Ping An to Counter Epidemic With Tech as Slowdown Saps Profit

(Bloomberg) -- Ping An Insurance (Group) Co., China’s largest insurer by market value, says it can counter the impact from the nation’s deadly coronavirus outbreak with its technology prowess even as income from that business slumps.

The Shenzhen-based company has moved all its life-insurance activities, from agent training and hiring to client interaction, online because the epidemic has disrupted any face-to-face communication. Many banking services have also resumed, but over the internet, Ping An President Xie Yonglin told reporters during a post-earnings conference call Friday.

“The impact is definitely there, but we’re using technology and our efforts to minimize such impact,” he said.

The epidemic, which has claimed more than 2,440 lives across China, adds pressure on Ping An’s management team, already trying to cope with slowing growth in the firm’s core life insurance business. Its agent force is also shrinking as it adjusts its product mix toward higher-margin policies that require more expertise to sell.

Net income for last year missed estimates, while the growth in value of new business, a gauge of profitability of new life policies sold, slipped to 5% from 7.3% in 2018, full-year results released Thursday showed.

‘Big Impact’

The epidemic will have a “very big impact” on life insurance sales through agents in the first quarter, particularly complicated products that typically require personal communication before any contract can be signed, Chief Insurance Business Officer Lu Min said, without giving specific estimates. The company is providing help including financial support to its one million-strong agent force to get them through this difficult time as commissions tumble, he added.

Analysts from Daiwa Capital Markets Hong Kong Ltd. to CCB International Holdings Ltd. are forecasting a further slowdown in new business value this year, with Daiwa’s Leon Qi predicting a double-digit decline in the first quarter.

Still, Lu said more people are participating in Ping An’s online job seminars for agent hiring than in regular times, and agents are spending more time on training, giving him hope the business can return to a normal level in the second half after the outbreak is contained.

Ping An has plowed billions of dollars into technology research over the past decade, and has been selling fintech and health-tech products from facial recognition to blockchain solutions. While operating profit from that business expanded quickly since the unit turned profitable in 2017, it slumped 40% for the 12 months ended Dec. 31 as costs jumped.

Tech Units

That decline raises “questions about the sustainability of its tech investments,” Daiwa’s Qi said. “We see the business models in Ping An’s technology business as not yet matured” and expect them to cause ongoing volatility to the group, he said.

Investors wanting some exposure to Ping An should invest selectively in some of its listed tech subsidiaries with proven business models and high barriers to entry, “instead of taking a blanket view on Ping An’s technology story,” Qi said.

Co-CEO Jessica Tan said management pays more attention to technology revenue, which expanded 27% last year. “Revenue and scale is more important,” she said on Friday’s conference call.

While new business value is likely to suffer in the first half, it should be able to resume momentum next year, Xie said. That’s because Ping An plans to use 2020 to accelerate the digitalization of its operations and optimize its management models through technology, he said.

“Ping An has accumulated a lot of technological capabilities, but we needed a catalyst,” he said in an interview.

To contact Bloomberg News staff for this story: Zhang Dingmin in Beijing at dzhang14@bloomberg.net

To contact the editors responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net, Peter Vercoe

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With assistance from Bloomberg