio (first-year premium) rose 6.5 pct from 16.3% in the same period last year to 22.8% (comparable caliber). The reduction in scheduled interest rates and the integration of banking insurance channels are probably the main reasons. 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.
Personal insurance production capacity continues to improve, and scale expectations have stabilized. In the first quarter, the number of agents in individual insurance channels fell 4% from the beginning of the year to 333,000, up from the 3.6% drop in the fourth quarter of last year. However, the team's production capacity increased markedly. The value of new business per capita increased by 56.4% year on year. At the same time, the share of “excellent +” agents representing high-quality production capacity in the new workforce increased by 11 pct year on year. 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.
eHealth Insurance continues to grow at a high rate, and natural disasters and the credit insurance business are dragging down profitability. In the first quarter, the company achieved production insurance premiums of 79.08 billion yuan, an increase of 2.8% over the previous year. Among them, accident and health insurance increased by 34.1% year over year. The comprehensive cost ratio of financial insurance increased by 0.9 pct to 99.6% year on year, mainly affected by natural disasters such as blizzards and freezing rain, as well as risk at the end of guarantee insurance. The company suspended financial guarantee insurance business in the fourth quarter of 2023, 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 24-year PEV valuation is 0.49 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.