Ping An of China (601318): Sudden change in life insurance value investment is difficult to prevent high growth

Ping An of China (601318): Sudden change in life insurance value investment is difficult to prevent high growth

Event: The company released its 2018 annual report and realized 1074 net profit attributable to shareholders of the parent company.

40,000 yuan, an increase of 20 in ten years.

6%, corresponding to an EPS of 6.

31 yuan / share; net assets attributable to shareholders of the parent company at the end of the period 5565.

08 million yuan, an increase of 17 over the beginning of the year.

6%, corresponding 重庆耍耍网 to 30 BVPS.

44 yuan / share; end-of-period embedded value is 10024.

56 ppm, an increase of 21 from the beginning of the year.

5%; planned cash dividends 1.

72 yuan / share.

The investment growth of the investment points exceeded expectations due to excellent life insurance management and control + improvement in property insurance, and a steady increase in operating profit + 19%: The company realized a net profit of 107.4 billion yuan, an increase of +20.

6% (+39 after excluding the impact of I9.

5%), compared with the first three quarters of 19.

7% increased slightly, Q4 exceeded + 23% in a single quarter, significantly higher than expected, mainly due to: 1) Life insurance profit increased rapidly, achieving 579.

1 billion profit, +62 per year.

4%, of which 18Q4 contributed 12 billion (17Q4 only-1.3 billion). The spin-off was mainly due to high operating deviation growth (that is, excellent management and control of life insurance claims and expenses). At the same time, the impact of changes in the discount rate of reserves was eliminated (sprint last year)(21.2 billion minus); 2) Profits from property insurance improved. Earlier three-quarter profit growth before tax was published to +3.

3%, but the decline in net profit narrowed to -8.

2%, a 40% increase in the fourth quarter of a single quarter, is expected to improve expenses in the fourth quarter, gradually increase interest rates to replace 37% (43% in the first three quarters), so the payout ratio fell by 1.

7% drive comprehensive cost rate optimization.

2% to 96%.

3) In terms of fintech, Lufax’s Series C financing brought a fair value revaluation gain of convertible promissory notes of USD 7.2 billion, but the gains were still replaceable.

2% comes from a high base of 17Q4 (Ping An Good Doctor reorganization contributed 10.9 billion high one-time income).

Operating profit budget, excluding changes in life insurance investment, assuming changes and turbulent one-time income from fintech, endogenous growth of the group’s operations was 19%, which was basically the same as the first three quarters. Life insurance in the fourth quarter covered high Q4 fintech growthSpeed down the gap.

Life insurance NBV increased by 7.

3% is slightly higher than expected, the quality of agents has improved, and ROEV leads the industry: the company ‘s core growth indicators for life insurance such as NBV, new orders, and human resources are significantly ahead of the industry: 1) New business value +7.

3% to 722.

900 million, compared with +3 in the first three quarters.

The 1% growth rate continued to increase, mainly due to the continued recovery of new orders, and the growth rate of new business premiums for personal business turned positive to +1.

3% (-2 in the first three quarters).

8%), and the new business value ratio continued to rise to 43.

7% (39 in the same period last year.

3%), a record high; 2) The number of agents at the end of the year was 141.

740,000, still +2 from the beginning of the year.

3%, an average of 132 people per month, +4 in ten years.

8%, per capita income slightly increased to 6290 yuan / month, the quality of the team continues to improve, to ensure the future growth of life insurance business; 3) the embedded value has steadily increased to 1 trillion, more than +21.

5%, ROEV is as high as 23.

7%, ahead of leading peers, investment disturbances were in line with expectations (long-term investment return deviations of -122 due to stock market volatility.

30,000 yuan, net / total return on investment dropped to 5.2%, 3.

The return on net investment yields is due to the sharp increase in dividends in the second half of the year).

Dividend-linked operating profit increases the attractiveness of indicators, and the first batch of US $ 5 billion to 10 billion in the repurchase program is launched: the group’s overall cumulative dividend1.

72 yuan / share (excluding 0 in the first quarter).

2 yuan special dividend), an annual increase of 15%, accounting for 28% of the operating profit attributable to the mother, dividend-linked operating profit to avoid the impact of I9 implementation on the exchange rate.

In addition, the company initiated the first share repurchase, and within 12 months from the annual date, it is planned to not exceed 101.

The price of 24 yuan / share to repurchase 50 shares?
100 trillion, all share repurchases will be used for employee stock ownership plans.

The share repurchase + long-term service plan gradually improves the company’s restraint and incentive mechanism, realizes the in-depth restraint of core personnel interests, and demonstrates the leadership’s confidence in the company’s long-term development.

Earnings forecast and investment rating: The company’s earnings are growing steadily, life insurance business performance has improved, leading its peers, NBV growth rate and new business value rate continue to pick up, and agent quality has improved.

In the long run, we are optimistic about the Group’s integration agent’s precipitation advantage to achieve continuous growth in EV and enjoy a valuation premium.

We expect the Group’s NBV growth to be 4 in 2019 and 2020 respectively.

5%, 7.

5%, has now reached the expected average level1.

06 times 2019 PEV, long-term stable and optimistic, maintain “Buy” rating.

Risk reminders: 1) the duration of new insurance premiums for life insurance; 2) the rapid decline in long-term interest rates affects the investment side; 3) the continued loss of property insurance income; 4) the management mechanism brings uncertainty.