Ping An Insurance Group (2318.HK)xqdoc.imedao.com/161e57536c4a91553fe3f473.pdf · Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs

Key Data __________________________________

GS Forecast ________________________________

GS Factor Profile ____________________________

Source: Company data, Goldman Sachs Research estimates.See disclosures for details.

As China’s largest publicly-traded financial conglomerate, Ping AnInsurance Group is using its in-house developed technologyinitiatives - like image-based risk verification - to deliver industryleading productivity and efficiency, market share gains and resilientearnings growth. It is also utilizing this technology infrastructure atits banking subsidiary, Ping An Bank (recently up to Buy, added toConviction List), and in other vertically-integrated ecosystems likeauto and health, to leverage the group’s large retail user base andcomprehensive financial products offering.

Although Ping An H/A’s share prices are up 120%/97% since thebeginning of 2017, we believe investors have yet to fully price in theabove-industry returns its technology initiatives are enabling in corebusinesses, ranging from insurance to internet finance. We viewthese returns as sustainable and therefore deserving of valuationpremiums, as Ping An uses its significant investment in R&D, 500+data scientists, and 2,000+ global patents to sustain and furtherdevelop its unified FinTech ecosystem. Our SOTP-based 12-monthH/A target prices of HK$113/Rmb88 (from HK$107/Rmb88) imply32%/26% upside potential; reiterate Buy (on Conviction List).

Ping An Insurance Group (2318.HK)Innovative to the Core;Reiterate Buy (on CL)

28 February 2018 | 5:21PM HKT

Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of thisreport. Investors should consider this report as only a single factor in making their investment decision. For Reg ACcertification and other important disclosures, see the Disclosure Appendix, or go towww.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as researchanalysts with FINRA in the U.S.

Mancy Sun+852-2978-6072 | [email protected] Sachs (Asia) L.L.C.

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https://research.gs.com/content/research/en/reports/2018/01/17/a68d54d9-9c05-4026-86de-455e4702a507.html


https://research.gs.com/

http://www.gs.com/research/hedge.html

mailto:[email protected]?subject=The%20Asia%20Stock%20Collection%3A%20Innovative%20to%20the%20Core%3B%20reiterate%20Buy%20%28on%20CL%29




Ratios & Valuation _______________________________________

Growth & Margins (%) ____________________________________

Price Performance _______________________________________

Source: FactSet. Price as of 27 Feb 2018 close.

Income Statement (Rmb mn) _______________________________

28 February 2018 2

Goldman Sachs

Balance Sheet (Rmb mn) __________________________________

Source: Company data, Goldman Sachs Research estimates.

Ping An Insurance Group (2318.HK)Rating since Feb 24, 2009Buy CL

Ping An Insurance Group (2318.HK)

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Where are we challenging consensus? 4

What drives top line, margins and ultimately, earnings? 6

What catalysts could drive the share price? 9

The Feature Picture 10

Does the company have a moat? 12

How do we value the company and why? 14

How does the company invest? 17

What could go wrong? 19

Quantamentals 23

ESG Overview 26

Appendix 27

MSCI disclosure 29

Disclosure Appendix 30

28 February 2018 3

Goldman Sachs Ping An Insurance Group (2318.HK)

Table of Contents

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Where are we challenging consensus?

We believe investors do assign some value to Ping An’s tech initiatives, but that theytend to value them as separate entities. We point out that the value does not only comefrom the internally incubated tech companies (that either already have or deserve aseparate valuation). The multi-year investment in tech creates significant synergies

with Ping An’s core businesses (such as life, P&C and banking), resulting in higher

return and high growth prospects for these businesses, and hence should be

rewarded with higher valuation multiples. In many cases, this is already visible. BothPing An Life and Ping An P&C have much higher return (ROEV or ROE) than peers. Thisis indeed a result of Ping An’s general focus on value/productivity and operationalcontrol, but technology is the key enabler for Ping An to achieve and sustain thosegoals.

Jin Guan Jia enables agents to promote customer development and cross-selln

diversified financial products in various scenarios;

Ping An’s investment in the healthcare/health-tech value chain is beneficialn

fundamentally, as it helps Ping An to better price its protection products (which are73% of life new business value as of 1H17);

Smart insurance cloud helps to reduce fraud risk and control expenses, thanks ton

image-based risk verification technology; and

Ping An Bank also benefits from a lower cost-income ratio and the synergy gainedn

from Ping An’s user base and technology infrastructure, as it transforms towardshigher ROE retail banking.

In The Feature Picture section, we map out Ping An’s technology infrastructure andhealthcare initiatives, and explain how they might benefit Ping An’s core businesses andenhance shareholder value.

Therefore, we are confident that Ping An will continue to deliver higher returns andgrowth from its core businesses over the next three years. In terms of net profitforecasts, GSe FY18/19 EPS are 6%/12% above Bloomberg consensus.

28 February 2018 4


This report was written byMancy Sun, Thomas Wang,Stanley Tian, and Dan Cao

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Exhibit 1: At the group level, Ping An looks best positioned amongits peers Listed Insurers’ ROE since 2015

Exhibit 2: We expect Ping An Life to maintain higher ROEVcompared to other listed life insurersListed life insurers’ operating ROEV since 2015

0%

5%

10%

15%

20%

25%

2015 2016 2017E 2018E 2019E

Ping An China Life CPIC NCI Taiping PICC Group

0%

5%

10%

15%

20%

25%

30%

35%

2015 2016 2017E 2018E 2019E

Ping An China Life CPIC NCI Taiping PICC Life

Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

Exhibit 3: Similarly, Ping An P&C has the lowest combined ratiocompared to its peersListed P&C insurers’ combined ratio since 2015

Exhibit 4: PAB’s retail business is already profitable, with 31%retail ROE vs 18% for our sample groupChina banks retail ROA and ROE in 2016

92%

93%

94%

95%

96%

97%

98%

99%

100%

101%

102%

2015 2016 2017E 2018E 2019E

Ping An CPIC Taiping PICC P&C

0%

5%

10%

15%

20%

25%

30%

35%

40%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Retail ROA Non-mortgage retail ROA

Retail ROE (RHS) Non-mortgage retail ROE (RHS)

Source: Company data, Goldman Sachs Global Investment Research Source: Company data

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What drives top line, margins and ultimately, earnings?

Ping An has four main business lines, insurance (life and P&C), banking, investmentmanagement, and internet finance. Insurance remains the largest operating segment,contributing 77%/65% of FY18-20E group revenue/profit. This is driven by strong growthin life insurance, with 25%/26% revenue/profit growth CAGR vs. 10%/10% for P&Cinsurance.

Despite some uncertainties around January 2018 jumpstart sales, we continue toexpect Ping An Life to deliver one of the fastest new business value (NBV) growth ratesover FY18-20E. This is enabled by Ping An’s superior distribution capability and better(FinTech-enabled) client relationship management.

Exhibit 5: Insurance (Life and P&C) remains the largest operating segmentPing An net profit breakdown by segment (Rmb mn)

32% 43%

40% 35% 42% 54% 23%

21%

22% 23%

23% 16%

34%

28%

29%

23% 24%

17%

-6% -8%

1%

10%

8%

9%

25% 18%

12%

20,050

28,154

39,279

54,203 52,897

43,427

2012 2013 2014 2015 2016* 1H17

Others

Internet Finance

Banking

P&C insurance

Life insurance

* 2016 profit excludes the one-off gain of Rmb9,247mn from the Puhui Financial transactions

Source: Company data

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For Ping An Bank, the second largest segment, we also expect to see an inflection inearnings growth in 2018, driven by growth in retail assets and expanding interestmargin. Please refer to the note Ping An Bank - Consumer Lending 3.0, January 18,2018 for more details.

Ping An Bank’s shift towards retail business aligns itself with Ping An Group’sretail-focused strategy, allowing it to leverage Ping An Group’s large retail customer/userbase and comprehensive financial products offering.

Exhibit 6: We expect Ping An Life to deliver one of the fastest newbusiness value (NBV) growth rates among its peers... Ping An vs peers’ NBV growth

Exhibit 7: ...driven by Ping An’s superior distribution capacityPing An vs peers’ agent productivity (average regular FYP per agent permonth, Rmb)

40%

32% 33% 29%

26% 31%

46%

30%

23% 22%

2015 2016 2017E 2018E 2019E

Ping An Peer Average

7,040 7,687 7,933

11,904

4,489 4,893 5,435

8,048

2014 2015 2016 1H17

Ping An Peers


Exhibit 8: Ping An’s technology enables superior distributionchannel management...Ping An’s NBV breakdown

Exhibit 9: ...and an innovative sales model, to improve clientrelationship managementPing An’s innovative real-time communication sales model

50,80538,420

4,3924,027

46,41334,393

Delivered Increases in both agency scale and per agent productivity

NBV

Agency

NBV

Other

NBV

First-year premium

NBV margin

Avg agent force

New policies per mth per

agent

Premium income per

policy

Activity rate in force

Policies per active agent per month

20162015

(in RMB million)

TTele-service

Social platform

Agent app

Customer app

Traffic

Financial Products

Life Service

Products

Source: Company data Source: Company data

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We also highlight Ping An’s internet finance businesses which, as a whole, have becomeprofitable in FY17 for the first time (excluding one-off gains). While we do not expectmaterial profit generation from the internet finance businesses, it does remove anearnings drag for Ping An and is incrementally accretive to ROE.

