Profit was significantly better than expected, operating profit to parent was slightly lower than our expectations, and financial insurance performance exceeded expectations. Ping An's net profit for the first half of the year increased 6.8% year over year, which was significantly better than our expectations. Operating profit attributable to mother decreased slightly by 0.6% year over year, slightly lower than our forecast of 1%. By business, financial insurance/life insurance and health insurance/banking business increased 7.2%/0.7%/1.9% year on year respectively. The above three core businesses increased 1.7% year over year, but this was basically offset by the year-on-year decline in technology business. The interim dividend was 0.93 yuan (RMB, same below), the same as the previous year.

The value of the new business is largely in line with expectations. The value of new business increased 11% year over year in the first half of the year, which is generally in line with our expectations. The value ratio of the new business was 24.2%, up 6.5 percentage points from the previous year, and a further increase of 1.4 percentage points over the first quarter. The increase was mainly due to the effects of product structure optimization, lengthening payment periods, lower predetermined interest rates, and integration of banking insurance channels.

Agents have rebounded steadily, and the quality of life insurance business has improved. The number of individual insurance agents was 0.34 million, down 2% from the beginning of the year, but there was a month-on-month increase of 0.007 million, the first positive month-on-month increase since the 3rd quarter of 2020. Business quality improved, and the 13/25-month insurance policy continuation rate was 96.6%/90.9%, up 2.8/3.3 percentage points from the previous year, the best level since 2019.

Ping An Insurance's profit was better than expected, and the drag on credit guarantee insurance was drastically reduced. Ping An Insurance's net profit increased 7.2% year on year in the first half of the year, better than expected. Among them, underwriting profit/ investment income was +15.7%/+6.7%, respectively. The comprehensive cost ratio was 97.8%, down 0.2 percentage points from the previous year, mainly due to the weakening of credit guarantee insurance, but the comprehensive cost ratio of car insurance was 98.2%, which increased 1 percentage point year on year due to natural disasters. It is expected that in the second half of the year, as the impact of credit guarantee insurance clears up, the profit growth rate will further increase significantly at a low base.

Maintain a buy rating. The strategic layout of Ping An Comprehensive Finance+Health Care and Pension has built a differentiated competitive advantage, and comprehensive finance has been upgraded to the 2.0 customer operation stage. We raised our profit forecast and expect OPAT to grow 13% year over year on a low basis in 2024. The current dividend rate is over 7%, and the valuation is attractive, maintaining the purchase rating and target price of HK$51.