Ping An's Mid-Year Performance: Strategic Synergy Ensures Steady Progress and High-Quality Growth

On August 22nd, Ping An Insurance (601318.SH/2318.HK) released its interim financial report for 2024.

Looking at the overall business performance, in the first half of the year, the company achieved an operating profit attributable to the shareholders of the parent company of 78.482 billion yuan; the annualized operating ROE was 16.4%; the net profit attributable to the shareholders of the parent company was 74.619 billion yuan, a year-on-year increase of 6.8%.

In terms of the three core businesses, life and health insurance, property insurance, and banking all demonstrated steady growth in their operations. The combined operating profit attributable to the shareholders of the parent company from these three businesses was 79.565 billion yuan, a year-on-year increase of 1.7%.

Among them, the life and health insurance sector, which accounts for the highest proportion of performance, showed particularly impressive results. Looking at the core indicators, the new business value of the life and health insurance business in the first half of the year reached 22.32 billion yuan, a year-on-year increase of 11.0%.

It is not difficult to see that against the backdrop of ongoing external environmental pressures, Ping An has shown a continuous recovery trend. Especially after going through the previous period of reform pains, the life insurance business has now entered a track of steady growth, providing continuous driving force for the continuous release of company profits.

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The company announced in this financial report that it will distribute an interim dividend of 0.93 yuan per share in cash to shareholders in 2024, and the level of cash dividends continues to remain stable.

Steady business growth combined with continuous shareholder returns, such operational results are obviously quite rare in the current market environment. This may also continue to prove that Ping An has completely emerged from the past period of pain and has entered a new stage of development.

The day after the financial report was announced, the capital market voted with confidence, and the company's A shares and H shares both rose sharply on the same day, with an increase of more than 3%.

1. The three major business segments are moving forward steadily, and continuous profit growth is expected.Focus on the company's three major business segments.

In terms of life and health insurance business, the value of new business has maintained double-digit growth. Although the growth rate has declined compared to the previous period, considering the high base and the pressure of the complex external environment faced by the entire industry, such results have already demonstrated the company's good operational capabilities.

In particular, looking at the new business value from the agent channel and the new business value per person, it reflects the continuous release of the company's previous reform achievements, and the efficiency of the agent channel and the agent's production capacity have achieved a qualitative improvement.

The financial report shows that in the first half of the year, the new business value of the agent channel was 18.106 billion yuan, a year-on-year increase of 10.8%, and the new business value per person increased by 36% year-on-year. In addition, the new business value of the bank insurance channel reached 2.641 billion, a year-on-year increase of 17.3%.

In addition, in the first half of the year, the new business value rate (based on the first-year premium) increased by 6.5 percentage points year-on-year to 24.2%, showing the steady improvement of the quality and profitability of the company's newly sold insurance policies. Behind this is due to the company's continuous deepening of the "4 channels + 3 products" strategy, comprehensively strengthening channel construction, optimizing product structure, and improving business quality. At the same time, through this indicator, it also indicates the company's future profitability improvement and the enhancement of long-term growth potential.

It is worth mentioning that the 13-month policy continuation rate of existing customers increased by 5.8 percentage points year-on-year, reflecting the continuous strengthening of the company's life insurance business quality, and customer service and product satisfaction continue to be recognized by customers.

In addition, the company's multi-channel continues to expand, with the number of grid specialists exceeding 15,000, a year-on-year increase of 59%, and the sales team continues to be strengthened.

Let's take a look at the property insurance business.

In the first half of the year, Ping An Property Insurance's insurance service revenue was 161.91 billion yuan, a year-on-year increase of 3.9%; Ping An Property Insurance maintained a healthy overall comprehensive cost rate of 97.8% by strengthening business management and risk screening.Among them, as an important part of property insurance, auto insurance business has performed impressively. As of the end of June, the number of registered users of Good Car Owners reached 218 million, a year-on-year increase of 17.2%, and the cumulative number of vehicles bound exceeded 142 million. By continuously optimizing customer experience and improving service quality, Ping An's customer loyalty and market share in the auto insurance field are constantly increasing.

In terms of banking business, thanks to the company's continuous optimization in business expansion and cost control, the operation of banking business in the first half of the year remained stable, the overall asset quality was stable, and the capital and risk compensation ability remained good.

Data shows that in the first half of the year, Ping An Bank achieved a net profit of 25.879 billion yuan, a year-on-year increase of 1.9%. As of the end of June, the core tier-1 capital adequacy ratio rose to 9.33%, and the provision coverage ratio was 264.26%. The company's ability in asset quality and risk management has been further enhanced.

Overall, the three major business segments of Ping An have shown a stable development trend, and the synergy between various businesses is also continuously strengthening, providing a strong guarantee for the company's overall profit growth.