Exhibit 10: Ping An Bank is shifting towards more profitable retail businessRetail vs. corp assets cost and income waterfall analysis for PAB (2016)

5.0%

1.6%

2.4% 3.2%

0.9%

0.8%

2.5% 1.2% 0.7% 1.0%

0.3% 0.8%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

NII Non-II Opex Provision Tax ROAA NII Non-II Opex Provision Tax ROAA

Retail Corporate

Source: Company data, Goldman Sachs Global Investment Research

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What catalysts could drive the share price?

Relatively weak share price performance over the past months (for Ping An as well asother life insurers) is partly due to a lack of official data releases. While overall Januarynew business sales were weak, we believe sales of (higher margin) protection haveremained solid, as the new product regulations mainly affected savings products. Thestructural demand for protection product coverage appears to remain intact. We expectFY17/1Q18 results, end of March/April, to show resilient growth in protection

product sales and VONB margin expansions, removing FY18 growth concerns. Thisshould lead to improvements in sentiment and valuation re-ratings for the Chineseinsurers, especially Ping An.

More disclosure about Ping An’s FinTech platforms, and the positive benefits theyhave on the traditional financial services business, would help investors to betterunderstand the value proposition of its technology strategy. This could come at FY17results (end of March) or targeted investor presentations (e.g., July 2017 FinTechpresentation).

Furthermore, one of Ping An’s FinTech subsidiaries, Ping An Good Doctor, has filed anIPO application to list on the Hong Kong Exchange. Not only should this bring increaseddisclosure, but it may also allow better value discovery. A potential spin-off, if any,could also be another catalyst for valuation re-rating.

Exhibit 11: January sales are heavily weighted towardslow-margin savings productsPing An NBV contribution vs NBV margin by quarter

Exhibit 12: The decline of savings product sales has a muchsmaller impact on NBV given lower contribution from theselow-margin productsPing An agency NBV by product

40%

21% 20% 19%

45%

20% 18% 18%

26% 26% 26% 22%

31%

26% 22%

20% 26%

52% 56%

51%

29%

55% 53%

43%

10%

20%

30%

40%

50%

60%

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17E

FYP as % of FY NBV as % of FY NBV/FYP Margin

15% 24%

81% 73%

4% 3%

0%

20%

40%

60%

80%

100%

FY16 1H17

Short-term insurance

Long-term protection

Savings


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https://research.gs.com/content/research/en/reports/2017/05/17/3c213cb1-39bd-41e1-b3d8-399e51b6255b.html

The Feature Picture

We think the market has not yet fully comprehended the key components of Ping An’stechnology investments and how they might benefit its core businesses or valuation. Inthis section, we map out Ping An’s technology infrastructure and healthcare initiatives -from Ping An’s technology export process to the overall healthcare ecosystem, and aimto explain how they might benefit Ping An’s core businesses and enhance shareholdervalue.

We highlight that, in many cases, Ping An has built the technology platform out ofnecessity, due to: 1) a lack of suitable external vendor; and 2) potential to improveinternal processes. As these technology initiatives mature, the ability to export thistechnology know-how has opened up new markets for Ping An.

A good example is its ability to tap the small-and-medium banks segment in China,which represents 40% of banking industry assets in China vs. c.1% for Ping An Bank. Inthis case, the export of technology also benefited from CBRC’s policy stance toencourage all banks to migrate IT systems to a cloud platform by 2020.

Source: Company data, Experian, Goldman Sachs Global Investment Research

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Does the company have a moat?

We believe Ping An’s moat is built on three competitive advantages:

Strong brand premium, with large existing customer base in its traditional financial1.businesses and online user base in its tech-driven eco-systems;

Comprehensive financial licenses; and2.

Early mover advantage and continued investments in the integration of technology3.with traditional financial services, with Rmb50bn invested in the past decade and1% of revenue (c.Rmb8bn, or c. US$1.2bn in 2017) invested annually. This ranks thecompany fifth in the world in financial services R&D spending for FY16/17 and, moreimportantly, in the top 50 among tech companies (ahead of Sharp and Twitter butbelow the likes of Tencent and HP1).

Tech-savvy customer/user base

Ping An already has a large customer base in its traditional businesses (143mn as of1H17), which is weighted towards tier-1 cities and more-developed coastal regions. Itsvarious online platforms and Apps have also gathered a large following, with430mn/312mn registered Internet/App users as of 3Q17.

1 According to The 2017 EU Industrial R&D Investment Scoreboard.

Exhibit 13: Comparisons between Ping An and other financial institutions and tech companies


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Comprehensive financial licenses

Ping An already holds licenses and operates in most segments of the financial servicesindustry, including insurance, banking, mutual fund, trust, securities broker, andpayment. Unlike an external innovator/disruptor, Ping An better understands the painpoints of the traditional financial institutions. Solutions provided by Ping An have alsoreadily fulfilled the compliance requirements prescribed by various regulatory agencies(e.g., CBRC, CIRC, and CSRC).

Exhibit 14: Ping An has been gathering a growing App and Internetuser basePing An’s registered Internet/App users (mn)

Exhibit 15: Ping An is the 2nd largest life insurer in China, but thelargest in Tier-1 citiesGross Written Premium of life insurance in 2016 (Rmb mn)

20 29 45 73

107

182 222 233

265 288 312

137 159 167

197 242

298 337 346

377 403

430

4Q14 1Q15 2Q15 3Q15 4Q15 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17

Registered App user Registered Internet user

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

China Life Ping An* CPIC

Jiangsu

Zhejiang

Guangdong

Beijing

Shenzhen

Shanghai

*Ping An includes Ping An Life, Ping An Health and Ping An Annuity.

Ping An’s market share in these developed regions is 15%, vs 11% nationwide.

Source: Company data Source: CIRC, Goldman Sachs Global Investment Research

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How do we value the company and why?

We value Ping An using a sum-of-the-parts (SOTP) valuation, given it operates in a widerange of markets in different stages of development. This also allows us to capture the‘enabling’ effect that the tech-initiatives have on Ping An’s traditional businesses,reflected in higher multiples vs. their peers, given stronger growth and higher returns.

We continue to apply a 10% conglomerate discount to reflect exposure to China’s assetquality cycle given its banking and lending-related activities. In addition, we have applieda volatility discount (24%/27% for Ping An H/A) based on historical share priceperformances.

How to value the tech initiatives?

One of the most frequently asked questions we receive from investors about Ping An’svaluation is how to assign value to its tech initiatives, given a relative lack of financialdisclosure for most of them.

The standalone valuation, based on available financial disclosure and news reports,1.only captures part of the benefits we see in Ping An’s investment in tech initiatives.

The more important aspect of the tech initiatives, in our view, is their ‘enabling’2.effect within the core businesses. This is reflected in the value created in its corebusinesses, which we capture by applying higher valuation multiples to Ping An’score insurance and banking businesses (vs. peers).

We value Ping An P&C, for example, at 2.2x FY18E P/B vs. 1.6x-2.0x for PICCo

and CPIC, reflecting higher sustainable ROE (17.5% FY18-20E vs. 15.0-17.0%).This partly reflects: 1) the strong growth in credit insurance (leveraging itstech-enabled risk underwriting); and 2) industry leading profitability in autoinsurance (leveraging its image-based loss verification technology and frauddetection capabilities).

For early-stage investments, we believe investors should assign nominal value3.(based on book value) given the relative lack of financial disclosure.

Details on Ping An valuation

We value Ping An Life using ROEV-derived price-to-embedded value (EV) multiples.

Exhibit 16: Ping An SOTP summary

Ping An: Sum-of-the-parts valuationTotal

2018E equity Per share Per shareEquity/EV Multiple value value value Valuation (Rmb mn) (X) (Rmb mn) (Rmb) (HK$) contribution

Life insurance EV (re-based to 2.8%) 586,855 2.9 1,730,313 94.7 117.2 71%P&C insurance 89,419 2.2 200,284 11.0 13.6 8%Banking (58%) 142,842 1.22 174,276 9.5 11.8 7%Securities, trust, and others 132,006 2.4 319,937 17.5 21.7 13%Sum-of-the-parts valuation 132.65 164.23

Conglomerate discount 10% 10%Volatility discount 27% 24%

Sum-of-the-parts valuation (post-conglomerate & volatility discount) 88.00 113.00

Source: Goldman Sachs Global Investment Research

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https://research.gs.com/content/research/en/reports/2017/12/12/bb3fb207-7026-4f7f-a9e5-0c29275e001f.html

We believe EV is the most appropriate valuation basis for Chinese life insurersn

because it takes into account long-term profitability. We see this as suitable becauseChinese life insurers are still growing rapidly and may incur initial capital expenditure(i.e., negative impact on book value), despite improved long-term profitability.

