Core viewpoints

In the context of pricing and interest rate adjustment, the company's NBV still achieved outstanding performance in the third quarter, further verifying the remarkable results of the company's in-depth channel reform in the past few years, and it is expected that the company's NBV will also achieve rapid growth throughout the year. Looking forward to next year, after not speculating in housing, new regulations on asset management, and net worth of financial products, savings insurance, as a scarce investment choice on the market, is still more competitive and is expected to undertake more steady investment demand from residents. With the company's diversified and high-quality channel layout, NBV is also expected to continue its growth trend next year. The current valuation of the company is obviously low, which is not in line with the excellent performance of the company's fundamentals. We think that the company's current configuration is cost-effective, and we suggest that we should focus on it.

Event

Ping An Insurance announces results for the first three quarters of 2023

In the first half of 2023, the company's homing operating profit in the first half of 2023 was-9.8% to 112.482 billion yuan; life insurance and health insurance business NBV + 40.9% to 33.574 billion yuan; property insurance business insurance service income + 6.8%; comprehensive cost rate + 1.6pct to 99.3%; annualized comprehensive investment return 3.7%.

Brief comment

1. Overall performance: asset management business and technology business drag down operating profit, but life insurance business profit resilience highlights the first three quarters of homed operating profit-9.8% to 112.482 billion yuan, mainly due to asset management business and technology business homed operating profit-177.8%,-60.0% to-4.344 billion yuan, 2.263 billion yuan. In the third quarter, the homing operating profit was-20.5% to 30.525 billion yuan compared with the same period last year, mainly because the asset management business was-587.0% to-5.756 billion yuan compared with the same period last year. The net profit of homing in the first three quarters was-5.6% to 87.575 billion yuan, and that in the third quarter alone was-19.6% to 17.734 billion yuan.

two。 Life insurance and health insurance business: under the background of pricing interest rate switching, NBV still achieved rapid growth, and per capita production capacity improved significantly in the first three quarters, NBV was + 40.9% to 33.574 billion yuan compared with the same period last year, and the high increase in NBV was mainly driven by the growth of new premiums. The first-year premiums used to calculate NBV in the first three quarters were + 44.8% to 144.764 billion yuan compared with the same period last year. NBVM year-on-year-0.6pct to 23.2%.

In the third quarter alone, NBV was + 28.6% year-on-year to 7.614 billion yuan, which was used to calculate the first-year premium of NBV from + 29.3% to 30.863 billion yuan.

From the perspective of sub-channels: 1) through excellent performance and fine management, the agent channel gradually improved the team structure, and the per capita production capacity increased significantly, and the per capita NBV in the first three quarters was + 94.4% compared with the same period last year. By the end of 23Q3, the number of personal life insurance sales agents was 360000, compared with-3.7% at the end of June and-26.3% compared with the same period last year.

2) strengthen the coordination and integration of bancassurance channels with Ping an Bank, and continue to expand external cooperative banking channels; 3) continue to promote the community grid business model, as of the end of 23Q3, a team of high-quality specialists with more than 11000 people has been formed, compared with 4000 in the same period last year.

3. Property insurance business: insurance service income grew steadily, and the comprehensive cost rate was higher than the same period last year. In the first three quarters, insurance service income was + 6.8% to 235.538 billion yuan, and original insurance premium income was + 1.8% to 225.932 billion yuan. Among them, auto insurance, non-car insurance and Italian health insurance were + 6.2%,-6.7%,-6.3% to 154.661 billion yuan, 53.36 billion yuan and 179.11 billion yuan respectively. In the third quarter, insurance service income was + 5.0% to 79.639 billion yuan compared with the same period last year, and the original insurance premium income was from-4.6% to 71.796 billion yuan compared with the same period last year. Among them, auto insurance, non-car insurance and Italian health insurance were + 6.2%,-34.1%, + 0.3% to 53.313 billion yuan, 12.72 billion yuan and 5.763 billion yuan respectively.

Cost side: in the first three quarters, the comprehensive cost rate was + 1.6pct to 99.3% compared with the same period last year, of which the comprehensive cost rate of auto insurance was 97.4%, which continued to outperform the industry. The main reasons for the upward comprehensive cost rate are as follows: 1) due to the typhoon and rainstorm disaster, the compensation costs of auto insurance and non-auto insurance have increased, and the comprehensive cost rate has recovered compared with the same period last year. 2) the travel demand of auto insurance customers has recovered, and the overall cost fluctuates due to the change of market environment.

