Ping An reported resilient 1H24 results with NBV +11% YoY on a like-for-like basis to RMB 22.3bn, outpacing our forecast / market consensus by 3.6%/9.5%. Agency and bancassurance NBV drove up by 10.8%/17.3% YoY given a better margin to 33.0%/22.5% in 1H24, +10.5pct/+6.8pct on a like-for-like basis. 2Q NBV stabilized at RMB9.43bn against a high base pushed by FYP increase (+49.6% YoY) in 1H23. NBV margin was 24.2%, +6.5pct YoY in 1H24, offsetting -19.0% YoY FYP decline. We maintain the view on high-quality NBV growth to be driven by improving margin rather than scaling up volumes, and expect Ping An's margin expansion to progress with more productive agents and efficient bancassurance models. Group OPAT decline narrowed to -0.6% YoY in 1H24 (vs 1Q24: -3.0% YoY), backed by 1.7% YoY increase in OPAT of three core business lines to RMB 79.6bn. Looking ahead, we expect the Group OPAT to turn around in FY24, given 1) stabilized L&H OPAT underpinned by improved operating efficiency; 2) enhanced P&C UWP with evident scale-back of guarantee biz, and 3) low base of AMC and Tech OPAT in 2H23. We expect full-year Group OPAT to grow 3.9% YoY (CMBI est), laying the ground for progressive dividend growth. Interim dividend was HK$ 0.93 per share, flat to that of 1H23. Maintain BUY, with TP unchanged at HK$52.0 implying 0.6x FY24E P/EV.
Expect NBV to navigate L&H OPAT growth. Ping An L&H achieved +11% YoY rise in NBV to RMB22.3bn in 1H24, implying a stable 2Q24 figure at RMB9.43bn. We see this result as a mix of: 1) margin expansion with total NBV margin +6.5pct to 24.2% in 1H24; 2) highly productive agent force as NBV per agent/month +36% YoY to RMB 9,785 with marginally lifted agent scale to 340k (vs 1Q24: 333k); and 3) restated 1H23 EV-related figures based on end-2023 long-run investment return (4.5%) and risk discount rate (9.5%) assumptions. L&H OPAT to S/H grew 0.7% YoY to RMB 54.7bn, enhanced by better operating variances (+10.2%) and investment service results (+12.1%) on a like-for-like basis in 1H24. CSM release dropped 5.5% YoY to RMB36.5bn, primarily dragged by the new business CSM -12.6% YoY to RMB23.7bn. Looking ahead, we expect the deviation of NBV and new business CSM to be short-term, as higher new biz growth shall accumulate distributable future earnings to benefit in CSM release. We forecast CSM release growth to turn positive in 1H25, and full-year L&H OPAT +1.9% YoY (CMBI est).
P&C CoR declined due to scale-back of guarantee insurance. P&C CoR was 97.8% in 1H24, -0.2pct YoY with expense ratio down to 27.2% (-0.2pct) and claim ratio remained intact at 70.6%. Auto CoR was 98.1%, +1pct YoY given increasing claims from recovering travels and more frequent natural catastrophes in 1H24. The insurer scaled back on high-loss guarantee business with insurance revenue of the line -44% YoY to RMB8.05bn and CoR contracted to 106.8% (-10.9 pct YoY). Non-auto CoR, excl. guarantee was up by 2.1pct to 95.5%, dragged by commercial property, health and agriculture. We see better-than-expected underwriting profit to RMB3.5bn, +15.3% YoY, thanks to increase in insurance revenue. We expect FY24E CoR to fall to 97.7% to reflect positive structural chg.
Valuation. The stock is trading at 0.42x FY24E P/EV and 0.61x FY24 P/BV, with 7.6% dividend yield and avg. 12.3% three-year ROE (CMBI est). We look positive on the Group's OPAT turnaround, given strengthened three core businesses and a low base in 2H23, esp. for AMC and Tech segments. Reiterate BUY, with TP unchanged at HK$52.0, implying FY24 0.6x P/EV.