Our adjusted EV is based on a 2.8% long-term government bond yield, vs. 3.4%n

company assumption and c.4% spot yield. We believe this provides a buffer invaluation, unless long bond yields decline significantly below 3%.

We value Ping An P&C using a three-staged DDM model.

To value Ping An Bank, we use a P/PPOP-based valuation, focusing on the capability ofintrinsic profit generation and the comparability with other banks across countries.Please refer to the note Ping An Bank - Consumer Lending 3.0, January 18, 2018 formore details.

In addition to a conglomerate discount of 10%, we also apply another discount at thegroup level to account for market volatility. After 2011, Chinese insurers appear to haveonly traded at the theoretical fair multiple except in the most constructive macroenvironments. On the other hand, there has seemed to be a floor valuation (“DistressedValuation”), 1 standard deviation below historical average P/EV, where the marketseems to ignore growth and finds bottom at prior lows. If we do not take a view on themacro trend, we believe the market will require a discount to the Theoretical Fair Value.Our current volatility discount, 24%/27% for Ping An H/A, implies a normalized macroenvironment and mid-cycle valuation.

Estimate changes

We fine-tune our FY17-19E NBV, reducing it by 3-6% to reflect weak January 2018 sales.We also revise our Rmb/HK$ exchange rate assumption to 1.24 from 1.18, and introduceour 2020E estimates. The 12m-SOTP based target price for Ping An H/A is raised toHK$113/Rmb88 from HK$107/Rmb88, implying 1.8X 2018E adjusted EV. Reiterate Buy(on Conviction List).

Exhibit 17: Life ROEV and P/EV multiple of Ping An Life

Ping An Life 10.5% 23.5% 0.3% 23.2% 4.0% 2.9

Theoretical Fair P/EVROEV based valuation COE

Sustainable ROEV

Long term growth rate

Sustainable ROEV at

assumed long-term return

ROEV reduction due to lower yields


Exhibit 18: 3-stage DDM valuation for Ping An P&CStage 1 Stage 2 Stage 3

Div. CAGR

No. of Year RoE

Div. payout Growth

No. of Year RoE

Div. payout Growth

Ping An P&C 10.7% 10.9% 3 17.5% 60% 7.0% 10 17.5% 80% 3.5% 12.8 2.24

Implied Theoretic

al Fair P/E

Theoretical Fair

P/BROEV based valuationDiscount

rate


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Exhibit 19: Summary of estimate changes

2017E 2018E 2019E 2020E 2017E 2018E 2019E 2017E 2018E 2019E 2017E 2018E 2019E 2020ENBV 65,701 82,463 103,128 126,122 67,509 87,185 109,837 -3% -5% -6% 29% 26% 25% 22%EV 804,304 1,000,996 1,236,968 1,516,976 823,019 1,028,795 1,274,175 -2% -3% -3% 26% 24% 24% 23%EPS (Rmb) 4.19 5.39 6.67 8.10 4.46 5.58 6.67 -6% -3% 0% 20% 28% 24% 21%BV 452,640 532,064 629,910 748,273 455,608 536,783 633,044 -1% -1% 0% 18% 18% 18% 19%

Rmb mnNew Old Change % Yoy growth %


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How does the company invest?

Ping An’s insurance business has been self-sustainable and has continued to upstreamcapital to the group since 2012. This has supported the group’s investment in Ping AnBank and tech-initiatives.

Strong capital generation from insurance

Since 2012, Ping An’s life and P&C insurance have been self-sustainable given strongprofit generation. This has allowed the two subsidiaries to continue to upstream capitalto the group company, totalling Rmb51bn between 2012 and 1H17.

Ping An Life’s capital position saw a significant improvement in 2016 due to the move toa risk-based capital regime, which reduced its capital requirement given its moreprotection-oriented product mix. This has allowed for a significant increase in capitalupstream in 2016.

Dividend and R&D set to increase as bank capital consumption declines

Capital generation from the insurance operations has been mainly used to fund growthat Ping An Bank and the tech-initiatives in recent years.

Capital raisings at Ping An Bank since 2013, totalling Rmb45bn; and n

Investment in tech-initiatives, with Rmb50bn invested over the last decade andn

c.1% of revenue annually going forward.

As Ping An Bank shifts towards less capital consuming retail business, we believe PingAn can now focus on investment in tech-initiatives, as well as shareholder returns,evident in the 150% dividend hike in 1H17.

Exhibit 20: Ping An Life’s business is self-sustaining and hascontinued to upstream capital to the Group since 2012.Ping An Life’s capital upstream to Ping An Group (Rmb mn)

Exhibit 21: Ping An Group’s solvency has been adequate.Ping An Group’s solvency ratio

5,987 5,987 5,987 6,828

17,289

6,223

2012 2013 2014 2015 2016 1H17

195% 186% 174%

205% 205% 210% 211%

100%

2012 2013 2014 2015 2016 1H17

Group Comprehensive Solvency Ratio - C-ROSSGroup Solvency Ratio - Solvency IRegulatory requirement

Source: Company data Source: Company data, Goldman Sachs Global Investment Research

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Exhibit 22: Capital raising since 2013 has improved Ping An Bank’sCapital Adequacy RatioPing An Bank’s Capital Adequacy Ratio %

Exhibit 23: Ping An Group started to increase its dividend payoutratio in 2016Ping An Group’s dividend history (Rmb, LHS) and payout ratio (RHS)

8.6 8.6 8.6 9.0 9.3 9.1

2.8 1.3

2.2 1.9 2.2 2.2

11.4

9.9 10.9 10.9

11.5 11.2

2012 2013 2014 2015 2016 1H17

Tier II CAR

Tier I CAR

0.08 0.10 0.13 0.18 0.20

0.50 0.15

0.23 0.25 0.35

0.55

0.85

0.23 0.33 0.37

0.53

0.75

1.35

18% 18% 17%

18% 22%

30%

0%

5%

10%

15%

20%

25%

30%

35%

-

0.2

0.4

0.6

0.8

1.0

1.2

1.4

2012 2013 2014 2015 2016 2017E

Final DPS

Interim DPS

Payout ratio(RHS)

Note: 2017 Interim DPS is actual number.

Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

Exhibit 24: Ping An’s investment in tech initiatives focuses on 4 core ecosystems and 5 technological capabilities

Source: Company data

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What could go wrong?

For Ping An’s core insurance business, we believe the strong growth outlook is likely toremain intact in the foreseeable future, driven by continued income and wealth growth,and the need for healthcare and retirement provisions in addition to public schemes.However, if long-term asset yields decline significantly and trigger concerns over

negative spreads (as we saw in 2015/16), we could see large negative share pricereactions as a result.

As we highlighted in our April 11, 2016 report, Can China’s Insurers afford theirn

promising future?, we believe negative spread (where asset yield is below cost ofliability) is unlikely to be a near-to-medium term issue for most listed insurers until atleast 2025, even assuming interest rates of 2.8%. Ping An already has a higherinsurance margin vs. peers, and has time to further improve its product mix towardsprotection products to reduce its dependence on investment returns.

Exhibit 25: We estimate Ping An’s EV and NBV to be the most resilient to changes in investment returnamong Chinese insurersEV/NBV sensitivity to a 50bps reduction in investment return assumption

-8% -5%

-8% -8% -6%

-8%

-17%

-9% -12%

-14% -16%

-49%

-60%

-50%

-40%

-30%

-20%

-10%

0%China Life Ping An CPIC NCI Taiping PICC Life & Health

EV sensitivities to a 50bps reduction in bond yieldsNBV sensitivities to a 50bps reduction in bond yields


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https://research.gs.com/content/research/en/reports/2016/04/11/ca50175a-d68f-421e-ad5a-56443c3b24d9.pdf

https://research.gs.com/content/research/en/reports/2016/04/11/ca50175a-d68f-421e-ad5a-56443c3b24d9.pdf

Ping An’s share price could also be negatively affected by China asset qualityconcerns, given its exposures through banking and other lending-related businessactivities. In particular, any potential equity raising by Ping An Bank as a result of assetquality issues could lead to concerns around dilution of Ping An Group’s ROE.

Exhibit 26: Ping An H share price declines as a result of long-term government bond yield decline in2015/2016Ping An H share price vs China 10 year government bond yield (%)

2.5

3

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4

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6

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40

60

80

100

120 Ping An H share price (HK$, LHS) China 10-year bond yield % (RHS)

Source: Datastream

Exhibit 27: Ping An Bank has raised c.Rmb45bn through three private placements since its consolidationinto the Ping An Group in 2012Ping An Bank’s capital raising history and Ping An H share price (HK$) since 2012

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100.00

120.00

Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18

Dec 2013: Raised Rmb14.8bn through common stock private placement to Ping An Group (100%)

May 2015: Raised Rmb10bn through common stock private placement. Ping An Group subscribed Rmb3.5bn (35%).

