Ping An of China (601318) Semi-annual Report 2019 Review: Investment Boosts Science and Technology, Empowers Value, Leads Model

Ping An of China (601318) Semi-annual Report 2019 Review: Investment Boosts Science and Technology, Empowers Value, Leads Model

Event: In the first half of 2019, Ping An of China realized operating profit of approximately 73.5 billion yuan (YOY + 24%), net profit of 977% (YOY + 68%), and realized new business value of 41.1 billion (YOY + 4).

7%), the group’s embedded value exceeds 1.

At 11 trillion (earlier + 11%), the company redistributed dividends of 0 in the first half of 2019.

75 yuan (YoY + 21%).

We believe that the core focus of the 2019 Interim Report is: (1) Optimizing the team to increase value, and the growth rate of NBV is in line with expectations.

Affected by the company’s adjustment of the start-up strategy and optimization of product structure, the long-term storage in the first half of the year, the proportion of guarantees increased, and the profit margin of NBV increased by 5.

7

It is necessary to resist the pressure of new single intervention and promote the growth of NBV4.

7pct.

Affected by factors such as the company’s increase in agent assessment in the first half of the year, and the initiative to clarify emptiness, the size of the agent expanded to 1.29 million, the overall quality of the team was improved to a certain extent, and the value of new business per capita was increased by 8.

5%.

(2) Benefiting from factors such as the better stock market in the first quarter, the investment yield has improved significantly.

Benefiting from the better stock market conditions in the first quarter of this year, the company’s total investment yield improved significantly, reaching 5.

6%; generally, the solid performance of the solid income category and the increase in dividends in the first half also pushed the net investment income to reach 4.

5%, in the first half of 2019, the company’s investment income + loss from changes in fair value reached 72.3 billion, an increase of 49.7 billion.

(3) Tax reform has significantly increased net profit.

In addition to investment income, benefiting from the increase in the pre-tax deduction ratio for program fees. In 2018, partial income deductions were paid. Life insurance and property insurance profits increased by 8.6 billion and 1.9 billion US dollars, respectively, driving the group to achieve a further increase in net profit attributable to mothers. 68%.

Outstanding value optimization structure, NBV growth rate is in line with expectations.

In 2019, Ping An Life Insurance realized a premium income of 315.8 billion (YoY + 9).

2%), the company’s life and health insurance business contributed 48.4 billion operating profit (YoY + 36%).

The value of the company’s new life insurance business reached US $ 41.1 billion. The main driving factor was that the company adjusted its start-up strategy in the first half of this year, focusing on traditional protection, sales of critical illness products, and promoting the implementation of the “product +” strategy.5).

7 points.

), Resist the new order of the Royal Personal Insurance (YOY-11%) to reduce the pressure and realize the continuous growth of new business value4.

7%.

(1) Increase the assessment and optimization team and improve the scale of agents.

Affected by regulatory factors in the second quarter and the increase in the number of agents in the company, the number of agents reached 1.29 million by the end of 2019.

3%).

In addition, the company launched the “Excellent Talents Program”, which focuses on recruiting and training outstanding talents, improving cross-selling capabilities, and improving the overall quality of the team. The talents per capita capacity of the Talents Program reaches the company’s average 1.

5 times.

(2) The agent activity rate has improved and is expected to usher 天津夜网 in improvement in the second half of the year.

Affected by factors such as the company’s product strategy adjustments and changes in assessment standards, the sales performance of agents has improved, resulting in an improvement in the activity rate (YOY-3.

2pct.

), But the value of new business per capita increased by 8.

5%, reflecting the improvement of product profitability and the subdivision performance of the agent team’s business capabilities.

We believe that due to the marginal attenuation of factors such as the adjustment of the company’s product strategy, indicators such as the size and activity rate of the agent team in the second half of the year are intended to stabilize and recover.

(3) Guarantee, the proportion of long-storage type increased, and the value rate of new business increased significantly.

In the first half of 2019, the company’s long-term security product NBV margin reached 97.

3%, the long-term savings NBV margin increased to 64%, benefiting from the increase in long-term storage and the proportion of protection, and promoted the overall NBV margin increased by 5.
7%.
Driven by new business contributions (US $ 41.1 billion), the remaining margin of the life and health insurance business reached 8,674 trillion, and the remaining margin of the future will be released steadily for a long time.

The comprehensive cost ratio has increased, and the financials have almost remained stable.

In 2019, the company realized a premium income of 130.4 billion yuan (YoY + 9).

7%), of which auto insurance premium income increased by 9%.

Affected by the increase in the supervision of automobile insurance, etc., the rate of improvement (YOY-1pct.

), Affected by the intensification of market risks such as guaranteed insurance, the compensation rate increased by 1.

8 points.

The comprehensive cost of property and casualty insurance reset 96.

6%.

In addition, benefiting from the increase in the pre-tax deduction ratio for litigation costs and the tax deduction for investment income, the effective tax rate has gradually increased, driving a net profit of 11.9 billion (YOY + 101%).

Since the second quarter, the CBRC has maintained strict changes in auto insurance and the integration of newspapers and banks, which is conducive to improving the current competition pattern of property and casualty insurance and improving the performance of industry leaders.

The equity market improved in the first quarter, and the investment yield improved significantly.

Affected by the better market performance in the first quarter of 2019 (Shanghai Composite Index YOY + 23%), the increase in fund dividends and other factors, the fair value gains and losses reached 27.8 billion (the same period last year-$ 11.1 billion), and the total investment yield was 5.

6% (+ 1% year-on-year.

6 pct.

), Net investment yield 4.
.

5% (0% YoY.

3

).
Affected by the increase in stock market value and the initiative to increase positions, equity assets accounted for 14% (a year-on-year increase of 1).

1 pct.

), The budget, the proportion of long-term equity category increased by 0.

2%; Considering that the market’s risk aversion has improved in the third quarter so far, investment income may narrow in the second half of the year.

The embedded value exceeded 1 trillion for the first time, and the operating deviation contribution exceeded expectations.

In 2019, the value of Ping An Group reached 1.

11 trillion (earlier + 11%), the end-of-life value of life insurance health insurance is 7,132 trillion (+ 14% from the beginning of the year), of which operating deviation contributed 9.7 billion yuan, investment deviation contributed 15.7 billion US dollars, and tax reduction policy contributed 85 billionTen million US dollars, a significant increase in the proportion of contribution increase.

The value creation of new business accounted for 49% of the incremental value of life insurance, and the proportion of the earlier business decreased by 3%.

Investment suggestion: Maintain Buy-A investment rating.

EPS of Ping An of China is expected to be 7 in 2019-2021.

1 yuan, 8.

7 yuan, 9.

5 yuan, corresponding to 2019 P / EV is 1.

3 times, maintain BUY rating, 6-month target price of 95 yuan.

Risk warning: the equity market fluctuates sharply, regulatory policies are uncertain, and premium income has increased significantly.