Company Reports

Ping An Insurance’s first-quarter 2024 year-on-year net profit decline narrowed to 4% versus the 23% decline in 2023. The results highlight stronger-than-expected growth in both new business value, or NBV, and operating profit after tax, or OPAT, driven by an improved life insurance margin. We expect this trend to continue in 2024, but full-year NBV growth is likely to moderate given a higher base in the second and third quarters of 2023 as a result of robust sales of last-batch 3.5% pricing savings-type products. Thus, we leave our assumptions largely unchanged and retain our fair value estimate at CNY 60 per A-share (HKD 65 per H-share) for Ping An.

We reduce our fair value estimates for Ping An Insurance, to CNY 60 per A-share (HKD 65 per H-share) from CNY 65 per A-share (HKD 71 per H-share), following its mixed 2023 results. The life insurance business continued a solid recovery in agent productivity and robust bancassurance growth, with new business value, or NBV if excluding the impact of actuarial assumption changes, growing at 36% year on year, beating our expectation for 25% growth.

In China's highly competitive insurance market, Ping An differentiates itself with its ability to use proprietary technology to strengthen the customer experience and enhance cross-sales for its major ecosystems: integrated finance, auto, healthcare, and eldercare. We believe its competitive advantage results in a better outlook than peers in terms of underwriting profitability and growth.

In China's highly competitive insurance market, Ping An differentiates itself with its ability to use proprietary technology to strengthen the customer experience and enhance cross-sales for its major ecosystems: integrated finance, auto, healthcare, and eldercare. We believe its competitive advantage results in a better outlook than peers in terms of underwriting profitability and growth.

We maintain our fair value estimates for Ping An Insurance, China Pacific Insurance, or CPIC, and New China Life Insurance, or NCI, at CNY 65 per A-share (HKD 71 per H-share), CNY 26 per A-share (HKD 30 per H-share) and CNY 23 per A-share (HKD 26 per H-share), respectively. Following in-line third-quarter results, we leave our 2023 new business value, or NBV, projections unchanged for these three insurers.

China Life‘s year-to-Sept. 30 year-on-year growth in premium slowed to 4.5% from 5.6% in August. As the first insurer to report monthly premium growth, the performance generally tracks our expectations. The year-on-year contraction in September premium narrowed to 7% from 10% in August on low base in the year-ago period. We expect slowing sales for other Chinese life insurers in September and October due to weakened product demands after the last-batch sales of 3.5% guaranteed rate savings products in July. We also expect ongoing regulation of bancassurance sales (an arrangement between a bank and an insurance company through which the insurer can sell its products to the bank's customers) to adversely affect September and October sales, but the impact should be small given these two months usually report weak sales. Despite the industrywide trend of slowing sales, we expect Ping An and PICC Life to see less downward pressure supported by lower base in the second half of 2022. We expect third-quarter new business value, or VNB, to decelerate significantly from the second quarter’s level, but fourth-quarter growth should rebound on low base and the resumption of bancassurance sales.

We are maintaining our fair value estimates of CNY 65 per A share and HKD 71 per H share for Ping An; CNY 23 per A share and HKD 26 per H share for New China Life or NCI; and HKD 4 per share for PICC Group and HKD 11 per share for PICC P&C following interim results. As expected, China’s insurers reported stronger new business value, or VNB, growth for first-half 2023 of 18%-33% year on year, as customers rushed to buy high-yield savings products before the pricing rate cut by end-July. We continue to expect Ping An and PICC P&C to deliver above-peer results in coming quarters. Both stocks are undervalued, trading at 0.5 times 2023 price to embedded value for H-share Ping An and 0.8 times 2023 price/book ratio for PICC P&C. We prefer Ping An as our top pick given its larger discount to our fair value estimate, better growth prospects following the successful implementation of the four-year in-depth life insurance reform and low earnings sensitivity to the volatile stock market.

We expect the upcoming interim earnings results to show that new business value, or VNB, growths of China’s insurers accelerated between 15% and 35% in the first half of 2023, from 8% to 17% year on year in the first quarter of 2023, as customers rushed to buy high-yield savings products before the pricing rate cut by end-July. However, the weaker equity market performance and falling interest rates in the second quarter are likely to weigh on net profits and shareholders’ equity under the new accounting rules. Nevertheless, we think downside risk to H-share prices is contained, with the H-shares of Chinese insurers trading at a historical low of 0.2 times to 0.6 times forward price/embedded value, or EV.

In China's highly competitive insurance market, Ping An differentiates itself with its ability to use proprietary technology to strengthen the customer experience and enhance cross-sales for its four major ecosystems: financial, health, auto, and small city. We believe its competitive advantage results in a better outlook than peers in terms of underwriting profitability and growth.

Ping An Insurance reported first-quarter total revenue and net profit rose 31% and 49% year on year, respectively, as it adopted IFRS 17. Its H shares surged 9% on April 27 following the results, boosted by optimism for the outlooks after new business value, or NBV, grew 8.8% year on year, the first positive growth in NBV since 2020. If we exclude the impact of changes in actuarial assumptions, adjusted NBV growth would have been 21% year on year, stronger still.

