Incidents:

In the first half of 2024, China Ping An's revenue was 494.97 billion yuan, +1.3%; net profit to mother was 74.62 billion yuan, +6.8%; operating profit to mother was 78.48 billion yuan, -0.6% year over year; new business value 22.32 billion yuan, +11.0% year over year; group included value of 1.48 trillion yuan, +6.2% compared to the beginning of the year; annualized net return on investment/ total return on investment/ comprehensive return on investment were 3.3%, respectively /3.5%/4.2%, year-on-year, -0.2pct/+0.1pct, respectively; the interim dividend was 0.93 yuan per share, flat year over year.

Comment:

The resilience of core business operations was highlighted, with profit of +20.4% year-on-year in the second quarter. In the first half of 2024, the company achieved net profit of 74.62 billion yuan, +6.8% year-on-year, and an increase of 11.1pct compared to Q1. Among them, 24Q1/Q2 were -4.3%/+20.4% year-on-year, respectively, and profit improved markedly, from life insurance business (24H1 increased 12.2% year over year to 50.61 billion yuan), financial insurance business (up 7.2% year on year to 9.91 billion yuan), and banking business (up 1.9% year on year to 15 billion yuan) Contributing together. Excluding short-term investment fluctuations and extraordinary operating expenses, 24H1 operating profit was 78.48 billion yuan, or -0.6% year-on-year, of which 24Q1/Q2 were -3.0%/+1.9% year-on-year, respectively; operating profit from the Group's three core businesses (life insurance+financial insurance+banking) increased 1.7% year-on-year, an increase of 1.4 pcts over Q1, and the core financial industry remained stable.

Personal insurance: The agent channel continues to deepen its transformation, and the increase in value ratio drives NBV to continue to grow better.

1) The scale of manpower has steadily rebounded, and the quality of the team continues to improve. In the first half of 2024, the company had an average of 0.308 million agents per month, a year-on-year decline of 7.3 pcts; by the end of 24Q2, the number of personal life insurance sales agents was 0.34 million, +2.1% compared to the end of Q1 (-4.0% at the end of 24Q1 compared to the end of 23Q4), achieving a steady recovery. In terms of team production capacity and revenue, in the first half of the year, the company's agent channel's NBV per capita increased 36.0% year over year to 0.059 million yuan/person per half year, and the increase was 20.4 pcts narrower than in the first quarter; per capita income increased 9.9% year over year to 0.012 million yuan/person per month; “Excellent +” accounted for +10.2 pct year on year in new manpower, and agent activity rate increased 1.8 pct to 55.9% year on year. The team quality continued to improve.

2) The value of the new business was +11.0% year-on-year, and the contribution of channels such as banking insurance and community grids continued to increase. In the first half of 2024, the company achieved first-year premiums (calculated NBV caliber) of 92.22 billion yuan, or -19.0% year-on-year, of which 24Q1/Q2 were -13.6%/-26.4%, respectively. It is expected to be mainly affected by changes in product reservation interest rates and the decline in banking insurance business under strict supervision of “integrated reporting and banking”. However, thanks to effective cost control, the company's new business value rate (based on first-year premiums) increased 6.5 percentage points to 24.2% year on year in the first half of the year, driving the value of new business up 11.0% year on year to 22.32 billion yuan. Of these, 24Q1/Q2 remained flat at +20.7% /year on year, respectively.

By channel, in the first half of the year, the new business value of the company's agent channel increased 10.8% year on year to 18.11 billion yuan, the value of the new banking insurance channel increased 17.3% year on year to 2.64 billion yuan, and the value of the new community grid business increased sharply by 269.2% year on year. In the first half of the year, the company's banking insurance channels, community grids and other channels contributed 17.4% of Ping An Life Insurance's new business value, with a contribution of +1.1 pct over the same period.

