Ping An reported 8.8% VNB growth YoY in 1Q23, beating the consensus of low single digit growth. We note that, excluding the negative impact of assumption changes, the VNB growth even reached 21.1% YoY in 1Q23, reflecting robust new business across all channels. During the 1Q23 results briefing, the management highlighted 37% YoY improvement of agent productivity, along with over 130% new business growth in bancassurance channel. Looking into FY23, we expect the ongoing channel reform will further drive sequential improvement in VNB momentum in 2Q-4Q23, and raise VNB forecasts of FY23E-FY25E by 5%. We believe the turnaround in VNB momentum will refuel the growth of contractual service margin （CSM） and underpin sustainable OPAT growth together with a progressive dividend payout in the long run. Reiterate BUY.
　　Life new business growth beat consensus in 1Q23, with positive VNB growth across all distribution channels. With the continual channel　reform, Ping An saw average agent productivity in terms of VNB further enhanced 37% YoY in 1Q23, while the average monthly income of agents grew around 10% YoY. Given the ongoing progress of Ping An’s channel reform, we expect to see sequential improvement in new business momentum in 2Q-4Q23. On product front, the penetration of health management and elderly care services continued to rise in 1Q23, reflecting strong synergies across Ping An’s ecosystem. We believe the enhancing service capacities will support product sales amid the cut of product guarantee rate which is guided by regulators.
　　Net profit and book value increased due to the adoption of IFRS 17,　because 1） the reserve charges due to the changes in discount rate now go through OCI instead of net profit, 2） for participating and universal portfolios applicable to the VFA （variable fee approach）， the reserve variance of other assumption changes will go directly into CSM and to be amortized over the policy duration, 3） Ping An reclassified some financial investments from AC （amortised cost） category to FVOCI, which optimized the asset-liability match, and therefore reduced the volatility of book value.
　　Valuation: Ping An’s A and H shares are now trading at 0.5x P/EV FY23E and 0.8x P/BV FY23E, with a dividend yield of around 6%. Looking forward, we believe the ongoing channel reform will steadily drive the sequential improvement of VNB growth throughout 2023, in which will underpin long- term operating profitability and a solid dividend payout. Reiterate BUY