Mar 2016: Raised Rmb20bn through preferred share private placement. Ping An Group subscribed Rmb11.6bn (58%).

Source: Company data, Datastream

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For Ping An’s tech initiatives, we believe the main risk lies in potential regulatorychanges, as the FinTech regulatory environment appears to have shifted from an initialrelative free hand to promote growth, to a seemingly more balanced approach. Whilethe changes should not suppress innovation, they could potentially add speed bumps orrequire some business models to adapt or change.

Ping An now trades at a premium to its proxy SOTP value, derived based on peern

market valuation multiples2. We believe this partly reflects the higher valuationmultiples assigned to its tech initiatives (vs. traditional financial businesses). If any ofits tech-initiatives are materially affected by regulatory changes, this impliedvaluation premium could decrease.

2 Our Ping An proxy is arrived at by assigning Ping An’s Life/P&C/Banking/Securities businesses valuationsbased on historical trading valuation multiples for China Life/PICC P&C/Ping An Bank/CITIC Securities. Thelatest multiples are 0.7X P/EV for life insurance, 1.2X P/B for P&C insurance, 0.9X P/B for Ping An Bank, and1.1X P/B for Securities for Ping An H proxy, and 1.0X/1.2X/0.9X/1.1X for Ping An A proxy. We value Ping An’sother businesses at 1X P/B for both Ping An H/A proxy.

Exhibit 28: Ping An H has traded mostly at a premium to SOTP-based proxy since 2016Historical share price performance for Ping An (H) and Ping An (H) proxy

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Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18

Ping An Bank A price performance (Base date: 7/27/2012) Ping An H price performance (base date 7/27/2012)Ping An Proxy H performance (base date: 7/27/2012) Ping An/Ping An Proxy Ping An/

Ping An proxy

Relative Price

Ping An H vs. Ping An H market SOTP

Current implied premium to mkt SOTP: 58% as of 02/26/2018

Implied discount to market SOTP: - Since consolidation of Ping An Bank (Jul 12): median: 12.9%; average: 5.0%

Premium to mkt SOTP

Discount to mkt SOTP

Average discount (Jul 2012 to Dec 2015):

18%

Source: Datastream, Company data, Goldman Sachs Global Investment Research

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Exhibit 29: Similarly, Ping An A has started to trade at a premium to its SOTP-based proxy since 1H17Historical share price performance for Ping An (A) and Ping An (A) proxy

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Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18

Ping An Bank A price performance (Base date: 7/27/2012) Ping An A price performance (Base date: 7/27/2012)Ping An Proxy A performance (base date: 7/27/2012) Ping An / Ping An Proxy Ping An/

Ping An proxy Relative Price

Ping An A vs. Ping An A market SOTP

Current implied premium to mkt SOTP: 27% as of 02/26/2018

Implied discount to market SOTP: - Since consolidation of Ping An Bank (Jul 12): median: 22.5%; average: 18.9%

Premium to mkt SOTP

Discount to mkt SOTP

Average discount (Jul 2012 to Dec 2015):

29%


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Quantamentals

This section was contributed by Asia Quantitative Research analyst Tsumugi Akiba.

1) 12M Return Attribution helps investors understand the drivers of the past 12Mreturn by disaggregating into Market, Sector and Factors (such as Value, Growth andMomentum). The regression is done using a time-series Multi-Factor approach basedon daily returns over the last one year (to February 23, 2018). The chart shows the actualbreakdown of the returns.

We see a significant portion of Ping An (H)’s 12-month return is attributable to companyspecific factors (+68.0%), which we define by “idiosyncratic” return in our regressionmodel. Idiosyncratic attribution is the portion that our multi-factor regression model wasnot able to explain. Ping An (H)’s performance is also largely driven by the local market(HSCEI). Coefficient to HSCEI is 0.87 with significant t-stats. This is intuitive as Ping An(H) is one of the largest constituents of the HSCEI. In terms of Investment Profiling (IP)factors, Ping An (H) had negative (and significant) coefficient to Momentum and Valuefactors. This means the stock benefits when the Momentum factor had negative returns

Exhibit 30: 12M return attribution breakdown of Ping An (H)

Return attribution breakdown analysis for Ping An Insurance (Group) Company of China, Ltd. Class H (2318.HK)

HSCEI FinancialsMarket Country Sector Size FX Value Growth Returns Mom. Idiosyn. 12M Perf

6.2% 17.5% -0.4% 4.9% -1.8% -2.5% 0.7% -1.6% 13.2% 68.0% 104.1%

9.8%

+ + + + =

IP Factors

+ + + + +

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(i.e., return reversal trend) and/or stock performance was dragged down a bit whenValue factor outperforms. All other factors are not significant.

2) Attribution Comparison: These charts compare Ping An (H)’s return attribution withthe MSCI AC Asia ex-Japan (MXASJ) stocks average and stocks average in Financials(under GICS Level 1) sector for return attribution of Market, Country, Sector, IP factorand Idiosyncratic factor.

We see Ping An (H) had much higher Country/IP/Idiosyncratic attribution compared to itspeers.

3) Investment Profiling (IP) scores: Looking at Ping An Insurance through the lens ofour IP Factors, Growth has consistently scored above our regional coverage averagepercentile for the past three years, and has recently risen to top regional quintile (82ndpercentile). Alongside, Multiples have also remained in the 52nd percentile. Thecompany ranks in the 66th percentile vs. our regional coverage on our Integrated (aproxy for Quality) Factor.

Exhibit 31: 12M return attribution comparison for Ping An (H)

12M Return attribution Comparison for Ping An Insurance (Group) Company of China, Ltd. Class H (2318.HK)

6.2

0.8

9.0

0.0 2.0 4.0 6.0 8.0 10.0

MarketAttribution

(%)

MXASJ Stock Avg Financials Sector Stock Avg 2318.HK

-0.4

-0.3

-3.0

-3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0

SectorAttribution

(%)


9.8

-0.4

0.7

-2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0

IPFactors

Attribution(%)


68.0

9.2

9.6

0.0 20.0 40.0 60.0 80.0

Idiosyn.Attribution

(%)


17.5

16.0

11.2

0.0 5.0 10.0 15.0 20.0

CountryAttribution

(%)



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Visit the Quantamentals page to read further on factors, positioning, correlations andmore.

Exhibit 32: Historical IP percentile score of Ping An (H)

Note: High Multiple percentile scores imply rich valuation. Integrated is our proxy for Quality - a combination of Growth, Multiple and Financial Returns.

0%

20%

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100%

Jan-

15Fe

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-15

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ay-1

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ay-1

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ct-1

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https://research.gs.com/content/research/themes/quantamentals.html

ESG Overview

This section was contributed by Asia GS SUSTAIN analyst Gabriel Wilson-Otto.

For more detail on our calculation methodology and metrics selected refer to ‘The PM’sGuide to the ESG Revolution‘, April 18, 2017 and ‘Governance and Risk Management -expanding coverage, narrowing focus‘, March 1, 2015.

For more on GS SUSTAIN and the ESG series, visit the page.

Exhibit 33: GS SUSTAIN Environmental, Social & Governance (ESG) Dashboard

ESG Commentary

Calculation methodology and notesOur proprietary ESG scores are based on a quantitative ESG framework that evaluates companies on: (1) Governance; and (2) Environmental & Social metrics (stakeholder management). We use

management.

Our ESG scores aim to flag companies and areas that in our view warrant further investigation, but do not necessarily indicate elevated risk for investors.

We source raw data from a collection of 3rd party data sources. Governance scores shown are the ’Organizational Checks and Balances’ Pillar of our ESG analysis and are ranked vs. global companies in the MSCI ACWI (not sector relative). Environmental & Social scores shown are the ’Stakeholder Management’ Pillar of our ESG analysis and are ranked vs. sector peers in the MSCI ACWI. Scores vs. region are measured relative to the following regions: (a) Asia ex-Japan; (b) Japan; or (c) Australia & New Zealand.

GS SUSTAIN Environmental, Social & Governance (ESG) Overview

Governance - In our Governance framework, Ping An Insurance Group (Ping An) scores at the 21st percentile vs. MSCI ACWI constituents and the 36th percentile vs. Asia ex Japan constituents of the MSCI ACWI. Relative to global peers, Ping An’s governance scores are impacted by a lack of separation between the roles of chairman and CEO and lack of a majority of independent directors.

While not included in our Governance score, we note that Ping An has a 5 member supervisory committee that oversees the board of directors and management of the firm. The supervisory committee has 2 independent members, 1 shareholder representative and 2 employee representatives. The firm’s largest shareholder is Charoen Pokphand Group Company Ltd, with c.10% of total issued shares of the company. The current chairman of the firm, Mr. Ma Mingzhe, is also the CEO of the company.