In particular, the steady increase in the new business value of core businesses such as life insurance and health insurance has brought a good expectation for future profit growth, further boosting market confidence.

Looking forward, as the market environment gradually improves and the company's strategy continues to deepen, Ping An's profit growth prospects are still worth looking forward to.

2. Perspective on Ping An's high-quality asset attributes from multiple dimensions

Faced with the complex and changeable global economic environment in recent years, the capital market's pursuit of high-quality assets is becoming more and more urgent. Buffett's latest holdings show that his cash reserves have reached a historical high, showing his cautious attitude towards the global macro economy. However, at the same time, Buffett still increased his position in insurance stocks, showing his optimism about this industry.

From a domestic perspective, Donghai Securities Research Report previously released a research report analyzing the current opportunities in the insurance sector. It believes that the insurance sector is in a historical low valuation range and needs to pay attention to the configuration opportunities of the sector. At the same time, it also suggests paying attention to large listed insurance companies with obvious "moats".

From the current point of view, what kind of enterprises have high-quality asset attributes and obvious "moat" characteristics, which is worth in-depth discussion.From the perspective of Ping An's safety, it can be unfolded from the following aspects.

Firstly, from the perspective of business strategy, the superiority of the business model.

Ping An's strategy focuses on "comprehensive finance + medical care for the elderly", and through this model, a strong synergy effect has been built, showing a continuous ability to explore value.

On the one hand, Ping An integrates its banking, insurance, asset management and other business segments to build a diversified financial service ecosystem. This cross-domain integration strategy allows customers to enjoy one-stop financial services on a single platform, greatly improving customer experience and satisfaction.

The increase in the number of individual customers and the improvement of cross-purchase rates shown in the financial report all reflect the effectiveness and attractiveness of this comprehensive financial service model.

As of the end of June 2024, the group had 236 million individual customers, among which customers holding four or more contracts within the group accounted for 24.9%, with a retention rate of 97.8%; more than 87.92 million individual customers also held contracts from multiple subsidiaries. These data show that customers have a high degree of dependence and loyalty to Ping An's comprehensive financial services, and also reflect Ping An's excellent performance in customer maintenance and service quality.

On the other hand, with the intensification of the trend of population aging, the demand for medical care and elderly care services is increasing. Ping An builds a medical health and elderly care service ecosystem to provide customers with comprehensive support from health management to elderly care services. This forward-looking strategic layout not only meets the market demand, but also achieves organic synergy with the insurance business and further explores new growth points.

In terms of the medical ecosystem, data shows that as of June 30, 2024, Ping An has achieved 100% cooperation coverage with the top 100 hospitals and tertiary hospitals in China through integrating suppliers, with about 50,000 internal and external medical teams, and the number of cooperative pharmacies has reached 233,000, adding more than 2,500 since the beginning of the year.

In terms of elderly care services, in the first half of 2024, Ping An Life Insurance Health Management has served nearly 16 million customers. As of the end of June 2024, home-based elderly care services have covered 64 cities across the country, with more than 120,000 customers obtaining home-based elderly care service qualifications; Ping An's high-quality health care community project has been launched in 5 cities.It is worth mentioning that in the first half of the year, customers who enjoy the rights and benefits of the medical and elderly care ecosystem accounted for more than 68% of the new value of life insurance business. Among them, customers with medical and health rights and benefits contributed 30.4% to the New Business Value (NBV), an increase of 0.7 percentage points year-on-year; customers with elderly care rights and benefits contributed 38.3% to the NBV, an increase of 9.3 percentage points year-on-year. In addition, customers who enjoy home services have an average first-year premium that is 3.8 times that of customers who do not enjoy home services. The proportion of new customers in home-based health care and elderly care has reached 77%, an increase of 23 percentage points year-on-year.

It is not difficult to see that the demand for health and elderly care services by customers has further transformed into a demand for life insurance products, thereby driving the growth of the new value of life insurance business. This fully proves the important role of the medical and elderly care ecosystem strategy in life insurance business, as well as the continuous empowerment value of this strategy for the main business of life insurance.

In this regard, Ping An also stated that it will actively promote the Chinese version of the "managed care model", seamlessly integrating the online and offline medical and elderly care ecosystem with financial services as the payer, building a wide coverage of medical health and elderly care service resources and high-quality self-operated resources, ensuring service quality, and forming a differentiated competitive advantage.

It can be said that Ping An has built a brand-new business model on the basis of traditional insurance companies, forming a diversified business ecosystem, continuously promoting the growth of the "second curve", and building a solid moat.

Secondly, from the perspective of shareholder return, the sustainability of high dividends and high dividends.

China Ping An has been committed to providing stable returns to shareholders, which is reflected in its continuous dividend policy. In the first half of 2024, the company announced the distribution of an interim dividend of 0.93 yuan per share in cash, which is the same as last year, showing the company's emphasis on shareholder interests.

