Ping An Insurance's Q2 Life Net Business Value Contracted as Expected, P&C Margins Deteriorated

We lower our fair value estimate for Ping An Insurance to HKD 76 from HKD 86 per H-share following its second-quarter results, factoring in continuous challenges in the life insurance business. The new valuation was based on downgraded revenue assumptions for banking business and lower underwriting margin for life insurance in 2022 and 2023. Despite a weaker macroeconomic environment and COVID-19 lockdowns, six-month operating profits after tax, or OPAT, delivered resilient 4.3% year-on-year growth. This was driven by the 18% and 25.6% increases in Ping An Life and Ping An Bank, respectively, despite the 22%, 45%, and 21% contractions in P&C insurance, asset management, and technology businesses. We expect positive growth in full-year OPAT given our expectation for better investment returns in the second half that should support improvement in OPATs for the P&C insurance and asset management business. Interim dividends increased 4.5% year on year to CNY 0.92 per share, indicating a strong capital position and management’s commitment to a steady and progressive dividend policy.