Ping An Profit Rises on Higher Bank Revenue, Premium Income

Aug 20, 2014 5:19 am ET

(Updates with executives’ comments in sixth and eighth paragraphs, closes share price in seventh.)

Aug. 20 (Bloomberg) -- Ping An Insurance (Group) Co., China’s second-largest insurer, said first-half profit grew 19 percent as premium income climbed and banking revenue increased.

Net income rose to 21.4 billion yuan ($3.5 billion), or a diluted 2.55 yuan a share, from 17.9 billion yuan, or 2.26 yuan, a year earlier, the Shenzhen-based company said in a statement to the Hong Kong stock exchange yesterday.

A 34 percent profit increase at unit Ping An Bank Co. and higher premiums earned helped Chairman Peter Ma boost profit. Smaller New China Life Insurance Co. said last month that net income for the first half may surge 60 percent due to bigger investment returns and premium growth.

“With its strong diversified financial model, Ping An’s life insurance had a strong growth and managed the cost control well,” Shenzhen-based analysts at Huatai Securities Co. led by Luo Yi wrote in a report today. The “outlook of the company in the second half is positive and the shares valuation is still low.”

Total investment income fell 12 percent even as net investment income, comprised mainly of interest and dividends, climbed 23 percent. Impairment losses from investments surged to 7.61 billion yuan from 1.05 billion yuan, the company said.

Stock Falls

The insurer recognized declines in the market value of some stock holdings, especially bank shares, in the first half, “relieving pressure in the second half and in the future by a lot,” Chief Financial Officer Jason Yao told reporters in Hong Kong today. “We’re full of confidence for performance results in the second half.”

The benchmark Shanghai Composite Index rallied 3.5 percent in the year ended June 30. The gauge fell 3.2 percent in the first half of this year, before rebounding 9.4 percent since June 30. Ping An shares closed 0.7 percent lower at HK$65.35 in Hong Kong.

Ping An will expand the share of overseas investments, so far totaling more than 30 billion yuan, in its portfolio in the next three to five years to diversify risks and as expectations for further yuan gains abate, Chief Investment Officer Timothy Chan said at a briefing in Shanghai.

Rising Premiums

Ping An Bank said last week that first-half profit rose to 10 billion yuan after fee income doubled and loan margins widened. Ping An Insurance said last month it would invest in the unit’s planned private placement and sale of preferred shares, which aims to raise a combined 30 billion yuan to replenish capital.

Net premiums earned climbed 22 percent, the company said. New business value, which measures the profitability of new life policies sold, rose 17 percent, according to the statement.

China’s life insurers will report “solid” earnings for the first half, partly driven by the sector’s 23 percent jump in gross premiums, Sanford C. Bernstein Co. analysts led by Hong Kong-based Linda Sun-Mattison wrote in a report Aug. 5.

The combined ratio of Ping An’s non-life insurance unit, used to measure claims and expenses as a percentage of premiums earned, dropped to 94.4 percent from 95.5 percent a year earlier, according to the statement. The unit’s profitability can improve further in the second half, Yao said without elaborating.

--With assistance from Helen Sun and Bonnie Cao in Shanghai and Kana Nishizawa in Hong Kong.