\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 318 Ping An Insurance (Group) Company Of China Ltd(601318) )
Report guide
The performance basically met expectations, life insurance continued to be under pressure, and other businesses such as banking and asset management grew rapidly.
Key investment points
Performance overview
In 2021, Ping An Insurance (Group) Company Of China Ltd(601318) net profit attributable to parent company was 101618 billion, a year-on-year increase of – 29%; The operating profit attributable to the parent company was 147961 billion, a year-on-year increase of + 6.1%; NBV378. 9.8 billion, a year-on-year increase of – 23.6%; EV1. 4 trillion, a year-on-year increase of + 5.1%.
Core concerns
1. Operating profit: the advantages of comprehensive fund are prominent, and the contribution of banking, asset management and technology business is increased
As for the growth of Ping An’s operating profit, from the driving factors, both personal business and institutional business grew steadily, with a year-on-year increase of + 5.7% and + 8.9% respectively. Among them, the number of individual customers holding multiple subsidiary contracts was 89 million, with a year-on-year increase of + 7.2%, accounting for 39.3%, and the cross penetration rate increased steadily. From the perspective of segment business, although the contribution of life insurance business slowed down, banking, asset management and technology businesses all achieved high growth, accounting for 27.9% of the total operating profit, with the amount of + 25.6%, 9.4% and 19.5% respectively year-on-year, which finally drove the steady growth of the group’s overall operating profit.
2. Life insurance: the performance is under pressure, basically in line with expectations, and the effectiveness of innovative channels and products can be expected
(1) NBV: if the impact of hypothetical adjustment is not considered, the year-on-year NBV of life insurance is – 18.6%, which is in line with expectations. The decline of NBV comes from the dual impact of new policy premium and value rate. The new policy premium decreases by 8.5% and nbvm decreases by 5.5pc to 27.8%. The adjustment of product structure (the proportion of savings products increased by 8pc) and the adjustment of actuarial assumptions (expense rate, continuation rate, etc.) led to the decline of nbvm by 3.7pc and 1.8pc respectively. Under the background of the current slowdown in macroeconomic growth and the expected decline in residents’ income, the demand for traditional security products is temporarily limited. It is expected that savings products will continue to consolidate and expand, and nbvm will still decline slightly in the future.
(2) channels: in addition to the existing agent team, Ping An explored and established three innovation channels: Community Grid, bank talent and sinking channel. The NBV of the three innovation channels accounted for 15.1% in total, with an increase of 3.8pc, so as to realize the transformation and promotion of multi-channel parallel development. ① Agent: the team structure was slightly optimized. The proportion of college degree or above increased by 2.4pc compared with that at the beginning of 2021. The NBV per capita of diamond team increased by more than 20% and the income increased by about 15% year-on-year. ② Community Grid: build a medium and high-end specialist team, serve 30 million orphan single customers, improve renewal, cross sales and life insurance coverage, and increase the policy continuation rate in the pilot area by more than 20 PC. ③ Bank talents: build an elite financial management team to serve Ping An Bank Co.Ltd(000001) 1.1 million wealth customers. At present, more than 300 talents have been recruited, almost all of them with bachelor’s degree or above with sales skills. ④ Sinking channel: relying on 1.1 million auto insurance agents, expand 600 million potential customers in third and fourth tier cities, make up for Ping An’s market vacancy outside the traditional first and second tier cities, and explore the business model of sinking channel through scenario sales of comprehensive finance and simple life insurance products. We believe that the three innovative channels start with light packaging, have no historical burden, and face huge opportunity space. It is expected to become a breakthrough point in channel transformation, and the results can be expected.
(3) products + services: Ping An has made a forward-looking layout of the medical and health ecosystem, and initially established a three-tier product system of “insurance + health management”, “insurance + high-end pension” and “insurance + home care”. Through the service advantages of health and pension, Ping An is expected to improve the hard strength of products, reduce the difficulty of sales and increase customer stickiness. It is expected to form a new differentiated competitive advantage of Ping An in the future.
3. Property insurance: the premium has decreased, but it has crossed the inflection point, and the optimization of business quality has exceeded expectations
The original premium income of Ping An Property Insurance in 21 years was 270043 billion, a year-on-year decrease of 5.5%, which was in line with expectations, and was mainly affected by the decline of average vehicle premium caused by the comprehensive reform of vehicle insurance. The comprehensive cost ratio was 98%, with a year-on-year decrease of 1.1pc. Considering the impact of the increase in the compensation ratio of automobile insurance and major disasters in Henan and other places in 21 years, Ping An Property insurance still achieved a decrease in the cost ratio, exceeding expectations. The reason is that the cost ratio fell sharply, with a year-on-year decrease of 7.6pc. Looking forward to the next 22 years, we believe that with the weakening impact of the comprehensive reform and steady economic growth, the property insurance premium is expected to return to a steady growth trend and the cost rate will decrease slightly.
4. Insurance investment: the rate of return decreased, the duration gap narrowed, and the real estate risk was controllable
The return on net investment of Ping An in the past 21 years was 4.6% and the total return on investment was 4%, with a year-on-year decrease of 0.5pc and 2.2pc respectively, mainly due to the impact of capital market fluctuations, the decline of long-term interest rates and the provision for asset impairment of China Fortune Land Development Co.Ltd(600340) China Fortune Land Development Co.Ltd(600340) has a total risk exposure of 54.1 billion, and 80% of the impairment loss has been accrued. Under the tone of stable growth policy, the risk of the real estate industry has been marginally improved. Although the downward trend of long-term interest rate is inevitable, the gap of Ping An duration narrowed to 4-5 years, which is at the excellent level of the industry, and the spread risk is small.
Profit forecast and valuation
Ping An’s innovative exploration in life insurance channels and the establishment of “insurance + service” system are expected to bring about the effectiveness of the reform. It is estimated that the year-on-year growth rate of Ping An Insurance (Group) Company Of China Ltd(601318) net profit attributable to parent company from 2022 to 2024 will be 23.7% / 12.6% / 13.9%. The current price corresponds to 0.58/0.53/0.49 times PEV from 2022 to 2024. Maintain the target price of 77.0 yuan, corresponding to pev0.5 yuan of 2022e group 9 times, maintaining the “buy” rating.
Risk tips
The progress of reform has been slow, the economic environment has deteriorated, the long-term interest rate has fallen sharply, and the real estate risk has expanded.