Ping An Insurance's 2022 results were in line with our expectations and we leave our earnings assumptions largely unchanged. Our fair value estimate is HKD 66 per H-share and CNY 60 per A-share. H-shares fell 3.35% on March 16, the first day after the results as the market seems worried about slowing growth in operating profit after tax and potential contagion risks caused by the unexpected collapse of Silicon Valley Bank. We believe Chinese insurers have negligible exposure to overseas bond investments as most of their liabilities are domestically driven. The 2022 OPAT was primarily dragged down by underwriting losses in the credit guarantee insurance line as borrowers’ willingness and ability to repay their debts were hurt by both coronavirus controls and widespread infections. Similarly, losses in the asset management business were caused by bond market turmoil in November and December 2022 after China’s reopening. We believe both negative factors are temporary and expect group-level OPAT growth to gradually recover in the second half. Looking past these challenges, we believe Ping An’s three-year life insurance reforms have started to bear fruit. Despite a 24% year-on-year decline in 2022 new business value, fourth-quarter NBV beat our expectations and turned positive for the first time since since first-quarter 2021, with 12% year-on-year growth. Management also guided for positive year-on-year growth in first-quarter NBV after more than 22% growth in average agent income and NBV per agent in 2022.

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.

In China's highly competitive insurance market, Ping An differentiates itself with its ability to use proprietary technology to strengthen the customer experience and enhance cross-sales for its four major ecosystems: financial, health, auto, and small city. We believe its competitive advantage results in a better outlook than peers in terms of underwriting profitability and growth.

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.

In China's highly competitive insurance market, Ping An differentiates itself with its ability to use proprietary technology to strengthen the customer experience and enhance cross-sales for its four major ecosystems: financial, health, auto, and small city. We believe its competitive advantage results in a better outlook than peers in terms of underwriting profitability and growth.

We maintain our fair value estimate for Ping An Insurance at HKD 86 per H-share following its first-quarter results that reported a 24% year-on-year decline in net profits to CNY 20.7 billion. The results were largely in line. Positively, year-on-year growth in operating profits after tax, or OPAT, was resilient at 10% to CNY 43 billion, up from the 6% growth in 2021. The growth was driven by the 16% and 27% increases in Ping An Life and Ping An Bank, respectively, despite a 41% decline in Ping An P&C on lower investment return. We expect the group’s OPAT growth to slow in coming quarters but its diversified business structure should be able to deliver positive growth in 2022. The 16% OPAT growth in life insurance was better than we expected, despite the high base of new business value, or NBV, growth in the year-ago period and the resurgence of COVID-19 cases in March. The strong rebound in life insurance OPAT growth from the 5% level in the year-ago period was attributable to positive operating variances as a result of higher tax-free investment income and actuarial assumptions changes to reflect a more conservative consistency rate and expense ratios. A strong improvement in the consistency rate in the first quarter also helped support a better OPAT growth. NBV dropped 33% from the year-ago period, or a 25% decline if excluding the impact of actuarial assumptions changes in the fourth quarter of 2021. As expected, NBV margin declined to 24.6% from 31%. We continue to expect NBV to drop by double digits in the first half.

We lowered our fair value estimates for Ping An Insurance to HKD 86 from HKD 95 for the H-share and to CNY 72 from CNY 80 for the A-share following its 2021 results which reflected continuous challenges in the life insurance business.

In China's highly competitive insurance market, Ping An differentiates itself with its ability to use proprietary technology to strengthen the customer experience and enhance cross-sales for its four major ecosystems: financial, health, auto, and small city. We believe its competitive advantage results in a better outlook than peers in terms of underwriting profitability and growth.

In China's highly competitive insurance market, Ping An stands out for its ability to use proprietary technology to strengthen the customer experience and enhance cross-sales for its four major ecosystems: financial, health, auto, and small city. We believe its competitive advantage results in a better outlook than peers in terms of underwriting profitability and growth.

Ping An Insurance’s third-quarter results were largely in line, with the first-nine-month net profit declining 20.8% year on year versus a 15.5% decline in the first half. Year-on-year contraction in the first-nine-month value of new business, or VONB, widened to 18% on a 4.5% decline in first-year premium and a 5-percentage-point decline in VONB margin. Such declining trend was expected, but the 20% quarter-on-quarter decline in agent headcount exceeded our expectation. We had expected agent headcount to gradually stabilize in the first half of 2022. But management indicated the shrinking agent force is likely to continue in coming quarters. Management guided a double-digit decline for 2021 VONB, but it did not provide guidance on 2022 VONB growth in light of 1) lingering uncertainties regarding the timing of agent headcount stabilization; and 2) the time needed for new agents to ramp up productivity after a six to 12 month training program. To factor in lower life insurance premium growth assumption for 2022, we modestly reduce our fair value estimates to CNY 80 from CNY 85 per A-share, and to HKD 95 from HKD 101 per H-share.