3Q22 results broadly in-line
Profitability: In 3Q22, shareholders’ operating profit increased by 3.8% yoy. Shareholders’ NP dropped by 6.3% yoy partly due to investment performance and impact of discount rate change. Life NBV: Life NBV dropped by 26.6% yoy in 3Q22, vs. down 28.5% yoy in 1H22. The decrease in NBV was the result of agent force contraction, NBV margin decline (NBM on FYP dropped to 25.8% in 3Q22 from 30.7% in 3Q21), and the high base from 1Q21. Life agent force: Total number of agents in the individual business further dropped by ~6% qoq from 519k at end-1H22 to 488k at end-3Q22, or dropped by ~19% YTD from 600k at end-2021. The Company continued promoting the quality-oriented transformation of the agent force and emphasized that agent productivity measured by pre- agent NBV increased by 22% yoy in 3Q22. The proportion of agents with a college education background and above rose by 4.0 pps yoy as of end- September 30, 2022. Ping An Life raised the proportion of “Talent +” new agents in its agent channel by 10.3 pps yoy in 3Q22. P&C: Aggregate COR came in at 97.9% at end-3Q22 (vs. 97.3% in 3Q21 or 97.3% in 1H22).
Operating profit of the P&C segment decreased by 21.3% yoy due to higher COR and lower investment incomes. Banking: Banking segment posted steady asset quality at end-3Q22, with virtually unchanged NPL ratio and provision coverage ratio. Net profit of the segment grew fast by
25.8% yoy in 3Q22. Healthcare ecosystem strategy: Ping An’s
healthcare ecosystem partnered with all top 100 hospitals and 3A hospitals, over 50,000 in-house doctors and contracted external doctors, and approximately 211,000 pharmacies in China as of end-3Q22.
Valuation, recommendation, and risks
Ping An is trading at ~0.36x 22E P/EV or ~0.6x 22E P/B, valuation undemanding. The negative NBV growth rate will not deteriorate in 2H22 in our view, given: 1) A low base from 2H21. For example, Ping An Life’s NBV dropped by 43.3% yoy in 2H21, vs. -11.7% in 1H21; 2) The gradually upgraded agent team and the strengthened agent productivity. We revised down our 2022E NBV and earnings forecasts (Fig. 2), taking into account the capital market conditions. We maintain BUY for the Company on its undemanding valuation. We slightly revised TP from HKD71.4 to HKD65.9, equivalent to ~0.7x 22E P/EV or ~1.2x 22E P/B (Fig. 8). Key catalysts: robust NBV growth, good capital market; key downside risks: weak NBV growth, adverse capital market.