China’s Ping An Insurance posts slim profit growth as investments take a hit
Ping An Insurance(Group) reported a net profit growth of nearly 4 per cent for the first quarter of 2016, as headwind from the mainland capital markets continued to buffet mainland Chinese insurers.
The company’s net profit stood at 20.70 billion yuan (HK$24.73 billion), up 3.7 per cent over the same period last year. New business value (NBV) of life insurance surged by 38.3 per cent to 13.08 billion yuan, according to its filing to the Hong Kong stock exchange on Tuesday evening, after the market closed.
The Ping An stock inched up 0.27 per cent to close at HK$37 in Hong Kong.
Affected by equity market volatility, total investment income for the insurance funds portfolio came down 36.4 per cent to 20.45 billion yuan in the first quarter.
Leon Qi, an analyst at Daiwa Securities, said China-based companies are facing short-term accounting profit risks in the quarter, mainly due to impairment of A-share investments and a high base of the comparable period last year.
The debt-fuelled bull run of China’s A-share stock market in the first half of 2015 had pushed up the investment yields of Chinese insurers to historic highs. Although the market crashed after mid-June, most insurers had taken profit before the rout.
Chinese stock markets have continued to languish in the past quarter. Fixed-income investment yields have also been falling in recent weeks as bond default risks loom on the horizon.
But for the long term, Qi said, the positive outlook has not changed. He estimates a 25 per cent top-line premium growth and 30 per cent NBV growth for the first quarter.
“Most professional investors are well aware of the weak profit and I believe the current share prices have priced in the concerns. Ping An seems particularly defensive due to its diversified business structure, including banking and asset management business, while China Life seems most vulnerable
to investment return impairment,” he added.
In a statement filed to the Hong Kong stock exchange last week, China’s biggest life insurer and Ping An’s rival, China Life, estimated that its net profit for the first quarter might decrease by 55 to 60 per cent year on year.
The China Insurance Regulatory Commission (CIRC) on Tuesday said at a press briefing that it expected first-quarter profit for the whole industry to decline by 55.29 per cent to 38.94 billion yuan, mainly due to lower investment returns. But premiums for the whole industry grew 42.18 per cent to 1.20 trillion yuan as life insurance policies continue to lead sales, CIRC said.