While not included in our Governance score, we note that Ping An Bank (c.58% owned by Ping An Insurance) raised capital via private placements to Ping An Insurance and other parties from 2013 to 2016. Through common stock private placements, Ping An Bank raised a total of RMB 25 billion (US$ c.4bn) at c.4% discount / c.7% premium to Ping An Bank’s share price in 2013 and 2015, respectively. Ping An Bank also raised c. RMB 20 billion (US$ c.3bn) via preferred share private placement in 2016.

Environmental and Social - Ping An ranked at the 47th percentile vs. MSCI ACWI sector peers and 53rd percentile vs. Asia ex Japan sector peers in our E&S framework. Ping An’s score is supported by the firm’s efforts to implement targets and policies around skills training and development, customer data privacy and integrity, and the avoidance of bribery and corruption. The overall score has been negatively impacted by a lower percentage of female employees relative to sector peers.

Ping An’s CSR report was independently audited and prepared in accordance with local guidelines and reference to GRI reporting standards.

Governance Score Environmental and Social ScorePercentile Rank vs. MSCI ACWI and Regional Peers Percentile Rank vs. MSCI ACWI and Regional Peers

0% 25% 50% 75% 100%

Score vs.Region

Score vs.MSCIACWI

0% 25% 50% 75% 100%

Score vs.Region

Score vs.MSCIACWI


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https://research.gs.com/content/research/en/reports/2017/04/18/ec03407d-8519-4a28-9803-19c3e0dc073e.pdf

https://research.gs.com/content/research/en/reports/2017/04/18/ec03407d-8519-4a28-9803-19c3e0dc073e.pdf

https://research.gs.com/content/research/en/reports/2015/03/01/22ffab98-d5cf-4146-9f39-04947a0a47e8.pdf

https://research.gs.com/content/research/en/reports/2015/03/01/22ffab98-d5cf-4146-9f39-04947a0a47e8.pdf

https://research.gs.com/content/research/subjects/e7f122da-27c6-11df-89b6-00215acf383a.html

Appendix

Exhibit 34: Ping An: Summary Financials2016 2017E 2018E 2019E 2020E (Rmb mn) 2016 2017E 2018E 2019E 2020E

Valuations Profit modelP/B (X) 3.67 2.97 2.41 2.04 1.72 Gross written premiums and policy fees 469,555 600,868 739,100 906,106 1,105,863P/EV (X) 2.21 1.67 1.28 1.04 0.85 Net earned premiums 441,620 564,274 701,764 867,130 1,065,158NBM (X) 15.1 8.2 3.4 0.5 (1.8) Reinsurance income 6,353 8,158 9,022 9,825 10,709P/E (X) 21.29 17.95 13.35 10.53 8.67 Total premium income 447,973 572,432 710,786 876,955 1,075,867Dividend yield (%) 1.0% 1.6% 2.2% 2.7% 3.3% Commission expense 78,754 112,262 137,845 170,530 204,619

G&A expenses 175,090 177,581 205,188 229,567 258,015Per share data (HK$) Claims and benefits 324,814 421,888 515,003 628,465 769,410BVPS 23.71 29.26 36.04 42.66 50.68 Increase in policy reserveEVPS (Reporting) 39.43 52.00 67.80 83.78 102.74 Underwriting profit (130,685) (139,300) (147,249) (151,607) (156,177)EVPS (Re-based) 37.69 49.52 64.42 79.47 97.34 Investment income 115,053 144,307 157,549 173,209 188,280NBVPS 3.14 4.25 5.59 6.98 8.54 Net interest income of banking operations 78,138 77,969 87,429 100,867 116,639EPS 4.09 4.85 6.51 8.26 10.03 Net fees and commission income 35,467 39,187 44,299 51,366 59,551DPS 0.88 1.42 1.89 2.36 2.84 Other income and expenses (3,562) (4,627) (972) 1,541 6,651

Pretax profit 94,411 117,536 141,055 175,376 214,944Per share data (Rmb) Tax 22,043 30,176 29,157 36,275 44,574EVPS (Reporting) 34.88 44.00 54.76 67.67 82.99 Net profit 62,394 76,675 98,476 122,012 148,104EVPS (Re-based) 33.34 41.90 52.03 64.19 78.62 Dividends 13,710 22,439 28,566 34,905 41,864NBVPS 2.78 3.59 4.51 5.64 6.90EPS 3.50 4.19 5.39 6.67 8.10 Balance sheet

Investment assets 3,189,746 3,592,982 3,899,005 4,244,459 4,634,425EVPS growth 15.3% 26.1% 24.5% 23.6% 22.6% Loans to customers 1,458,291 1,703,719 1,914,400 2,188,061 2,493,734NBVPS growth 32.2% 29.3% 25.5% 25.1% 22.3% Total assets 5,576,903 6,264,865 6,790,977 7,421,446 8,287,848EPS growth 17.3% 20.0% 28.4% 23.9% 21.4% Insurance and investment contract liabilities 1,670,403 1,970,049 2,282,954 2,654,340 3,097,004

Customer deposits 1,894,377 2,038,399 2,191,983 2,441,714 2,680,173Factors driving earnings growth Shareholders’ equity 383,449 452,640 532,064 629,910 748,273Gross written premium growth 21.6% 28.0% 23.0% 22.6% 22.0%Net earned premium growth 26.2% 27.8% 24.4% 23.6% 22.8% Life insuranceTotal premium income 24.8% 27.8% 24.2% 23.4% 22.7% Gross written premiums 291,264 385,406 505,305 651,988 829,487Commission expenses - net 55.5% 42.5% 22.8% 23.7% 20.0% Net earned premiums 288,064 381,961 501,768 647,424 823,681G&A expenses 8.4% 1.4% 15.5% 11.9% 12.4% Total premium income (incl. reinsurance) 288,339 382,807 502,758 648,414 824,671Claims and benefits 12.2% 29.9% 22.1% 22.0% 22.4% Commission expenses - net 56,249 81,012 103,432 133,186 163,576Underwriting losses -8.4% 6.6% 5.7% 3.0% 3.0% G&A expenses 59,523 67,050 87,402 103,557 123,177Investment income -14.7% 25.4% 9.2% 9.9% 8.7% Claims and benefits 241,283 316,761 397,507 499,645 627,167Net interest income of banking operations 15.9% -0.2% 12.1% 15.4% 15.6% Underwriting profit (68,716) (82,016) (85,583) (87,974) (89,249)Other income and expenses 11.7% 29.9% -79.0% -258.5% 331.7%Pretax profit 1.1% 24.5% 20.0% 24.3% 22.6% FYP (including deposits) 141,967 181,207 219,271 259,603 308,628Net profit 15.1% 22.9% 28.4% 23.9% 21.4% APE (including deposits) 109,634 151,539 188,697 226,351 271,747

New business value 50,805 65,701 82,463 103,128 126,122Key operating ratios for group Embedded value (Reporting) 637,703 804,304 1,000,996 1,236,968 1,516,976Operating expenses / total premiums 56.67% 50.63% 48.26% 45.62% 43.00%Total benefit payouts / total premiums 72.51% 73.70% 72.46% 71.66% 71.52% P&C insuranceUnderwriting profit / total premiums -29.17% -24.33% -20.72% -17.29% -14.52% Gross written premiums 178,291 215,304 233,795 254,118 276,376Investment yield 3.87% 4.26% 4.21% 4.25% 4.24% Net earned premiums 153,556 182,208 199,996 219,706 241,477Effective tax rate 23.3% 25.7% 20.7% 20.7% 20.7% Total premium income (incl. reinsurance) 159,634 189,510 208,028 228,541 251,196ROA 1.21% 1.29% 1.51% 1.72% 1.89% Commission expenses - net 25,486 33,651 37,053 40,249 44,238ROE 17.4% 18.3% 20.0% 21.0% 21.5% G&A expenses 45,451 46,429 49,331 54,649 60,062Solvency ratio 210% 216% 212% 209% 209% Claims and benefits 83,531 105,077 117,496 128,820 142,243

Underwriting profit 5,166 4,354 4,148 4,823 4,653Key operating ratios for life insuranceGross writtten premium growth 31.2% 32.3% 31.1% 29.0% 27.2% BankingTotal premium income growth 32.8% 32.8% 31.3% 29.0% 27.2% Gross loans 1,475,801 1,703,719 1,914,400 2,188,061 2,493,734FYP growth (including deposits) 34.2% 27.6% 21.0% 18.4% 18.9% Net interest income 76,248 77,313 87,429 100,867 116,639APE growth (including deposits) 36.0% 38.2% 24.5% 20.0% 20.1% Non-interest income 29,585 33,123 37,957 44,129 51,329NB margin (on FYP) (Reporting) 35.8% 36.3% 37.6% 39.7% 40.9% Total operating revenue 105,833 110,436 125,387 144,996 167,968NB margin (on APE) (Reporting) 46.3% 43.4% 43.7% 45.6% 46.4% Operating expenses 32,266 31,582 39,187 45,020 51,069New business value growth 32.2% 29.3% 25.5% 25.1% 22.3% Preprovision operating profit 73,567 78,854 86,200 99,976 116,899Embedded value growth 15.3% 26.1% 24.5% 23.6% 22.6% Provision charges 45,435 49,012 50,983 55,921 59,373