Property insurance: Insurance service revenue grew steadily, and the comprehensive cost ratio was optimized by 0.2 pct to 97.8% year-on-year. In the first half of 2024, the company's property insurance service revenue increased 3.9% year-on-year to 161.91 billion yuan. The increase was 1.8 pct narrower than Q1, and remained steady overall. Among them, vehicle insurance/non-car insurance/health insurance service revenue was 108.39/41.4/12.12 billion yuan, respectively, +6.0%/-3.1%/+11.2% year-on-year, respectively. Benefiting from the company's strengthened business management and risk screening, the company's comprehensive cost ratio was optimized by 0.2 pct to 97.8% year over year in the first half of the year. Among them, the comprehensive cost rate/comprehensive compensation rate was 27.2%/70.6%, respectively, and remained flat at -0.2 pct/y. Looking at insurance types, the comprehensive cost ratio of car insurance/non-car insurance (excluding guarantee insurance) increased by 1.0 pct/2.1 pct to 98.1%/95.5% year over year, mainly affected by natural disasters such as torrential rain; the comprehensive cost ratio of guarantee insurance was greatly optimized by 10.9 pct to 106.8% year over year. The company suspended the new financing guarantee insurance business in the fourth quarter of '23. In the future, as the risk exposure of this business rapidly settled, COR is expected to improve further.

Investment: The annualized comprehensive return on investment increased by 0.1 pct to 4.2% year-on-year. In the first half of 2024, due to the maturity of existing assets and the decline in the return on new fixed income assets, the company's annualized net investment return fell 0.2 pct to 3.3% year on year; however, thanks to the company's balanced asset allocation strategy and the improvement in equity asset performance over the same period last year, the company's annualized total return on investment/ comprehensive return on investment increased 0.1 pct/0.1 pct to 3.5%/4.2% year on year, respectively.

Banks: Profits have maintained positive growth, and risk offsetting capacity has remained stable. In the first half of 2024, Ping An Bank's operating income was 77.1 billion yuan, -13% year over year; net profit to mother was 25.9 billion yuan, +1.9%; net interest spread 1.96%, down 5 bps from 1Q; non-interest income increased 8% year on year to 28 billion yuan, of which net income from handling fees and commissions fell 20.6% year on year to 13 billion yuan, mainly affected by the decline in agency insurance and credit card business fee revenue. Net other non-interest income increased sharply by 56.7% to 15 year on year Billions, a bullish bond market boosted investment returns and increased returns from changes in fair value. As of the end of 24Q2, Ping An Bank's non-performing loan ratio was 1.07%, the same as at the end of 1Q; the provision coverage rate rose slightly by 2.6 pct to 264.3% from the end of 1Q, and loans rose slightly by 3 bp to 2.82% compared to the end of 1Q.

Comprehensive finance: The number of individual customers is growing steadily, and the scale of asset management continues to rise. 1) The company's comprehensive financial model continues to deepen, deeply cultivate individual customers and consolidate customer base management. By the end of 24Q2, the number of individual customers in the group was 0.24 billion, +1.9% compared to the beginning of the year; the average number of customer contracts was 2.9, -0.7% compared to the beginning of the year, which was a phased fluctuation caused by the company actively adjusting the customer base structure for credit products. 2) The company mainly carries out asset management business through companies such as Ping An Securities, Ping An Trust, Ping An Financial Leasing and Ping An Asset Management. As of the end of 24Q2, the asset management scale exceeded 7.6 trillion yuan (over 7 trillion yuan at the end of Q1); due to factors such as rising credit risk and capital market fluctuations, the net profit attributable to the asset management sector fell 8.2% year on year to 1.3 billion yuan. The decline was 22.1 pcts narrower than Q1.

Profit prediction and rating: Ping An Life Insurance continues to deepen the “4 channels+3 products” strategy, comprehensively strengthen channel construction, improve business quality, and rely on the Group's healthcare ecosystem to lay out “insurance+health management”, “insurance+home care”, and “insurance+high-end pension” to enhance differentiated competitive advantage through “insurance+service”. 24H1 customers enjoying the service benefits of the medical and pension ecosystem contributed 68.7% (of which health care rights accounted for 30.4% and pension rights accounted for 38.3%), an increase of 0.7 percentage points over the previous year In the future, as diversified products are launched one after another and service support effects continue to be released, NBV is expected to maintain a positive trend and drive further upward revisions in valuation. We maintain the company's 2024-2026 net profit of 102.4/107.7/112.2 billion yuan, respectively. Currently, the A/H stock price corresponds to the company's PEV of 0.52/0.39 in 24, maintaining the “buy” rating for A/H shares.

Risk warning: Economic recovery fell short of expectations; policy reforms fell short of expectations; long-term interest rates declined beyond expectations.