Ping An Life Agent Headcount Contraction Slightly Below Expected; P&C Margins Deteriorated

We lower our fair value estimate for Ping An Insurance to CNY 60 from CNY 65 per A share and HKD 66 from HKD 76 per H share following its third-quarter results, factoring in weaker outlook for new business recovery and investment returns in 2023 given the increasing macroeconomic uncertainties. The new FVE is based on downgraded assumptions for both life and property and casualty, P&C insurance premium income growths, investment return, and lower underwriting margins for life insurance in 2023 as demands for high-margin protection type products remain subdued. The year-on-year decline in the first three quarters of new business value, or NBV, only marginally narrowed to 26.6% from 28.5% in the first half, likely to miss our previously full-year expectation for a 22% decline. Despite the challenges, first-nine-month operating profits after tax, or OPAT, delivered a resilient growth at 3.8% year on year, versus 4.3% in the first half. This was driven by the 17% and 25.8% growths in Ping An Life and Ping An Bank respectively, largely flat from the 18% and 25.6% increases in the first half. We expect 2022 OPAT growth to marginally decline from current level but should remain positive given our expectation for largely steady underwriting margins in the fourth quarter.