Ping An Insurance Group (2318 HK) Summary
Core Content
Ping An Insurance Group (2318 HK) released its third-quarter results, showing NBV up 10.9% YoY and NBM maintained at ~54%. The company also proposed a share buy-back and drafted a long-term service plan to retain core talents and improve governance. The overall results were in line with expectations, with shareholders' net profit up 19.7% YoY to RMB79.4bn, and ROE at ~15.9%. The company's life insurance business continued to recover, while its property and casualty (P&C) insurance combined ratio slightly increased to 96.0% in 3Q18.
Main Points
Financial Performance
- 3Q18 NBV: RMB55.4bn, up 10.9% YoY, showing continuous recovery.
- 3Q18 NBM: ~54%, stable compared to previous quarters.
- 3Q18 Net Profit: RMB79.4bn, up 19.7% YoY (35.1% under old accounting standards).
- 3Q18 Operating Profit: RMB85.6bn, up 19.5% YoY.
- 3Q18 Total Revenues: RMB1,158.4bn, up 19.5% YoY.
- Agent Force: Life insurance agents increased by 2% QoQ, indicating stability in the sales force.
Growth and Strategy
- "Product +" and "Technology +" strategies: Ping An Life is focusing on high-value long-term protection products and enhancing technology capabilities in sales and customer services.
- User Growth: Internet and APP users continued to grow by 6-7% QoQ in 3Q18.
- Share Buy-Back: The company proposed to repurchase up to 10% of total shares issued, indicating confidence in its financial position.
Valuation
- P/B Ratio: ~2.2x for 2018E, suggesting potential undervaluation.
- Target Price: HK$109.00, representing a 50% upside from the previous price of HK$72.75.
- Peer Comparison: Ping An is rated BUY, with a P/EV of 1.2x for 2018E and 1.0x for 2019E, and a P/E of 11.7x for 2018E and 9.9x for 2019E.
Key Information
Investment Outlook
- Rating: BUY
- Reasons for Buy Rating:
- Acceptable NBV growth and good NBM.
- Competitive advantage in selling protection-type life insurance due to high-quality agent force.
- Positive impact of the long-term service plan on governance structure.
- Key Catalyst: Improved NBV growth at end-2018.
- Key Downside Risks:
- Adverse capital market conditions.
- Lower-than-expected jump-start season performance.
Financial Forecasts (Year ended 31 Dec)
| Metric |
2016 (RMBmn) |
2017 (RMBmn) |
2018E (RMBmn) |
2019E (RMBmn) |
2020E (RMBmn) |
| Total Revenues |
774,488 |
974,570 |
1,158,387 |
1,325,302 |
1,526,271 |
| Shareholders' Net Profit |
62,394 |
89,088 |
96,689 |
114,450 |
133,650 |
| EPS (RMB) |
3.49 |
4.99 |
5.29 |
6.26 |
7.31 |
| BVPS (RMB) |
20.98 |
25.89 |
28.61 |
34.88 |
42.19 |
| ROE (%) |
17.4 |
20.8 |
19.4 |
19.7 |
19.0 |
Sector Performance
- Hang Seng Index (HSI): Down 11.1% in 1m, 17.6% in 6m, and -12.4% in 12m.
- HSCEI: Down 17.6% in 6m and -12.4% in 12m.
- Ping An's 3Q18 Performance:
- Total Life GWP: RMB461.2bn, up 20.7% YoY.
- Life FYP: RMB131.5bn, down 7.4% YoY.
- VNB: RMB55.4bn, up 3.2% YoY.
- VNB margin: 42.1%.
- P&C GWP: RMB181.1bn, up 15.0% YoY.
- Combined ratio: 96.0% in 3Q18, slightly higher than 1H18.
- Internet and APP users: up 19.4% and 44.0% YoY respectively.
Investment Ratings
Industry Rating
| Rating |
Definition |
| OVERWEIGHT |
Sector is expected to outperform the market over the next 12 months. |
| NEUTRAL |
Sector is expected to perform in-line with the market. |
| UNDERWEIGHT |
Sector is expected to underperform the market. |
Company Rating
| Rating |
Definition |
| BUY |
Stock is expected to generate 10%+ return over the next 12 months. |
| NEUTRAL |
Stock is expected to generate +10% to -10% return. |
| SELL |
Stock is expected to generate a loss of 10%+. |
Shareholding Structure
| Shareholder |
Percentage |
| CHAROEN POKPHAND GROUP |
29.8% |
| JPMORGAN CHASE & CO |
6.5% |
| Free Float |
69.0% |
Summary of Key Figures
- 3Q18 NBV: RMB55.4bn, up 10.9% YoY.
- 1H18 NBV: RMB55.4bn, up 3.2% YoY.
- 3Q18 P&C GWP: RMB181.1bn, up 15.0% YoY.
- 3Q18 Combined Ratio: 96.0%, slightly increased from 1H18.
- User Growth: Internet users up 19.4% YoY, APP users up 44.0% YoY.
Risks and Catalysts
- Key Catalyst: Improved NBV growth at end-2018.
- Key Risks:
- Adverse capital market conditions.
- Lower-than-expected jump-start season performance.
Analyst and Regulatory Information
- Analyst: Felix LUO, PhD.
- Contact: +852 3189 6288 | felixluo@cmschina.com.hk.
- Disclaimer: This document is prepared by CMS HK and is for informational purposes only. It does not constitute investment advice and should not be relied upon for making investment decisions. The information is subject to change and is not guaranteed to be accurate or complete. Investors are advised to seek independent financial and tax advice.
