In 9M22, Ping An’s OPAT grew 3.8% YoY to RMB123bn, translating into 2.8% YoY OPAT growth in 3Q22. Life OPAT growth remained stable at 15% YoY, with VNB decline marginally narrowed to 20% YoY in 3Q22 from the 28.5% YoY decrease in 1H22. P&C OPAT declined 17% YoY in 3Q22 largely due to lower investment return. Ping An Bank’s profit growth remained strong at 26% YoY in 3Q22, with NIM edged up to 2.77% in 3Q22 vs 2.76% in 1H22. Bank’s asset quality and capital position remained largely stable in 3Q22. Asset management segment OPAT turned positive in 3Q22 from RMB6bn losses, due to impairment in 3Q21. OPAT from technology segment was dragged by RMB1.5bn revaluation losses from Lufax CB, as Lufax’s share price plummeted 58% in 3Q22. Core solvency margin of life/P&C arms both improved QoQ despite investment volatilities. Insurance investment exposure to real estate sector narrowed to 4.8% at end-3Q22 from 5.2% at end-1H22.Ping An targets to launch the 2023 jumpstart pre-sale in mid-Nov 2022. We expect enhanced agency productivity and growing demand of savings products will support the jumpstart sales. Reiterate BUY.
　　Mr. Yao Bo will remain as co-CEO of Ping An Group. On 25 Oct, Ping　An announced that Mr. Yao would hand over his CFO responsibility to Ms.Zhang Zhichun. In 3Q22 analyst briefing, Mr. Yao clarified that he would retain his position as the co-CEO of Ping An Group, and Ms. Zhang, the new CFO, would report to him going forward. Albeit the top management change, we expect that the management stability will be maintained within the Group.
　　Life agency scale further slid in 3Q22 due to COVID headwinds, but　quality improved. Although total agent headcount declined 6% QoQ in 3Q22 to 488k, agent productivity increased over 22% YoY in 9M22. And the number of high quality new recruits, “Talent+” agents, grew 120% YoY in 9M22, accounting for 20% of total new agents (vs approx. 7% in 9M21). The channel reform is well on track to expand nationwide by the end of 2022.
　　We estimate P&C combined ratio improved YoY in 3Q22. Ping An P&C’s　combined ratio edged up 0.6ppt YoY to 97.9% in 9M22, vs a 1.4ppt YoY uptick in 1H22. With a marginal decrease in combined ratio in 3Q22, we estimate that the year-on-year improvement, implying higher efficiency, is possibly due to stabilizing asset quality of credit guarantee insurance.
　　Valuation. Ping An-H is trading at 0.3x P/EV FY23E and 0.6x P/BV FY23E with operating ROE of 20%, at a historical trough valuation. We believe the worst period is over and expect the recovery of new business growth to support the company’s future share price performance.