Confident on 2017 outlook. Ping An held a conference call this afternoon to update their 3Q16performance. Management is satisfied with their performance so far in 2016,and is confident on 2017 outlook. Key takeaways are as follow:On life insurance, the strong net profit growth in 3Q16 (60+% yoy) was mainlyattributable to 1) a better equity market, 2) profit contribution from businessacquired in 2015 and 1H16, and 3) experience gains on better actualexperience than assumptions. Management attributed the strong 3Q16 VNBgrowth to higher margin products and improvement in product mix, whichshould be a sustainable trend going forward. In terms of the plans for 2017jumpstart sales, the strategy will be similar to previous years with focus onsavings products in 1Q. The management noted the steady agency expansion(+20+% YTD with agent number reaching 1.1-1.2mn) will bode well forbusiness growth in 2017. On P&C insurance, the company attributed the improvement in 3Q16underwriting to 1) slight improvement in auto insurance and 2) better-thanindustryperformance of properties insurance, which also saw someimprovement vs. last year. Overall, the combined ratio for 2016 should berelatively stable vs. last year. Ping An has shifted some guarantee insurancebusiness back to P&C (however in different business model), which explainedthe pickup in non-auto premium growth in 3Q16 (+12.0% vs. -32.4% in 1H16). On investments, the strong net investment yield of 6.0% in 9M16 was mainlyboosted by dividend income from funds, which may not be sustainable. Giventhe low rate environment, the company expects some downward pressure onnet investment yield going forward. However, management expects thedecline to be gradual given 1) early allocation to long-term assets to lock inhigh yield 2-3 years ago, 2) new money allocation to long-term bond (govtbond and credit bonds), high-dividend blue-chip stocks, funds and preferredshares. The current new money yield is ~3% (down from 4+% at the beginningof the year). The company expects to increase allocation to overseasinvestments for higher yields. On Ping An Bank, management noted they have successfully completed thefirst phase of infrastructure build-out catering to serve the needs of retailclients in 2013-15. Starting from 2016, PAB will conduct more extensivemigration from corporate to retail business and aim to reach 100m customerby end-18 and to achieve >50% revenue contribution from retail business by2020 (currently ~30%).

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.

News Ping An released a profit alert today indicating that its 1H15 net profit willincrease by ~62% yoy thanks to the stable development of each businesssegment and yoy increase in investment yields. This implies a 2Q15 net profitof Rmb14,642mn (+39% yoy, vs. +85% yoy in 1Q15) and 1H15 net profit ofRmb34,606mn. It accounts for 76% of our 2015 full year estimate and 65% ofBloomberg consensus. DB view We believe the substantial growth in net profit should be expected by themarket given Ping An’s strong 1Q15 yoy growth of 85%. We noted that PingAn realized most of its investment gains in 1Q15, resulting in higher 1Q15growth than 2Q15 (+39%) while CPIC realized most in 2Q15, leading to higher2Q15 growth of +72% (vs. +53% in 1Q15). We maintain our Buy rating on Ping An – A with the stock currently trading at1.4x 2015E P/EV and 4.2x 2015E NB multiples assuming 0% A-share gains. Webelieve its diversified business model and continuous focus on internet financestrategy are likely to generate synergies in the long run.