Ping An:3Q16–Strong VNB growth,tracking ahead of DB estimates
FocusPingHKD55.00PingCNY49.40Source:3Q16 VNB +60.7%, 9M16 VNB achieved 86% of 2016E DBePing An reported 3Q16 net profit of Rmb15,732mn (+15.4% yoy), whileComprehensive earnings was Rmb18,824mn (vs. Rmb373mn in 3Q15) thanksa unrealized gains of Rmb6,598mn (vs. loss of Rmb23,133mn in 3Q15). 9M16earnings accounted for 85.6% of DBe and 96.3% of BBG consensus. Life andP&C reported 9M16 net profit of Rmb22,983mn (+18.7% yoy) andRmb10,507mn (-6.0%), indicating 3Q16 growth of ~75% (vs. 5% in 1H16) and~54% (vs. -23%), respectively. Book value expanded 4.2% qoq to Rmb379bn.
Ping An disclosed 9M16 VNB of Rmb35,348mn (+48.1% yoy), achieving 86%of our 2016 estimates and implying 3Q16 VNB of Rmb11,331mn (+60.7%).
P&C 9M16 combined ratio slightly deteriorated by 0.5ppt to 94.9% (butimproved from 95.3% in 1H16). Overall, a decent set of results, maintain Buy.
Robust agency FYP growth; Improving underwriting9M16 life written premium was up 26.6% to Rmb282,153mn, with 9M16agency FYP (written premium) up 39.5% to Rmb82,831mn, indicating 3Q16growth of 29.0% (vs. 40.5% in 1H16). Total claim and reserve ratio improvedby 2.1ppt thanks to the 2.1ppt improvement in claim ratio (to 34.7%) andstable reserve ratio (at 30.1%). Total expense ratio also improved to 52.2% (-3.5ppt yoy) with improvement in operating expense ratio (-9.8ppt to 32.8%)more than offset the deterioration in commission ratio (+6.3ppt to 19.4%). PingAn recorded reserve charges of Rmb8,003mn in 3Q16, with 9M16 chargesamounting to Rmb17,235mn.
Investments and other businessesInv related income grew 39.4% yoy to Rmb14,810mn thanks to strong net invincome (+30.7% yoy to Rmb29,276mn) and FV gains of Rmb2,627mn (vs.
losses of 435mn in 3Q15). 9M annualized net inv yield was 6.0% (vs. 5.7% in1H16) and total inv yield was 4.9% (vs. 4.4%). P&C non-auto premium growthturned positive in 3Q16 at 12.0% (vs. -32.4% in 1H16) while auto premiumgrowth decelerated to 7.6% (vs. 14.1%). 9M16 combined ratio slightlydeteriorated by 0.5ppt to 94.9%, but improved from 95.3% in 1H16. Trustassets declined 2.7% qoq to Rmb626bn. Lufax recorded 9M16 transactionvolume of Rmb4.3trn (+363.9% yoy), with 25% from retail customers (vs. 34%in 9M15). Puhui had loans issuance of Rmb111bn (+282% yoy).
Capital positionsLife core solvency improved 9ppt qoq to 216% with comprehensive +8ppt to229%). P&C core solvency improved 12ppt to 269% with comprehensive +11%to 300%).
More to follow after the earnings call at 4:30pm next Monday.