Ping An’s Life Insurance NBV Growth Turned Positive in Q4 While P&C Underwriting Margin Missed

Ping An Insurance's 2022 results were in line with our expectations and we leave our earnings assumptions largely unchanged. Our fair value estimate is HKD 66 per H-share and CNY 60 per A-share. H-shares fell 3.35% on March 16, the first day after the results as the market seems worried about slowing growth in operating profit after tax and potential contagion risks caused by the unexpected collapse of Silicon Valley Bank. We believe Chinese insurers have negligible exposure to overseas bond investments as most of their liabilities are domestically driven. The 2022 OPAT was primarily dragged down by underwriting losses in the credit guarantee insurance line as borrowers’ willingness and ability to repay their debts were hurt by both coronavirus controls and widespread infections. Similarly, losses in the asset management business were caused by bond market turmoil in November and December 2022 after China’s reopening. We believe both negative factors are temporary and expect group-level OPAT growth to gradually recover in the second half. Looking past these challenges, we believe Ping An’s three-year life insurance reforms have started to bear fruit. Despite a 24% year-on-year decline in 2022 new business value, fourth-quarter NBV beat our expectations and turned positive for the first time since since first-quarter 2021, with 12% year-on-year growth. Management also guided for positive year-on-year growth in first-quarter NBV after more than 22% growth in average agent income and NBV per agent in 2022.