Pretax profit 29,356 30,052 35,217 44,055 57,526Key operating ratios for P&C insuranceGross written premium growth 8.7% 20.8% 8.6% 8.7% 8.8% Breakdown of premium and profitTotal premium income growth 12.5% 18.7% 9.8% 9.9% 9.9% Gross written premiumsUnderwriting profit growth 1.3% -15.7% -4.7% 16.3% -3.5% Life insurance 62% 64% 68% 72% 75%

P&C insurance 38% 36% 32% 28% 25%Expense ratio 41.5% 39.4% 38.7% 38.6% 38.6% Total premium incomeLoss ratio 54.4% 57.7% 58.7% 58.6% 58.9% Life insurance 64% 67% 71% 74% 77%Combined ratio 95.9% 97.1% 97.4% 97.2% 97.5% P&C insurance 36% 33% 29% 26% 23%

Key operating ratios for banking Life insurance 33% 47% 46% 45% 44%Loan growth 24.1% 15.4% 12.4% 14.3% 14.0% P&C insurance 16% 15% 14% 12% 11%Preprovision profit growth 25.9% 7.2% 9.3% 16.0% 16.9% Banking 31% 26% 25% 25% 27%Pretax profit growth 4.2% 2.4% 17.2% 25.1% 30.6% Others 20% 13% 15% 17% 18%NII / average assets 2.79% 2.47% 2.51% 2.60% 2.67% Net profitNon-int income / total operating revenue 28.0% 30.0% 30.3% 30.4% 30.6% Life insurance 36% 52% 55% 54% 54%Cost income ratio 30.5% 28.6% 31.3% 31.0% 30.4% P&C insurance 20% 18% 15% 14% 12%Credit cost 3.41% 3.08% 2.82% 2.73% 2.54% Banking 21% 17% 16% 16% 17%Pretax ROA 1.07% 0.96% 1.01% 1.14% 1.32% Others 23% 13% 14% 16% 17%

Shareholders’ equityROE by division Life insurance 30% 30% 30% 31% 31%Group 17.4% 18.3% 20.0% 21.0% 21.5% P&C insurance 17% 17% 17% 17% 16%

Life insurance 21.9% 32.2% 36.4% 37.3% 37.2% Banking 31% 29% 27% 26% 25%P&C insurance 20.8% 19.3% 18.2% 17.3% 15.9% Others 22% 25% 26% 26% 27%Banking 12.0% 10.6% 11.2% 12.6% 14.5%Others 16.3% 9.9% 11.3% 12.8% 13.4%


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Share prices on page one of this report are as of market close February 27, 2018 -elsewhere they are as of market close February 26, 2018 unless stated otherwise.

Ping An Bank (000001.SZ, closing price as of February 27, 2018 - Rmb12.28)

Views in this report are those of the authoring analysts:

Mancy Sun

+852-2978-6072, [email protected], Goldman Sachs (Asia) L.L.C.

Thomas Wang


Stanley Tian


Dan Cao

+65-6654-5566, [email protected], Goldman Sachs (Singapore) Pte

Exhibit 35: Ping An H and Ping An A on our ex-Japan Conviction List with an upside potential of 30% and 24%, respectivelyValuation comparison table

As of Feb-26-2018 Ticker RatingShare price 12m TP 2017E 2018E 2019E 2020E 2017E 2018E 2019E 2020E 2017E 2018E 2019E 2020E 2017E 2018E 2019E 2020E 2017E 2018E 2019E 2020E 2017E 2018E 2019E 2020E

H-share insurers (HK$)China Life (H) 2628.HK Neutral 23.80 31.70 33% 0.81 0.69 0.62 0.55 (2.53) (4.33) (5.38) (6.25) 1.79 1.56 1.42 1.28 19.1 14.5 11.5 9.8 10% 11% 13% 14% 1.9% 2.4% 3.1% 3.6%Ping An (H) 2318.HK Buy* 87.00 113.00 30% 1.67 1.28 1.04 0.85 8.24 3.44 0.46 (1.84) 2.97 2.41 2.04 1.72 17.9 13.4 10.5 8.7 18% 20% 21% 21% 1.6% 2.2% 2.7% 3.3%CPIC (H) 2601.HK Neutral 39.75 50.90 28% 1.05 0.84 0.72 0.61 0.56 (1.66) (2.96) (4.03) 2.13 1.86 1.69 1.52 18.4 13.6 11.0 9.3 12% 15% 16% 17% 2.9% 3.9% 4.8% 5.7%NCI (H) 1336.HK Buy 49.85 71.90 44% 0.86 0.71 0.61 0.52 (1.70) (3.57) (4.63) (5.50) 1.95 1.64 1.43 1.24 18.3 13.6 10.6 8.4 11% 13% 14% 16% 1.6% 2.2% 2.8% 3.6%Taiping 0966.HK Neutral 31.30 34.90 12% 0.93 0.79 0.67 0.57 (0.90) (2.29) (3.37) (4.33) 1.86 1.63 1.42 1.23 19.2 15.4 12.7 10.8 11% 12% 12% 13% 0.4% 0.5% 0.6% 0.8%PICC Group 1339.HK Sell 4.35 4.75 9% 0.96 0.79 0.69 0.61 (3.00) (14.13) (19.63) (23.99) 1.10 0.93 0.83 0.74 8.8 7.7 7.0 6.6 13% 13% 12% 12% 1.1% 1.3% 1.4% 1.5%PICC 2328.HK Buy 15.86 21.50 36% N/A N/A N/A N/A N/A N/A N/A N/A 1.44 1.21 1.07 0.95 8.9 8.0 7.2 6.6 18% 16% 16% 15% 2.8% 3.1% 3.5% 3.8%Average (H) 27% 1.05 0.85 0.72 0.62 0.11 (3.76) (5.92) (7.66) 1.89 1.61 1.41 1.24 15.8 12.3 10.1 8.6 13% 14% 15% 15% 1.8% 2.2% 2.7% 3.2%A-share insurers (Rmb)China Life (A) 601628.SS Sell 27.75 24.60 -11% 1.12 1.00 0.89 0.79 1.67 0.02 (1.56) (2.91) 2.47 2.26 2.05 1.85 25.7 20.4 16.6 14.1 10% 11% 13% 14% 1.4% 1.7% 2.1% 2.5%Ping An (A) 601318.SS Buy* 70.80 88.00 24% 1.61 1.29 1.05 0.85 7.46 3.56 0.56 (1.77) 2.86 2.43 2.05 1.73 16.9 13.1 10.6 8.7 18% 20% 21% 21% 1.7% 2.2% 2.7% 3.2%CPIC (A) 601601.SS Neutral 42.51 40.80 -4% 1.33 1.12 0.95 0.81 3.66 1.26 (0.55) (2.00) 2.70 2.46 2.23 2.02 22.7 17.6 14.6 12.3 12% 15% 16% 17% 2.3% 3.0% 3.6% 4.3%NCI (A) 601336.SS Neutral 55.88 60.70 9% 1.14 0.98 0.84 0.73 1.69 (0.24) (1.87) (3.14) 2.59 2.28 1.98 1.72 24.2 18.9 14.8 11.7 11% 13% 14% 16% 1.2% 1.6% 2.0% 2.6%Average (A) 4% 1.30 1.10 0.93 0.79 3.6 1.1 (0.9) (2.5) 2.65 2.36 2.08 1.83 22.4 17.5 14.1 11.7 13% 15% 16% 17% 1.7% 2.1% 2.6% 3.2%AIA Group 1299.HK Buy* 63.20 76.00 20% 1.99 1.77 1.56 1.38 13.72 10.15 6.98 4.40 2.43 2.24 2.05 1.88 16.9 18.8 16.7 14.8 15% 12% 13% 13% 1.6% 1.9% 2.3% 2.7%

* denotes stock is on our regional Conviction List.

