Ping An: OPAT Q1 Growth Resilient, Slowing Growth in Financial Customers in Challenging Environment

We maintain our fair value estimate for Ping An Insurance at HKD 86 per H-share following its first-quarter results that reported a 24% year-on-year decline in net profits to CNY 20.7 billion. The results were largely in line. Positively, year-on-year growth in operating profits after tax, or OPAT, was resilient at 10% to CNY 43 billion, up from the 6% growth in 2021. The growth was driven by the 16% and 27% increases in Ping An Life and Ping An Bank, respectively, despite a 41% decline in Ping An P&C on lower investment return. We expect the group’s OPAT growth to slow in coming quarters but its diversified business structure should be able to deliver positive growth in 2022. The 16% OPAT growth in life insurance was better than we expected, despite the high base of new business value, or NBV, growth in the year-ago period and the resurgence of COVID-19 cases in March. The strong rebound in life insurance OPAT growth from the 5% level in the year-ago period was attributable to positive operating variances as a result of higher tax-free investment income and actuarial assumptions changes to reflect a more conservative consistency rate and expense ratios. A strong improvement in the consistency rate in the first quarter also helped support a better OPAT growth. NBV dropped 33% from the year-ago period, or a 25% decline if excluding the impact of actuarial assumptions changes in the fourth quarter of 2021. As expected, NBV margin declined to 24.6% from 31%. We continue to expect NBV to drop by double digits in the first half.