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Ping An Net Misses Estimates as Technology Income Drops
Ping An Profit Misses Estimates as Technology Revenue Drops
20 Feb 2020, 06:42 PM IST
(Bloomberg) --
Ping An Insurance (Group) Co., China’s largest insurer by market value, reported results for last year that missed analyst estimates, although profit jumped 39% as a stock-market rally and tax relief helped fuel earnings growth.
- Net income for the 12-month period ended Dec. 31 climbed to 149.4 billion yuan ($21.3 billion), from 107.4 billion yuan a year earlier, the company said in an exchange filing after market close on Thursday. That trails the 157.3 billion yuan average estimate of 21 analysts surveyed by Bloomberg.
- Although Ping An has plowed billions of dollars into tech -- and senior management has used that to argue for a higher stock valuation -- operating profit from Ping An’s fintech and health-tech businesses, which sell products from facial recognition to blockchain solutions, slumped 40% to 4.7 billion yuan from 7.7 billion yuan in 2018
- At Lufax, Ping An’s online wealth management and retail lending platform, customer assets under management dropped by 6.1% “due to the asset portfolio adjustment and restrictions on consumer finance products,” Ping An said. Wealth management transaction volumes fell by almost 30%
- Within customer assets under management, consumer finance was hit the hardest, with its assets under management plunging 45%. Ping An said that category was “greatly affected” due to regulatory requirements.
Key Insights
- Stripping out short-term investment volatility and one-off items, the result shows growth momentum at Ping An lost some steam. Operating profit, which Ping An says better reflects its performance, climbed 18.1%, compared to 19% in the previous year
- Growth in the value of new business, a gauge of the profitability of new life policies sold, slowed to 5% from 7.3% in 2018. That’s going to put more pressure on management, with analysts from Daiwa Capital Markets Hong Kong Ltd. to CCB International Holdings Ltd. forecasting a further slowdown in the key indicator this year as the coronavirus hurts sales of higher-value products
- Operating profit per customer, which the company says is a better indicator for ascertaining its potential as a technology provider instead of a financial firm, rose 13%, down slightly from 14% the previous year. And total revenue from Ping An’s tech business rose 27%, underpinning potential
- Daiwa’s Leon Qi last week downgraded Ping An to underperform from hold, saying the insurer sometimes prioritizes cross-selling its fintech products “in order to achieve operating and financial targets for its fintech” units, at the expense of life insurance. He expects a poor first quarter with the value of new business falling by double digits versus the first three months of 2019 as online sales of low-margin policies struggle to offset the epidemic’s impact on protection products sold via agents on the ground
- Third-party agencies are expecting significant declines in insurance sales for February. Business quickly dried up in late January when Wuhan, the epicenter of the outbreak, was put on lockdown, Shanghai-based Minder Insurance Brokers said
- Investment income more than tripled to 101.7 billion yuan, as a 22% gain in the Shanghai Composite Index in 2019 bolstered returns from its stock holdings
Market Reaction
- Ping An rose 0.6% Thursday to HK$91.60 in Hong Kong ahead of the results. That trims this year’s decline to 0.5%
Get More
- China Insurers’ Investments Hit as Virus Outbreak Fells Yields
- China Life Prelim FY Net 57B-59.3B Yuan; Est. 59.5B Yuan (1)
To contact Bloomberg News staff for this story: Zhang Dingmin in Beijing at dzhang14@bloomberg.net
To contact the editor responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net
©2020 Bloomberg L.P.
With assistance from Bloomberg
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