Ping An Boosted as Insurer Sees Limit to Developer Losses

Ping An Insurance (Group) Co. signaled the worst of its hit from a troubled property developer may be over after impairments caused profit to drop in the first half.

China’s largest insurer by market value may spare additional impairment on its exposure to China Fortune Land Development Co., Chief Financial Officer Jason Yao said at an earnings conference Friday. The investment erased 20.8 billion yuan ($3.2 billion) from net profit in the first six months, more than double the toll announced in April, results showed Thursday.

Ping An may even claw back some of the losses this year if the debt situation of the developer improves, Yao said. The insurer said it will continue to work with various parties to resolve the “debt crisis” of China Fortune, which earlier this year defaulted on a $530 million dollar bond, becoming the nation’s first real estate firm to suffer a repayment failure since Beijing tightened controls of the debt-laden sector last year. Ping An holds a 25% stake, according to Bloomberg data.

“The drag from China Fortune investments may ease in the second half,” said Steven Lam, a Hong Kong-based Bloomberg Intelligence analyst. “Ping An already set aside 36 billion yuan for losses, accounting for the bulk of its exposure,” he said.

Operating profit, which the insurer says better reflects performance by stripping out short-term investment volatilities and one-time items, rose 10% for the six months ended June 30.  That indicator beat market consensus compiled by the company by 4%, according to its Chief Capital Markets Officer James Garner. Net income dropped 16% to 58 billion yuan.

In a move that may lift investor confidence, Ping An also said it plans to buy back up to 10 billion yuan of Shanghai-listed A shares.

Ping An rose 3% to HK$64 in Hong Kong on Friday, trimming this year’s decline to 33%. 

“Ping An attaches great importance to investment risks caused by the debt crisis of China Fortune,” the company said Thursday, adding it had organized “comprehensive self-examinations and self-corrections in the departments and subsidiaries concerned.” 

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.