Incidents:

Ping An of China released its 2024 interim report. In the first half of 2024, the company achieved a total operating income of 494.966 billion yuan, a year-on-year increase of 1.3%, achieved operating profit to the mother of 78.482 billion yuan, a year-on-year decrease of 0.6%, and realized a net profit of 74.619 billion yuan, an increase of 6.8% over the previous year. The first half of 2024 achieved a new business value of 22.32 billion yuan, an increase of 11% over the previous year. As of the first half of 2024, the Group's embedded value was 1.48 trillion yuan, an increase of 6.19% over the beginning of the year.

Comment:

Premium income from the scale of the personal insurance business increased steadily, and the increase in the value ratio of the new business led to an increase in NBV.

In the first half of 2024, the company's personal insurance business achieved a total large-scale premium income of 387.766 billion yuan, an increase of 2.07% over the previous year. By channel, the company's agent channel continued to deepen its transformation, and per capita production capacity continued to increase. The average number of agents per month in the first half of 2024 was 0.308 million, down 18.7% year on year, but per capita NBV increased 36.0% year on year to 58,708 yuan, and channel scale premium revenue was 323.713 billion yuan, up 1.41% year on year, accounting for 83.48%. The company's banking insurance channels focus on high-quality growth. 2024H1 achieved large-scale premium revenue of 30.249 billion yuan, an increase of 12.69% over the previous year, accounting for 7.8%.

Influenced by the high base of the new order business in 2023, the company's 2024H1 premium revenue for calculating NBV fell 19% year on year to 92.218 billion yuan, but the value ratio of the new premium business in the first year increased 6.5 pct to 24.2% year on year, driving NBV up 11% year on year to 22.32 billion yuan.

The comprehensive cost ratio of the property insurance business declined slightly. 2024H1 achieved premium income of 160.397 billion yuan from the property insurance business, up 4.06% year on year. Among them, the car insurance business achieved premium income of 104.824 billion yuan, up 3.43% year on year, accounting for 65.4%, down 0.4 pct year on year, and the revenue structure was optimized. 2024H1's property insurance business COR was 97.8%, down 0.2 pct year on year. Among them, the comprehensive expense ratio was 27.2%, down 0.2 pct year on year, and the comprehensive payout rate was 70.6%, which was the same year on year.

The scale of investment expanded steadily, and the total return on investment rose slightly. As of 2024H1, the company's investment assets were 5.2 trillion yuan, up 10.19% from the beginning of the year. Among them, debt-based financial assets were 3.86 trillion yuan, up 12.36% year on year, accounting for 74.1%, up 1.4 pct year on year. The company's net/total/comprehensive return on investment for the first half of 2024 was 3.3%, 3.5% and 4.2%, respectively, with year-on-year changes of -0.2 pct, 0.1 pct and 0.1 pct, respectively.

Net interest spreads in banking operations declined, and net profit increased slightly. Affected by the decline in market loan interest rates, the annualized net interest spread of the company's banking business decreased by 0.59 pct to 1.96% year on year, but the net profit of the business increased slightly by 1.9% year on year to 25.879 billion yuan.

Investment advice: As a leading company in the insurance industry, Ping An of China has significant competitive advantages. The company's net profit from 2024 to 2026 is estimated to be 105.33 billion yuan, 117.62 billion yuan, and 129.35 billion yuan, respectively, and the corresponding PEV valuation is 0.52/0.48/0.44 times, respectively. Give it a “buy” rating.

Risk warning: The company's performance falls short of expectations, regulatory policies have changed, and equity market fluctuations have intensified.