1H26 preview: 2Q OPAT strength persists while NBV takes a breather

Ping An (2318 HK/601318 CH) takes a breather 1H26preview: 2Q OPATstrength persists whileNBV takes a breather Ping An isset to release its 1H26 results on Aug 20 (Thu) post-market. We estimateGroup OPAT at RMB83.3bn (+7.2% YoY), implying a robust 2Q26 increase of 6.8%,(vs. +7.6% in 1Q26). WeexpectGroup NPAT to reach RMB83.8bn (+23% YoY),slightly above OPAT, reflecting positive short-terminvestmentvariances from the 2Qequity market rally (i.e. CSI300: +12% in 2Q26 vs.-4% in 1Q26/+1% in 2Q25) andrevaluation gains on the conversion value of the outstanding convertible bonds. China Insurance Key drivers for this solid 1H26 performance include1) L&H OPAT expected togrow ~3% YoY (CMBI est) benefiting from a more stable interest rateenvironmentin 2Q26 (i.e. 10YR government bond yield down 5.7bps, vs.-17bps in 2Q25), whichshould aid new business contractual service margin (NB CSM) growth. This ispartially offset by a near-term deceleration in CSM release, as in-force book mixshifts toward savings products; 2) P&C underwriting to improve on disciplinedexpense controls,andwe project 1H26 COR to edge down to 95.1% (vs. 95.2% in1H25); 3) PAB to deliver quality growth in linewithits year-start guidance; 4) Assetmanagement profit momentum likely sustained thanks to improving sentiment andtrading activities.Weremain positive on the Group’s core earnings trajectory,and reiterate our view on L&H CSMgrowthinflection by FY26E.Maintain BUY,with TP at HK$86/RMB75 (unchanged) based on SOTP implying0.83x FY26E P/EV. ◼L&Hcore metrics back on track.We estimate 2Q26 Group OPAT atRMB42.5bn(+6.8% YoY)driven bycross-segment growth. L&H OPATislikelyto sustainitsuptrendasCSM releasegradually returns toa growthtrajectory.We estimatethe Group’sNB CSM to rise by mid-teens YoY in 1H26againstamorestabilizedinterest ratebackdrop,thoughpartiallyoffset by alowerCSMrelease ratedue to in-forceproductmixshifttowardsavings-typepolicies.Wemaintain our viewthatL&H CSMgrowth inflectionwill reachby FY26E.. Source:FactSet ◼2Q NBVmaymoderateonstringent regulationsandmargin recalibration.Weforecast 1H26 NBV at RMB25bn (+12% YoY), implying a flattish 2Q26.Thismoderation reflects 1) stringent regulatory oversight onbancassuranceexpensesextendingfrom commissions to the full fee structure (i.e. Circular 65 in Mar 2026);2) a high base effect following theactuarialassumption changes as of end-FY25,which left NBV margin in 1H25 unadjusted. Looking into 2H26E, we thinkthehighbase impact on new policy sales could be more evident in 3Q26, while the NBVmargin drag should gradually normalize toward year-end. ◼Higher OCI allocation lowersbottom-lineupsidefrom equity rally.Unlikemajor peers,Ping Ancaptured lessNPATupside fromthe 2Q equity market rally(i.e. CSI 300 +12%)largelydue toits higherallocation ofstocksand equity fundstoFVOCIrelative toFVTPL.As ofFY25,Ping An’s FVOCI stockexposurewasat43.6%(vs.listed peers at 10%-31%).We forecast net asset value atRMB1.12tnby 1H26,supported by1)robustretained profitgrowthfromnetearnings,and2)amodestpositive impactfromhigher FVOCI reserves(lowerspot yields) partiallyoffset byan increase in insurance finance reserves amidthedownward trending20-dayavg.bond yield. Related reports:1.1Q OPAT a slight beat; positive outlook forfull-yearNBVandlifeOPATacceleration, Apr 29, 20262.1Q26 preview: Expect resilient OPAT,NPAT to slide on equity swings; solid NBVuptrend, Apr 22, 20263.Group OPAT back to double-digit rise;expect CSM to return to positive growth in2026E, Mar 30,20264.Banca fuelling NBV growth in jumpstartsales; 4Q earnings could ease on growthstock corrections, 23 Jan 20265.China Insurance-Easing solvency riskfactors to steer insurance funds into long-term stockholdings, 8 Dec 20256.3Q earnings beat; improving businessqualitywith catalysts across-the-boardworth to expect, 31 Oct, 2025 ◼Valuation:Ping An-H is trading at 0.52x FY26E P/EV and 0.75x FY26E P/B, witha yield of 6% and anaveragethree-year forward operating ROE >13%.Weareconstructive on the prospect of Ping An’s core business improvements,including1)acceleratingLife OPAT growth inFY26E driven by CSMrelease andbalanceapproachingtoinflection; 2) PAB profit enhancement; and 3) ongoing de-riskingofthe AM segment. Maintain BUY, withourTP at HK$86/RMB75 (unchanged)for H/A share, which implies 0.83x FY26E P/EV and 1.2x FY26E P/B. ◼Catalysts:1)faster-than-expectedL&HCSM balance growthturnaround within2026E; 2) continued AM OPAT outperformance led bythede-risking progress;3) accelerating OPAT payout ratio growth; 4) significant rallies in equity markets;5) newprotection-type product rollouts, i.e. participating critical illness, etc. ◼Keyrisks:1)regulatory tightening on life insurance and financialconglomerates; 2) heightened equity market volatility; 3)aprolonged low-interestrate environment; 4) intensified pricing competition in P&C industry; 5) assetquality deterioration; and 6) a significant decline in Group capital level weighingon DPS growth, etc. ◼Ping An-H (23