Ping An disclosed 1H23 results with NBV +32.6% YoY （+45.0% restated for prior value on basis of comparable EV assumptions and method） driven by noticeable improvements achieved in Life and Health insurance segment, handily beating consensus estimates. Even though the Group’s OPAT was down by 5.0% in 1H23, the insurer raised interim dividend by 1.1% YoY to RMB 0.93 per share, implying a potentially higher cash dividend payout in full year to above 28.8% in FY22 under new standards （vs 29.5% under old standards）。 We believe the L&H segment will further unlock growth potential given 1） the agency reform has paid off, evidenced by the avg. productivity per agent +94.3% YoY in 1H23; 2） PAB’s exclusive Private Wealth Adviser（PWA） model giving access to high-net-worth PB clients contributing to ~4x of industry average bancassurance margin at 19.7%. The outperformed agency and bancassurance mix generated robust NBV growth each at +43.0%/+174.7% YoY in 1H23; 3） synergies to be sought within the Group allowing distinctive cross-sales and up-sales opportunities, and we expect them to continue to prosper as the “healthcare and elderlycare” service framework deepens. Reiterate BUY.
　　Strong NBV in 1H23, beating consensus given optimized channel mix. Ping An achieved outstanding results in L&H insurance attributable to an optimized channel mix. The first-year premium （FYP） rose by 49.6% YoY to RMB113.9bn giving rise to strong NBV growth by +32.6% YoY （restated: +45.0%YoY） to RMB25.96bn in 1H23. Given 8.8% rise in 1Q23 NBV, we see strong momentum sales in 2Q23 transferring to like-for-like NBV growth by more than 75% in second quarter. As margin was slightly down to low-twenties （1H23: 22.8%）， we believe the sales rally more refers to improvements in channel mix rather than in product front.
　　For one, the 3-year agency reform finally paid off, shown as 1） monthly avg. agent productivity measured by NBV increasing to RMB9.4k per agent, +94.7% YoY; 2） agent income from life policies and cross-sales boosted by 37% YoY, implying strong individual performances. Agency NBV resulted +29.6% YoY （restated: +43.0% YoY）， outperforming peers given Taiping （966 HK）/China Life （2628 HK）/CPIC （2601 HK）/NCL （1336 HK）+22.4%/+13.3%/+13.3%/-5.2% YoY respectively in 1H23. Agency margin remained resilient at ~30%. For another, bancassurance stood out with NBV margin rising to 19.7%, ~4x of industry average at 5% in 1H23. This margin highlight can be seen as a result of exclusive PAB channel with current 2,000 professionals trained in a Private Wealth Advisor （PWA） agency model whom on average can generate ~1.8x NBV over a top-level “diamond” agent. The scale and margin uplifts gained traction to bancassurance NBV growth.
　　Interim dividend raised by 1.1% YoY despite an OPAT decline. Ping An Group’s OPAT was down by 5% in 1H23, mainly due to the negative OPAT impacts from the AMC and Technology segments with each -67.9%/-64.7% YoY in first half. L&H’s OPAT -3% YoY to RMB57.39bn was caused by: 1） a lagged effect on CSM release （-6.9% YoY） given the NBV falls in past three years; 2） one-off impacts of income tax and consolidation for investments in subsidiaries. The segment’s profit before tax was up by 1.9% YoY to RMB65.62bn, implying sustainable operating profitability. Given the Group’s dividend policy linked to OPAT, the Company increased interim dividend to RMB0.93 per share despite an OPAT decline showing the management’s optimism on long-run growth trajectory.
　　Healthcare and elderlycare services shore up pricing with differentiation. As one of the first movers in industry entering to healthcare and elderlycare services, Ping An Group is able to consolidate resources from all associates and joint ventures to create synergies for internal conversion and customer acquisitions. By 1H23, over 68% of Ping An Life’s NBV was generated by customers entitled to healthcare services, and ~30% of the Group’s new retail customers were from the healthcare ecosystems. Going forward, we see more cross-sales and up-sales opportunities to be untapped within the Group, and expect such value-added services can protect margins from being narrowed among industry competition.
　　Valuation: Ping An is trading at 0.5x FY23E P/EV, 0.8x FY23E P/B, ranking at 21.4%/5.7% 1-yr/5-yr P/EV historical valuation percentile. We believe the NBV beat in 1H23 indicates a turnaround in Ping An’s L&H fundamentals. The interim dividend increase reinforced a long-run growth story as more synergies to be unleashed. Maintain BUY with TP at HK$80.3, implied 0.97x FY23E P/EV.
　　Risks: 1） product shifts under the regulatory change may require 2-3 month transition period; 2） elevated on assets and property risks; 3） continued easing CN 10Yr Treasury yields and sharper-than-expected equity volatilities.