[Event] Ping An of China announced its 2024 interim results: 1) Net profit to mother of 74.6 billion yuan, +6.8%, Q1/Q2 -4.3% and +20.4%, respectively; annualized ROE was 16.2%, +0.8pct year-on-year. 2) Operating profit attributable to mother was 78.5 billion yuan, -0.6% YoY, Q1/Q2 -3.0% and +1.9%, respectively. 3) Net assets of 931.2 billion yuan, +3.6% at the beginning of the year and +2.9% at the end of Q1. 4) NBV +11% year-on-year ratio under the same caliber. The Group and Life Insurance EV were +6.2% and +10.3%, respectively, compared to the beginning of the year. 5) The interim dividend per share was 0.93 yuan/share, the same as the previous year.
Life insurance/financial insurance/bank net profit is growing, and the life insurance contract service margin continues to decline compared to the beginning of the year. 1) Net profit from life insurance, industrial insurance, banking, asset management, and technology sectors in the first half of the year was +12%, +7%, +2%, -8%, and -74%, respectively. The operating profits of the life insurance and technology sectors were +0.7% and -83%, respectively. 2) Life insurance business insurance service performance was 47 billion yuan, -2.2% year over year, investment service performance was 15.1 billion yuan, +12.1% year over year, contract service margin was 774.4 billion yuan, compared to -5.3% at the end of the previous year.
Life insurance: NBV remained flat year on year in the second quarter; the size and quality of agents both increased. 1) New premiums are under pressure for a short period of time.
In the first half of the year, the first-year premium for calculating NBV was -19%, and new instalment payments for personal insurance and bank insurance were -4% and -30%, respectively. 2) NBV was +11.0% year-on-year, and Q1/Q2 was +20.7% year-on-year, flat; the insurance, banking insurance, and grid channels were +10.8%, +17.3%, and +269%, respectively. The NBV margin was 24.2%, +6.5 pct year over year under comparable caliber. The NBV margins for individual insurance and banking insurance channels were 33.0% and 22.5%, respectively, +10.5pct and +6.8pct compared with the previous year. 3) The number of agents increased sequentially, and production capacity per capita increased dramatically.
The number of agents reached 0.34 million, -2.0% from the beginning of the year and +2.1% at the end of Q1; the average number of agents per month was 0.308 million, -18.7% compared to the same period last year. The agent activity rate was 55.9%, +1.8pct year on year. Monthly income per capita and NBV per capita (same caliber) were +9.9% and +36.0%, respectively.
Industrial insurance: Credit guarantee insurance coverage losses have narrowed, and the comprehensive cost ratio has improved year-on-year. 1) The original premium income of production insurance in the first half of the year was +4.1%; income from insurance services was +3.9%. Among them, car insurance, non-car insurance, and eHealth Insurance were +6.0%, -3.1%, and +11.2%, respectively. 2) Underwriting profit of 3.5 billion yuan, +15.7% YoY. The comprehensive cost ratio was 97.8%, -0.2 pct year over year, the cost ratio was -0.2 pct to 27.2% year over year, and the payout rate remained the same at 70.6% year over year. The increase in underwriting profits is mainly due to the decline in underwriting losses in the guarantee insurance business. The comprehensive cost ratio of car insurance was 98.1%, +1.0pct year on year. Mainly affected by natural disasters such as torrential rain, the underwriting profit was 2.05 billion yuan; the comprehensive cost ratio of guaranteed insurance rose to 106.8% year-on-year - 10.9pct, and the underwriting loss narrowed to 0.55 billion yuan.
Investment: Allocate additional bonds and stock assets, and equity investments drive improvements in overall and comprehensive return on investment. 1) The total investment scale reached 5.2 trillion yuan, +10.2% compared to the beginning of the year. Among them, bond investment and stock investment accounted for +2.6 pct and +0.2 pct to 60.7% and 6.4% respectively at the beginning of the year, while funds were -1.0 pct to 4.4% compared to the beginning of the year. Real estate investment accounted for 4.0%, of which property rights accounted for 79.1%. 2) The annualized net return on investment was 3.3%, -0.2pct year on year, mainly affected by the maturity of existing assets and the decline in return on new fixed income assets. The total return on investment was 3.5%, +0.1 pct year on year, and the comprehensive return on investment was 4.2%, and +0.1 pct year over year, mainly due to the improvement in equity asset performance compared to the same period last year.
The valuation is still low, and the rating is “superior to the market”. We are optimistic that the results of the company's life insurance reform will be gradually released, the team quality will continue to improve, the comprehensive financial advantage+healthcare ecosystem layout will enable long-term performance growth, and at the same time, stable dividend returns will increase investment value. As of August 22, 2024, the company's stock price corresponds to 2024E PEV 0.51x.
We gave 0.65-0.7 times 2024E PEV, a reasonable value range of 53.10-57.18 yuan, and a “superior to the market” rating.
Risk warning: Long-term interest rates are trending downward; new premium growth falls short of expectations.