4. On the asset side: the net investment return declined slightly, and the real right real estate investment scale increased year-on-year. In the first three quarters, the annualized comprehensive investment return of the company's insurance fund portfolio was 3.7%, and the annualized net investment return was-0.2pct to 4.0% compared with the same period last year. In the investment portfolio of insurance funds, the investment structure of real estate has changed, the proportion of real right investment has increased, and the proportion of equity investment has decreased. As of the end of 23Q3, the balance of real estate investment in the company's insurance fund investment portfolio was 209.482 billion yuan, + 1.4% year-on-year, accounting for 4.5% of the total investment assets, year-on-year-0.3pct. This kind of investment is mainly real right investment (including direct investment and holding property in the form of equity investment in project companies), which is measured by cost method, accounting for 76.1% of real estate investment, which is + 20.1pct compared with the same period last year. Debt investment accounted for 18.9%, compared with the same period last year-2.3pct. Equity investment accounts for 5.0%, compared with the same period last year-17.8pct.

5. Banking business: the operating performance remains sound, and the overall asset quality is stable.

In the first three quarters, net profit was + 8.1% year-on-year to 39.635 billion yuan, and net interest margin (annualized) was-0.30pct to 2.47%. In terms of retail business, as of the end of 23Q3, retail customer assets (AUM) were managed at 3.998848 trillion yuan, + 11.5% from the beginning of the year; the number of retail customers was 124.8237 million, of which 1.3693 million were Fortune customers, + 8.2% from the beginning of the year; and the balance of personal deposits was 1.176532 trillion yuan, + 13.7% from the beginning of the year.

The overall asset quality is stable. As of the end of 23Q3, the non-performing loan ratio of Ping an Bank was 1.04%, compared with-0.01pct at the beginning of the year; the provision coverage rate was 282.62%, and the risk offset ability remained good.

6. Asset management & technology business: profits fell sharply compared with the same period last year

In the first three quarters, due to the influence of the macroeconomic environment, the business volume declined, the project valuation changed, the fluctuation of the capital market, the weak market investment demand, and the profit of the asset management business declined. the homed operating profit in the first three quarters and the third quarter was-177.8%,-587.0% to-4.344 billion yuan,-5.756 billion yuan, respectively.

In the first three quarters, technology business revenue was under pressure, and net profit decreased compared with the same period last year. The operating profit of the technology business in the first three quarters and the third quarter is-60.0%,-29.3% to 2.263 billion yuan and 528 million yuan respectively compared with the same period last year.

Investment suggestion: the NBV growth rate is eye-catching to verify the effectiveness of the previous reform, and the comprehensive financial and medical ecosystem jointly drive long-term value growth in the context of pricing interest rate adjustment, the company's NBV still achieved outstanding performance in the third quarter, further verifying the remarkable results of the company's in-depth channel reform in the past few years, and it is expected that the company's NBV will also achieve rapid growth throughout the year. Looking forward to next year, after not speculating in housing, new regulations on asset management, and net worth of financial products, savings insurance, as a scarce investment choice on the market, is still more competitive and is expected to undertake more steady investment demand from residents. With the company's diversified and high-quality channel layout, NBV is also expected to continue its growth trend next year. In the long run, the coordination of integrated finance and medical ecosystem is expected to provide sufficient driving force and deep moat for the company's long-term value growth.

In the long run, with the improvement of residents' awareness of independent pension, there is a broad space for the development of pension financial products in the future, and the company relies on the group's medical and health ecosystem to deepen the three core services of medical health, home care and high-end endowment. With the combination of products and health care services, it is expected to continue to benefit from the continuous expansion of the pension financial market. Recently, regulators have issued a series of policies, such as the "integration of banking and insurance channels" and the "notice on strengthening management to promote the stable and healthy development of life insurance business", which will help to control market chaos, create a healthy development environment for the industry, and promote insurance companies to reduce operating costs and improve debt quality, which is conducive to the profitability of the life insurance industry and achieve high-quality development in the long run.

On the asset side, the recent stock market has ushered in a series of positive signals, including Huijin Company to increase its holdings of bank shares and ETF, economic data continued to pick up, superimposed buybacks, holdings, not reduced the number of listed companies continued to increase, help to boost market sentiment, in the current market valuation level has been low, is still optimistic about the stock market trend to usher in a long-term rebound, and then drive asset-end performance repair.

In terms of dividends, the company's annual profit stability is expected to be better than that of its peers, providing a solid foundation for a stable dividend level.

The current valuation of the company is obviously low, which is not in line with the excellent performance of the company's fundamentals. We believe that the company's current configuration is cost-effective. It is expected that the company's NBV growth rate in 2023, 2024, 2025 will be 26.1%, 10.7%, 11.6%, respectively. The company will be given a target price of 58.3 yuan in the next 12 months, corresponding to 0.7 times PEV in 2023, maintaining a "buy" rating.