Ping An announced 9M19 results on 24 Oct. Operating profit after deducting short-term investment variances, impact of discount rate change and one-off items, increased 21.5% YoY. However, NBV growth missed previous guidance by the Company due to restructuring of life insurance business. The Company also announced changes of senior management to lay foundation for long-term development.
- NBV guidance trimmed. In 9M19, NBV increased 4.5% YoY to RMB 58.81bn (6.1%/3.2%/4.1% in 1Q/2Q/3Q, respectively). NBV growth fell short of the Company’s guidance at interim briefing at >7.3%. Weaker-than-expected NBV growth was due to sluggish first-year premium growth (-7.0% YoY in 9M19), although NBV margin expanded 5.3ppt YoY to 48.1% in 9M19. Restructuring of life business, with respect to product mix upgrade and agent team management has weighed on life premium growth of the Company. As of 30 Sep 2019, agent headcount shrank 12.1%/3.2% from YE18 and 2Q19.
- Result highlights. 1) Steady increase of operating profit, which was up 21.5% YoY to RMB 104.1bn in 9M19, primarily driven by life & health insurance and P&C insurance business. 2) Investment of insurance funds achieved annualized net investment yield of 4.9% and total investment yield of 6.0%. Insurance funds increased 8.6% from YE18 to RMB 3.03tn. 3) Satisfactory customer development, with retail customers increasing 9.5% from YE18 to 201.4 million and internet users increasing 10.4% to 594.4 million.
- Changes of senior management to improve governance structure. The Company also announced some changes in senior management, particularly the appointment of Mr. Xie Yonglin as the president of the Company. We think the above changes could improve efficiency of decision-making of Ping An and may clear some uncertainties regarding future governance structure of the Company.
- Valuation. The stock now trades at 1.36x 1H19A P/EV, above insurance peers’ average of 0.52x P/EV. We think stock price may face some pressure in the near term due to weaker NBV growth and management shuffle. However, we believe Ping An’s long-term growth story empowered by technology applications remains intact and the Company is likely to deliver stable annual growth in 2019.
