The value of new business is expected to increase 12% year over year in the first half of 2024. The increase is mainly due to the increase in the value ratio of new business over year. According to the company's monthly report, Ping An Life Insurance's new policy premiums fell 5.2% year on year in the first half of the year, an increase of 1.4 percentage points over the first quarter; we expect the value rate of the new business in the second quarter to be 23.1%, a slight increase over the previous month; the value of the new business was 9.6 billion yuan, an increase of 2% year over year. The same period last year was affected by expected interest rate adjustments to form a high base. The value of new business is expected to increase 12% year on year in the first half of the year, and the value ratio of new business rose 5.2 percentage points year on year to 22.9% year on year. The increase in the value ratio of new business is mainly due to lower scheduled interest rates, lower processing rates through integrated banking insurance channels, and product structure optimization.
The comprehensive cost ratio of financial insurance is expected to be 99.4%, which is an increase over the previous year. According to the company's monthly report, financial insurance premiums increased 4.1% year on year in the first half of the year. Among them, car insurance increased 3.4% year on year, and the growth rate was slower than in 2023, mainly due to the slow growth rate of new car sales; non-car insurance fell 2.3% year on year, and the drag of credit guarantee insurance showed a weakening trend; and eHealth Insurance increased 30.5% year on year, and the growth rate accelerated significantly. The comprehensive cost ratio for the first half of the year is expected to be 99.4%, up 1.4 percentage points from the previous year, mainly due to the slowdown in car insurance growth and the impact of natural disasters; however, it fell slightly by 0.2 percentage points from month to month, and the drag on credit guarantee insurance has weakened.
Operating profit (OPAT) is expected to fall 3% year on year in the first half of the year. Among them, life insurance and banking business were basically the same year on year, financial insurance fell 18% year on year (credit guarantee insurance underwriting losses were concentrated in the second half of last year), and asset management and technology businesses stabilized month-on-month. Net profit for the first half of the year is expected to drop 2% year on year, and profit growth is expected to pick up in the second half of the year.
The company will issue $3.5 billion 5-year H-share convertible bonds. 1) Convertible bonds provide investors with options for future stock conversion. The issuance interest rate is 0.875%, which is conducive to reducing financing costs; 2) The impact of dilution is limited. If all convertible bonds are converted into shares, the share capital will increase by 0.625 billion, accounting for 7.74%/3.32% of the H share capital/total share capital after the share conversion; 3) Based on the Group's solvency at the end of 2023, if all convertible bonds are converted, it is expected that the core solvency adequacy ratio will increase by 3 percentage points.
Maintain a buy rating. The company currently has a dividend rate of over 7%, which is attractive in valuation. The year-on-year recovery in operating profit for the full year of 2024 is highly certain, maintaining the purchase rating and target price of HK$51.