Insurers Ping An, China Life vow to further develop online sales after coronavirus pandemic eats into first-half earnings
- Ping An’s net profit declined 30 per cent, while China Life’s net profit dropped 19 per cent in the six-month period
- Further development of online sales by two of China’s largest insurance companies could change the sector forever, analyst says
Ping An Insurance (Group) and China Life Insurance, two of the mainland’s largest insurers, have vowed to step up the development of online sales after their first half earnings were hit by the coronavirus pandemic.
Their results were marred by social distancing measures that made it difficult for millions of their agents to meet clients and sell policies, while returns on investments were hit hard by market uncertainties. Moreover, both companies benefited from a tax rule change last year, a one-off boost that will not be repeated this year.
“Other insurers will follow suit. The trend will have a positive impact to the industry as a whole, as insurers will be able to sell products at a lower cost and provide better services,” said Kenny Ng Lai-yin, a securities strategist at Everbright Sun Hung Kai.
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“History shows that turbulence leads to great change, and crisis breeds opportunities,” he said, adding that the insurer will carry out more reforms to address these challenges, including digitising its life insurance business.
Ping An said an increase in online sales had helped mitigate some of the challenges posed by the pandemic. The company said 560 million customers used its online platforms to buy insurance, wealth management and health care products as of the end of June, an increase of 8.7 per cent over the start of the year.
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The insurer’s profit declined partly because of a one-time gain last year of 10.45 billion yuan from tax incentives on its life and property insurance businesses. Moreover, it is also HSBC’s second-largest shareholder, with a 7 per cent stake. The London-based bank said this year that it would not declare any dividend payments for at least a year starting with the last quarter of 2019 to meet a regulatory requirement in the United Kingdom.
Ping An’s operating profit – a better reflection of performance as it removes one-off items – rose 1.2 per cent to 74.3 billion yuan, the company said. Its core life insurance business’s operating profit rose 6.4 per cent to 51.4 billion yuan.
However, the value of new business in the first half, another important performance indicator, dropped 24 per cent to 31 billion yuan. Ping An’s shares fell 0.9 per cent to close at HK$83.4 in Hong Kong on Thursday before its earnings were announced.
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The insurer’s net investment yield was 4.3 per cent in the first half, down by 37 basis points from a year earlier, following a drop in interest rate and a delay in dividend payments from some stocks in its portfolio.
The company said the pandemic had contributed to more new sales on its online platform, and that it would continue to diversify its online insurance products offering in addition to its 1.6 million sales agents.
