Introduction to this report:
Net profit is expected to improve month-on-month due to the recovery in investment income; improved life expectancy and easing of asset management impairment pressure are beneficial to improving operating profit; life insurance NBV growth is better than expected, and financial insurance COR is improving month-on-month, maintaining “increase in holdings.”
Key points of investment:
Investment advice: Maintain the “increase” rating and maintain the target price of 58.98 yuan/share, corresponding to the 24-year P/EV of 0.71 times: Considering that the 24Q2 equity market performance was better than the same period in '23, it is expected that better price spread earnings than in the same period in '23 will lead to a marginal improvement in profits. We expect the company's 24H1 net profit to be 6.0% year-on-year, changing from negative to positive over 24Q1. Considering the positive contributions brought about by business improvements in core business sectors such as life insurance and industrial insurance, and the reduction in asset management impairment pressure, the 24H1 Group's operating profit to mother is expected to be 1.4% year-on-year, of which operating profit from life insurance to parent is 2.5% year-on-year. Considering the operating profit linked to the company's dividend policy, the mid-term dividend is expected to increase year-on-year.
Maintain the 2024-2026 EPS at 6.17/7.57/8.77 yuan.
NBV growth was better than expected, mainly due to improved value ratios from new businesses, while new orders were under slight pressure from a high base. We expect the company's NBV comparable caliber (based on adjusted assumptions at the end of '23) to be 12.3% in the first half of '24, mainly due to improvements in the value ratio of new businesses. Benefiting from factors such as product pricing and interest rate switching, banking insurance “integrated reporting and banking” control channel rates, and the company's active optimization of the product structure to increase longevity and sales of high-value guaranteed products, it is expected that the company's 24H1 value ratio will improve markedly. On the other hand, the company's new orders are under slight pressure. According to the premium announcement, the company's 24H1 life insurance premiums were 5.0%, of which the new policy premium was -5.2%, of which -6.9% year-on-year in the second quarter. It is expected to be mainly due to the high base impact caused by centralized sales of savings insurance during the same period in '23, and strong demand for capital protected savings from customers made the pressure on new orders better than expected.
Industrial insurance premiums are growing slowly, and COR is expected to improve month-on-month. According to the premium announcement, the company's 24H1 production insurance premiums were 4.1% year-on-year, of which car insurance premiums were 3.4%. The expected slowdown was mainly due to a slow increase in the number of insured vehicles due to a slowdown in the growth rate of new car sales, and the reduction in premium pricing for high-quality car owners to benefit consumers; non-car insurance premiums were 5.3% year-on-year, with accident health insurance being the main driving force, 30.5% compared with the same period. At the same time, due to the impact of the three-year credit insurance business, it is expected that COR will still be under some pressure, but it is expected that the pressure will gradually decrease. We forecast the comprehensive cost ratio of Ping An Financial Insurance 24H1 is 99.2%, 1.2pt year over year, and -0.4pt month-on-month.
Catalyst: Real estate credit risk mitigation.
Risk warning: Stricter regulations; capital market fluctuations; rising real estate risks.