Potential upside/

downside

P/EV(X) NBM (X) P/B (X) P/E (X) ROE Div. yield


Exhibit 36: Ping An H is trading at 1.2X P/EV, vs historical mean 1.3XPing An H 12-month rolling forward P/EV (X)

Exhibit 37: Ping An A is trading at 1.2X P/EV, vs historical mean 1.6XPing An A 12-month rolling forward P/EV (X)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Jan-

05Ju

l-05

Jan-

06Ju

l-06

Jan-

07Ju

l-07

Jan-

08Ju

l-08

Jan-

09Ju

l-09

Jan-

10Ju

l-10

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11Ju

l-11

Jan-

12Ju

l-12

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13Ju

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Jan-

14Ju

l-14

Jan-

15Ju

l-15

Jan-

16Ju

l-16

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17Ju

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Jan-

18

Ping An (H) -1SD Mean +1SD

0.0

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2.0

3.0

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7.0

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-07

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-08

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-10

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-11

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-13

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-14

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14

Mar

-15

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15

Mar

-16

Sep-

16

Mar

-17

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Ping An (A) -1SD Mean +1SD

Source: Datastream, Goldman Sachs Global Investment Research Source: Datastream, Goldman Sachs Global Investment Research

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MSCI disclosure

All MSCI data used in this report is the exclusive property of MSCI, Inc. (MSCI). Withoutprior written permission of MSCI, this information and any other MSCI intellectualproperty may not be reproduced or re-disseminated in any form and may not be used tocreate any financial instruments or products or any indices. This information is providedon an “as is” basis, and the user of this information assumes the entire risk of any usemade of this information. Neither MSCI, any of its affiliates nor any third party involvedin, or related to, computing or compiling the data makes any express or impliedwarranties or representations with respect to this information (or the results to beobtained by the use thereof), and MSCI, its affiliates and any such third party herebyexpressly disclaim all warranties of originality, accuracy, completeness, merchantabilityor fitness for a particular purpose with respect to any of this information. Withoutlimiting any of the foregoing, in no event shall MSCI, any of its affiliates or any thirdparty involved in, or related to, computing or compiling the data have any liability for anydirect, indirect, special, punitive, consequential or any other damages (including lostprofits) even if notified of the possibility of such damages. MSCI and the MSCI indexesare service marks of MSCI and its affiliates. The Global Industry Classification Standard(GICS) were developed by and is the exclusive property of MSCI and Standard & Poor’s.GICS is a service mark of MSCI and S&P and has been licensed for use by The GoldmanSachs Group, Inc.

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Disclosure Appendix

Reg ACWe, Mancy Sun, Thomas Wang, Stanley Tian and Dan Cao, hereby certify that all of the views expressed in this report accurately reflect our personalviews about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly orindirectly, related to the specific recommendations or views expressed in this report.

Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs’ Global Investment Research division.

GS Factor ProfileThe Goldman Sachs Factor Profile provides investment context for a stock by comparing key attributes to the market (i.e. our coverage universe) and itssector peers. The four key attributes depicted are: Growth, Financial Returns, Multiple (e.g. valuation) and Integrated (a composite of Growth, FinancialReturns and Multiple). Growth, Financial Returns and Multiple are calculated by using normalized ranks for specific metrics for each stock. Thenormalized ranks for the metrics are then averaged and converted into percentiles for the relevant attribute. The precise calculation of each metric mayvary depending on the fiscal year, industry and region, but the standard approach is as follows:

Growth is based on a stock’s forward-looking sales growth, EBITDA growth and EPS growth (for financial stocks, only EPS and sales growth), with ahigher percentile indicating a higher growth company. Financial Returns is based on a stock’s forward-looking ROE, ROCE and CROCI (for financialstocks, only ROE), with a higher percentile indicating a company with higher financial returns. Multiple is based on a stock’s forward-looking P/E, P/B,price/dividend (P/D), EV/EBITDA, EV/FCF and EV/Debt Adjusted Cash Flow (DACF) (for financial stocks, only P/E, P/B and P/D), with a higher percentileindicating a stock trading at a higher multiple. The Integrated percentile is calculated as the average of the Growth percentile, Financial Returnspercentile and (100% - Multiple percentile).

Financial Returns and Multiple use the Goldman Sachs analyst forecasts at the fiscal year-end at least three quarters in the future. Growth uses inputsfor the fiscal year at least seven quarters in the future compared with the year at least three quarters in the future (on a per-share basis for all metrics).

For a more detailed description of how we calculate the GS Factor Profile, please contact your GS representative.

M&A RankAcross our global coverage, we examine stocks using an M&A framework, considering both qualitative factors and quantitative factors (which may varyacross sectors and regions) to incorporate the potential that certain companies could be acquired. We then assign a M&A rank as a means of scoringcompanies under our rated coverage from 1 to 3, with 1 representing high (30%-50%) probability of the company becoming an acquisition target, 2representing medium (15%-30%) probability and 3 representing low (0%-15%) probability. For companies ranked 1 or 2, in line with our standarddepartmental guidelines we incorporate an M&A component into our target price. M&A rank of 3 is considered immaterial and therefore does notfactor into our price target, and may or may not be discussed in research.

QuantumQuantum is Goldman Sachs’ proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used forin-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.

GS SUSTAINGS SUSTAIN is a global investment strategy focused on the generation of long-term alpha through identifying high quality industry leaders. The GSSUSTAIN 50 list includes leaders we believe to be well positioned to deliver long-term outperformance through superior returns on capital, sustainablecompetitive advantage and effective management of ESG risks vs. global industry peers. Candidates are selected largely on a combination ofquantifiable analysis of these three aspects of corporate performance.

DisclosuresCoverage group(s) of stocks by primary analyst(s)Mancy Sun: A-share Insurance, Greater China Insurance, Hong Kong Insurance. Thomas Wang: India Insurance, Taiwan Banks, Taiwan Insurance.

A-share Insurance: China Life Insurance Co. (A), China Pacific Insurance (A), New China Life Insurance (A), Ping An Insurance Group (A).

Greater China Insurance: China Life Insurance Co. (H), China Pacific Insurance (H), China Taiping Insurance Holdings, New China Life Insurance (H),PICC Group, PICC Property and Casualty Co., Ping An Insurance Group (H).

Hong Kong Insurance: AIA Group.

India Insurance: Bajaj Finserv Ltd., ICICI Prudential Life Insurance Co..

Taiwan Banks: Cathay Financial Holding, Chailease Holdings, CTBC Financial Holdings, E.Sun Financial Holding, First Financial Holdings, Fubon FinancialHoldings, Mega Financial Holdings, Shin Kong Financial Holdings, Taishin Financial Holdings, Yuanta FHC.

Taiwan Insurance: China Life Insurance Co..

Company-specific regulatory disclosuresThe following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, “Goldman Sachs”) and companies coveredby the Global Investment Research Division of Goldman Sachs and referred to in this research.

Goldman Sachs beneficially owned 1% or more of common equity (excluding positions managed by affiliates and business units not required to beaggregated under US securities law) as of the month end preceding this report: Ping An Insurance Group (A) (Rmb69.81) and Ping An Insurance Group(H) (HK$85.35)

Goldman Sachs has received compensation for investment banking services in the past 12 months: Ping An Insurance Group (A) (Rmb69.81) and PingAn Insurance Group (H) (HK$85.35)

Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Ping An Insurance Group(A) (Rmb69.81) and Ping An Insurance Group (H) (HK$85.35)

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Goldman Sachs had an investment banking services client relationship during the past 12 months with: Ping An Insurance Group (A) (Rmb69.81) andPing An Insurance Group (H) (HK$85.35)

Goldman Sachs had a non-securities services client relationship during the past 12 months with: Ping An Insurance Group (A) (Rmb69.81) and Ping AnInsurance Group (H) (HK$85.35)

Goldman Sachs makes a market in the securities or derivatives thereof: Ping An Insurance Group (A) (Rmb69.81) and Ping An Insurance Group (H)(HK$85.35)

Distribution of ratings/investment banking relationshipsGoldman Sachs Investment Research global Equity coverage universe

As of January 1, 2018, Goldman Sachs Global Investment Research had investment ratings on 2,867 equity securities. Goldman Sachs assigns stocksas Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell forthe purposes of the above disclosure required by the FINRA Rules. See ‘Ratings, Coverage groups and views and related definitions’ below. TheInvestment Banking Relationships chart reflects the percentage of subject companies within each rating category for whom Goldman Sachs hasprovided investment banking services within the previous twelve months.

Price target and rating history chart(s)

Regulatory disclosuresDisclosures required by United States laws and regulationsSee company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manager orco-manager in a pending transaction; 1% or other ownership; compensation for certain services; types of client relationships; managed/co-managedpublic offerings in prior periods; directorships; for equity securities, market making and/or specialist role. Goldman Sachs trades or may trade as aprincipal in debt securities (or in related derivatives) of issuers discussed in this report.

The following are additional required disclosures: Ownership and material conflicts of interest: Goldman Sachs policy prohibits its analysts,professionals reporting to analysts and members of their households from owning securities of any company in the analyst’s area of coverage.Analyst compensation: Analysts are paid in part based on the profitability of Goldman Sachs, which includes investment banking revenues. Analystas officer or director: Goldman Sachs policy generally prohibits its analysts, persons reporting to analysts or members of their households fromserving as an officer, director or advisor of any company in the analyst’s area of coverage. Non-U.S. Analysts: Non-U.S. analysts may not beassociated persons of Goldman Sachs & Co. LLC and therefore may not be subject to FINRA Rule 2241 or FINRA Rule 2242 restrictions oncommunications with subject company, public appearances and trading securities held by the analysts.

