Ping An Insurance

Ping An profit rises to 7.1b yuan on banking gains

PUBLISHED : Wednesday, 30 April, 2008, 12:00am
UPDATED : Wednesday, 30 April, 2008, 12:00am

Stock market slide hits investments

Ping An Insurance (Group), the nation's second-largest life insurer, said first-quarter net profit gained 23.62 per cent to 7.1 billion yuan (HK$7.9 billion) as its banking operations helped offset losses from investments in the stock market.

Gross income increased 6.29 per cent to 35.59 billion yuan, based on mainland accounting standards, the Shenzhen-based insurer said.

Insurers, which last year saw income soar on the back of a surging stock market, are now reeling from a slump in equities. The mainland market slid 34 per cent last quarter, its worst performance since 1992.

Net profit at Ping An jumped 140 per cent to 18.7 billion yuan last year, largely fuelled by stock investments. The insurer last year derived about 38 per cent of its revenue from equity gains, a feat unlikely to be repeated as equities continue to drop.

Analysts had expected Ping An's profit growth in the first quarter to be even weaker than its larger rival China Life because of its investment in blue-chip stocks that were hit the hardest in the market downturn.

The firm's investment income fell 34.84 per cent to 8.02 billion yuan while its equity investment value dropped 21.58 per cent to 67.12 billion yuan.

By comparison, China Life on Sunday reported a 9.9 per cent drop in investment income and an unexpected 61 per cent dive in profit.

The results 'reflect Ping An's ability to withstand poor market sentiment due to its diversified business model', said Sun Hung Kai Financial strategist Castor Pang Wai-sun.

The insurer's banking business contributed 1.67 billion yuan in interest income, compared with 971 million yuan a year earlier. Loans and advances to customers grew 6.33 per cent to 67.12 billion yuan.

The insurance giant branched out into commercial banking in 2006 when it acquired Shenzhen Commercial Bank.

It aims to build insurance, banking and asset management into three equally important lines of business over the next decade.

'For Ping An, the diversified business model and the long-term business plan are more attractive than China Life,' said JP Morgan in a research report.

The company's life insurance business still provided a solid income stream, with gross written premiums, policy fees and premium deposits amounting to 28.22 billion yuan, up 33.3 per cent.

Premiums from property and casualty insurance increased 42.4 per cent to 7.58 billion yuan.

Ping An said it faced challenges, including a rise in the claims-to-premium ratio for its property and casualty insurance business following the devastating snowstorms in parts of the mainland earlier this year.

Shares of Ping An rose 2.55 per cent to HK$72.50 in Hong Kong yesterday while its A shares closed 0.54 per cent higher at 65.05 yuan in Shanghai.

Bankable asset

The insurer's banking division helped first-quarter profit rise: 23.6%