The company's long-term stable performance has provided a solid financial foundation for shareholder returns.

Data shows that from 2012 to 2023, China Ping An's dividend level has continued to increase for 12 consecutive years, with a total of 24 dividends, and the total dividend amount exceeds 300 billion yuan.

It is worth mentioning that the company has a clear future dividend plan. According to the shareholder return plan of China Ping An for 2024-2026, the company's annual dividend amount in the next three years will be原则上 20%-50% of the net profit attributable to the shareholders of the parent company after audit in the previous year. This plan provides shareholders with a clear expectation and further boosts the market's confidence in the company's future development.Thirdly, from the perspective of financial robustness and the ability to resist risks.

On one hand, from a business level, through diversified business layout, compared with single-industry operations, Ping An can demonstrate a stronger ability to resist market risks, smooth out cyclical fluctuations, and from the past company's overall capital returns, profit performance and other data, Ping An has always maintained a relatively stable posture, showing a healthy development trend.

On the other hand, the company continuously consolidates asset quality, maintains a high solvency margin and liquidity, ensuring robustness in the face of market fluctuations.

Looking at the financial report data, as of June 30, 2024, Ping An's comprehensive solvency margin ratio under the second phase of the second generation of solvency rules was 208.8%, and the core solvency margin ratio was 164.9%, far above regulatory requirements. At the same time, as of the end of the period, Ping An's available funds balance reached 45.835 billion yuan, and sufficient liquidity provided a strong risk buffer for the company.

In addition, the company has further enhanced its ability to resist risks by optimizing asset allocation, such as prudent operations in insurance fund investments.

Fourthly, from the perspective of growth certainty and the driving force for continuous growth.

Ping An's growth comes from the "comprehensive finance + medical and elderly care" strategic layout on one hand, accurately grasping industry demands, and the company has already occupied a market advantage in related fields in advance, laying a solid foundation for future growth.

On the other hand, it comes from the company's continuous investment in technological innovation. Through technology empowerment, it has not only improved the efficiency and quality of financial services and medical and elderly care services, enhanced risk management capabilities, expanded profit margins, but also opened up more new business areas through technological innovation, bringing new potential growth points to the company.

The financial report data for the first half of 2024 shows that Ping An AI's seat service volume was about 870 million times, covering 80% of Ping An's total customer service volume. In addition, the second-level insurance policy underwriting and rapid claims of life insurance, and the reduction of losses by 6.1 billion yuan through anti-fraud intelligent claims interception, a year-on-year increase of 4.3%, all fully prove the significant effectiveness of technological innovation in improving business efficiency and risk control.The company is currently maintaining a high level of R&D investment and has demonstrated a profound accumulation in technological innovation, which provides a solid foundation for its sustained growth and enhancement of market competitiveness. As of June 30, 2024, Ping An has over 20,000 technology developers and more than 3,000 scientists, forming a top-tier team of scientific and technological talents. The group's cumulative number of patent applications has reached 52,185, ranking among the forefront of international financial institutions.

3. Conclusion

With the release of Ping An's financial report, multiple institutions have expressed their recognition of the company's mid-term performance through their comments.

Guolian Securities has given China Ping An a "Buy" rating, with its research report suggesting that, given the relatively good performance of China Ping An's financial main business, it still possesses high investment value from a medium to long-term perspective.

CICC maintains its earnings forecast and a "sector outperform" rating, with its viewpoint indicating that Ping An's overall performance basically meets market expectations. The company's life insurance main business shows a clear trend of improvement, the profitability of property insurance is recovering, and the company's profit inflection point may have already emerged. The certainty of stable growth in Ping An's future dividends has been enhanced, and it currently has strong allocation value.

In addition, Founder Securities maintains a "strong recommendation" rating for Ping An. It believes that the company's performance growth in the first half of the year was robust, and cash dividends remained stable. The life insurance NBV maintained a high growth rate on a high base, the team achieved high-quality development, the external new business value of the bank insurance channel nearly doubled, and the value transformation was significantly effective. The performance of equity assets on the investment side improved compared to the same period last year, and the fair value change gains significantly improved. Against the backdrop of the continued reduction in the预定 interest rate in the second half of the year and the low base of profits in the same period, the company's value and profit growth are expected to continue to accelerate.

Integrating the views of various institutions, it is not difficult to see that China Ping An has shown a positive growth momentum and robust financial performance in multiple business areas. The company's strategic layout, financial stability, profitability predictability, and shareholder return policy have all been recognized by the market.

Looking forward, with the Federal Reserve's interest rate reduction cycle, the expected recovery of the Hong Kong and A-share markets, combined with the repair trend realized under the current low valuation of insurance stocks, Ping An's good mid-term performance report is expected to boost market performance and further catalyze the company's value growth.