1H24 results are in line with our expectations

1H24 Ping An Life Insurance's new business value (NBV) was +11.0% year over year; financial insurance comprehensive cost ratio (CoR) -0.2ppt to 97.8% year over year; the Group's operating profit/net profit to parent was -0.6%/+6.8%, respectively, parent shareholders' equity was +3.6% compared to the beginning of the year, and Group EV was +6.2% compared to the beginning of the year; the overall dividend was 0.93 yuan per share, which was flat year on year.

Development trends

There is a clear improvement trend in the main life insurance industry. 1H24 Ping An NBV +11.0% (comparable caliber), of which agents/banking insurance were +10.8%/+17.3%, respectively; although the number of agents was -2% to 0.34 million at the beginning of the year, per capita NBV was +36%, activity rate +1.8ppt to 55.9% year over year, per capita income +10.8% to 9,608 yuan/month; life insurance contract service margin was +0.8% compared to the beginning of the year, operating profit +1.3%; life insurance net/total/comprehensive investment returns were +0.0./ 0./ 2/+ 0.2ppt to 3.4%/3.6%/4.3%, net profit +12.7% YoY; thanks to endogenous profitability, life insurance core/comprehensive solvency ratio was +18.6/14.1ppt to 123.6%/208.8% compared to the beginning of the year. Although some investors have doubts about the complex measurement of NBV, we believe that for companies that operate prudently, NBV that returns to a growth trend will eventually be realized as an improvement in profits, based on trends in various indicators of the Ping An Life Insurance business, and we are optimistic about their future business trends.

The profitability of Ping An Financial Insurance is recovering. 1H24 Ping An Insurance Service Revenue +3.9% YoY, with Auto Insurance/Non-Auto Insurance +6.0%/-3.1%, respectively; overall COR -0.2ppt to 97.8% YoY, better than our expectations. Among them, the expense ratio was -0.2ppt, and the payout rate was flat year-on-year; Credit Insurance CoR was -10.9ppt to 106.8% yoy, still being gradually cleared; net insurance/total/comprehensive investment returns were -0.6/-0.1/-0.1ppt to 3.0%/3.3%/3.4%, respectively, corresponding to net profit +7.2% Earnings in the 2Q quarter were +27.9% YoY.

Asset management business and technology business dragged down the Group's profit performance. Net profit of the 1H24 asset management business was -14.7% to 1.685 billion yuan, mainly affected by financial market fluctuations; net profit of the technology business was -54.3% to 1.05 billion yuan, and operating profit was -61.2% to 0.87 billion yuan. Among them, the loss of 1.66 billion yuan due to factors such as increased taxes (1.05 billion billion yuan) and contraction of business by Lujin's special dividend was the main drag.

The inflection point of Ping An's profit may have already appeared. 1H24 Ping An Group's operating profit/net profit was -0.6%/+6.8%, respectively, corresponding to the same period of +1.9%/+20.4% in the 2Q single quarter; it announced an interim dividend of 0.93 yuan/share, which was the same as the previous year. Looking ahead, taking into account the improving trends and operating advantages of Ping An Insurance's main business, the low base due to past asset management business impairment, and possible future impairment levels, we believe that Ping An Group's profit inflection point may have already appeared. The certainty of steady future dividend growth has increased, and it currently has strong allocation value.

Profit forecasting and valuation

We maintain profit forecasts, industry ratings and A/H 63.5 yuan/55.65 HKD target, corresponding to 0.8/0.6x 2024e P/EV. Ping An A/H is currently trading at 0.5/0.4x 2024e P/EV, with a potential upside of 52%/62%.

risks

The increase in premiums for new orders fell short of expectations; long-term interest rates fell sharply; capital markets fluctuated greatly; and policy and regulatory uncertainty.