Distribution of ratings: See the distribution of ratings disclosure above. Price chart: See the price chart, with changes of ratings and price targets inprior periods, above, or, if electronic format or if with respect to multiple companies which are the subject of this report, on the Goldman Sachswebsite at http://www.gs.com/research/hedge.html.

Additional disclosures required under the laws and regulations of jurisdictions other than the United StatesThe following disclosures are those required by the jurisdiction indicated, except to the extent already made above pursuant to United States laws andregulations. Australia: Goldman Sachs Australia Pty Ltd and its affiliates are not authorised deposit-taking institutions (as that term is defined in theBanking Act 1959 (Cth)) in Australia and do not provide banking services, nor carry on a banking business, in Australia. This research, and any access toit, is intended only for “wholesale clients” within the meaning of the Australian Corporations Act, unless otherwise agreed by Goldman Sachs. Inproducing research reports, members of the Global Investment Research Division of Goldman Sachs Australia may attend site visits and othermeetings hosted by the companies and other entities which are the subject of its research reports. In some instances the costs of such site visits ormeetings may be met in part or in whole by the issuers concerned if Goldman Sachs Australia considers it is appropriate and reasonable in the specificcircumstances relating to the site visit or meeting. To the extent that the contents of this document contains any financial product advice, it is generaladvice only and has been prepared by Goldman Sachs without taking into account a client’s objectives, financial situation or needs. A client should,before acting on any such advice, consider the appropriateness of the advice having regard to the client’s own objectives, financial situation and needs.Brazil: Disclosure information in relation to CVM Instruction 483 is available at http://www.gs.com/worldwide/brazil/area/gir/index.html. Where

Rating Distribution Investment Banking Relationships

Buy Hold Sell Buy Hold Sell

Global 33% 54% 13% 63% 57% 52%

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applicable, the Brazil-registered analyst primarily responsible for the content of this research report, as defined in Article 16 of CVM Instruction 483, isthe first author named at the beginning of this report, unless indicated otherwise at the end of the text. Canada: Goldman Sachs Canada Inc. is anaffiliate of The Goldman Sachs Group Inc. and therefore is included in the company specific disclosures relating to Goldman Sachs (as defined above).Goldman Sachs Canada Inc. has approved of, and agreed to take responsibility for, this research report in Canada if and to the extent that GoldmanSachs Canada Inc. disseminates this research report to its clients. Hong Kong: Further information on the securities of covered companies referred toin this research may be obtained on request from Goldman Sachs (Asia) L.L.C. India: Further information on the subject company or companiesreferred to in this research may be obtained from Goldman Sachs (India) Securities Private Limited, Research Analyst - SEBI Registration NumberINH000001493, 951-A, Rational House, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025, India, Corporate Identity NumberU74140MH2006FTC160634, Phone +91 22 6616 9000, Fax +91 22 6616 9001. Goldman Sachs may beneficially own 1% or more of the securities (assuch term is defined in clause 2 (h) the Indian Securities Contracts (Regulation) Act, 1956) of the subject company or companies referred to in thisresearch report. Japan: See below. Korea: Further information on the subject company or companies referred to in this research may be obtainedfrom Goldman Sachs (Asia) L.L.C., Seoul Branch. New Zealand: Goldman Sachs New Zealand Limited and its affiliates are neither “registered banks”nor “deposit takers” (as defined in the Reserve Bank of New Zealand Act 1989) in New Zealand. This research, and any access to it, is intended for“wholesale clients” (as defined in the Financial Advisers Act 2008) unless otherwise agreed by Goldman Sachs. Russia: Research reports distributedin the Russian Federation are not advertising as defined in the Russian legislation, but are information and analysis not having product promotion astheir main purpose and do not provide appraisal within the meaning of the Russian legislation on appraisal activity. Singapore: Further information onthe covered companies referred to in this research may be obtained from Goldman Sachs (Singapore) Pte. (Company Number: 198602165W). Taiwan:This material is for reference only and must not be reprinted without permission. Investors should carefully consider their own investment risk.Investment results are the responsibility of the individual investor. United Kingdom: Persons who would be categorized as retail clients in the UnitedKingdom, as such term is defined in the rules of the Financial Conduct Authority, should read this research in conjunction with prior Goldman Sachsresearch on the covered companies referred to herein and should refer to the risk warnings that have been sent to them by Goldman SachsInternational. A copy of these risks warnings, and a glossary of certain financial terms used in this report, are available from Goldman SachsInternational on request.

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Ratings, coverage groups and views and related definitionsBuy (B), Neutral (N), Sell (S) -Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. Being assigned a Buy orSell on an Investment List is determined by a stock’s total return potential relative to its coverage. Any stock not assigned as a Buy or a Sell on anInvestment List with an active rating (i.e., a stock that is not Rating Suspended, Not Rated, Coverage Suspended or Not Covered), is deemed Neutral.Each regional Investment Review Committee manages various regional Investment Lists to a global guideline of 25%-35% of stocks as Buy and10%-15% of stocks as Sell; however, the distribution of Buys and Sells in any particular analyst’s coverage group may vary as determined by theregional Investment Review Committee. Additionally, each Investment Review Committee manages Regional Conviction lists, which representinvestment recommendations focused on the size of the total return potential and/or the likelihood of the realization of the return across theirrespective areas of coverage. The addition or removal of stocks from such Conviction lists do not represent a change in the analysts’ investment ratingfor such stocks.

Total return potential represents the upside or downside differential between the current share price and the price target, including all paid oranticipated dividends, expected during the time horizon associated with the price target. Price targets are required for all covered stocks. The totalreturn potential, price target and associated time horizon are stated in each report adding or reiterating an Investment List membership.

Coverage groups and views: A list of all stocks in each coverage group is available by primary analyst, stock and coverage group athttp://www.gs.com/research/hedge.html. The analyst assigns one of the following coverage views which represents the analyst’s investment outlookon the coverage group relative to the group’s historical fundamentals and/or valuation. Attractive (A). The investment outlook over the following 12months is favorable relative to the coverage group’s historical fundamentals and/or valuation. Neutral (N). The investment outlook over the following12 months is neutral relative to the coverage group’s historical fundamentals and/or valuation. Cautious (C). The investment outlook over the following12 months is unfavorable relative to the coverage group’s historical fundamentals and/or valuation.

Not Rated (NR). The investment rating and target price have been removed pursuant to Goldman Sachs policy when Goldman Sachs is acting in anadvisory capacity in a merger or strategic transaction involving this company and in certain other circumstances. Rating Suspended (RS). GoldmanSachs Research has suspended the investment rating and price target for this stock, because there is not a sufficient fundamental basis fordetermining, or there are legal, regulatory or policy constraints around publishing, an investment rating or target. The previous investment rating andprice target, if any, are no longer in effect for this stock and should not be relied upon. Coverage Suspended (CS). Goldman Sachs has suspendedcoverage of this company. Not Covered (NC). Goldman Sachs does not cover this company. Not Available or Not Applicable (NA). The informationis not available for display or is not applicable. Not Meaningful (NM). The information is not meaningful and is therefore excluded.

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General disclosuresThis research is for our clients only. Other than disclosures relating to Goldman Sachs, this research is based on current public information that weconsider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates andforecasts contained herein are as of the date hereof and are subject to change without prior notification. We seek to update our research asappropriate, but various regulations may prevent us from doing so. Other than certain industry reports published on a periodic basis, the large majorityof reports are published at irregular intervals as appropriate in the analyst’s judgment.

Goldman Sachs conducts a global full-service, integrated investment banking, investment management, and brokerage business. We have investmentbanking and other business relationships with a substantial percentage of the companies covered by our Global Investment Research Division.Goldman Sachs & Co. LLC, the United States broker dealer, is a member of SIPC (http://www.sipc.org).

Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients and principaltrading desks that reflect opinions that are contrary to the opinions expressed in this research. Our asset management area, principal trading desks andinvesting businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research.

The analysts named in this report may have from time to time discussed with our clients, including Goldman Sachs salespersons and traders, or maydiscuss in this report, trading strategies that reference catalysts or events that may have a near-term impact on the market price of the equity securitiesdiscussed in this report, which impact may be directionally counter to the analyst’s published price target expectations for such stocks. Any suchtrading strategies are distinct from and do not affect the analyst’s fundamental equity rating for such stocks, which rating reflects a stock’s returnpotential relative to its coverage group as described herein.

We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in, actas principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.

The views attributed to third party presenters at Goldman Sachs arranged conferences, including individuals from other parts of Goldman Sachs, do notnecessarily reflect those of Global Investment Research and are not an official view of Goldman Sachs.

Any third party referenced herein, including any salespeople, traders and other professionals or members of their household, may have positions in theproducts mentioned that are inconsistent with the views expressed by analysts named in this report.

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Documents

Ping An Insurance Group (2318.HK)xqdoc.imedao.com/161e57536c4a91553fe3f473.pdf · Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs