Description of the event

Ping An of China released its 2024 mid-year report. The company achieved net profit of 74.619 billion yuan, a year-on-year increase of 6.8%; achieved a new business value of 22.32 billion yuan, an increase of 11.0% year-on-year on a comparable scale.

Incident comments

Profit improvements are mainly due to asset-side improvements. Investment income improved year on year. The company achieved a total investment income of 97.883 billion yuan, an increase of 23.0% year on year. Among them, the net, total and comprehensive return on investment were 3.3%, 3.5% and 4.2% respectively, down 0.2 pct, up 0.1 pct, and 0.1 pct, respectively. In terms of asset allocation, stock positions rose to 6.4% from 6.2% at the end of the year, with OCI stocks rising 3.7% to 4.0%. The real estate balance was 207.425 billion, and the exposure continued to decrease by 4.0%, of which the cost method measured property rights accounted for 79.1% and claims 16.9%.

Under a high base, the value of new businesses continued to grow well. In the first half of 2024, a new business value of 22.32 billion yuan was achieved. The year-on-year growth rate was 11.0% under a comparable scale. Among them, the single Q2NBV growth rate was basically the same. Considering last year's high base, it performed well. Looking at the breakdown, the improvement in the value ratio of the new business is the main source of value growth in the current period: the new policy premium fell 19.0% year on year to 92.218 billion yuan; the new business value ratio (first-year premium) increased by 6.5 pct to 24.2% (comparable caliber). The reduction in predetermined interest rates and the implementation of integrated reporting and banking insurance channels may be the main reasons. Looking ahead, the value ratio is expected to continue to improve, considering that the industry will lower the scheduled interest rate again.

The number of individual insurance agents has steadily rebounded. The number of individual insurance channel agents in the first half of the year fell 2% from the beginning of the year to 0.34 million, and the scale rebounded from 0.333 million in the first quarter. At the same time, the team's production capacity continued to increase. The value of new business per capita increased sharply by 36.0% year on year, and revenue increased by 9.9% year on year. The share of “Excellent +” agents representing high-quality production capacity in the new workforce increased by 10.2 pct over the same period last year. The company continues to promote high-quality team building and increase revenue and production capacity. It is expected that the number of agents will remain stable, and continue to pay attention to agents' revenue and production capacity. In addition, the community grid business model covers 90 cities, an increase of 39 cities over the end of 2023, and is expected to continue to contribute premiums and value in the future.

Financial insurance underwriting profits improved year over year. In the first half of the year, the company achieved industrial insurance premiums of 160.397 billion yuan, an increase of 4.1% over the previous year. Among them, car insurance premiums grew by 3.4%, non-car premiums decreased year on year, and accident and health insurance increased by 30.5% year on year. The comprehensive cost ratio of financial insurance decreased by 0.2 pct year on year to 97.8%. Among them, car insurance COR increased by 1.0 pct year on year, mainly affected by natural disasters such as blizzards and freezing rain. The company suspended the financial guarantee insurance business in the fourth quarter of 2023. The uninsured liability balance continued to decline in the first half of 2024, and future performance is expected to improve.

Focus on the main asset side in the short term and be optimistic about ecological advantages in the long term. The main contradictions in the industry are still asset-side factors, so we need to pay attention to long-term interest rates, equity markets, and real estate industry conditions. In a situation of marginal improvement, there is broad room for improvement.

In the medium to long term, the company continues to push forward channel reforms, emphasizes supply-side innovation, and is also deeply involved in healthcare and comprehensive finance businesses. It is expected that ecosystem advantages will help the company build future product and pricing barriers. Currently, the company's 24-year PEV valuation is 0.53 times, in the bottom range, maintaining a “buy” rating.

Risk warning

1. Major adjustments to industry policies;

2. The equity market fluctuated greatly, and interest rates declined sharply.