Hong Kong company reporting season

Ping An and China Life expected to report improved profits for 2017

But analysts are awaiting further news on Ping An’s proposed spin offs of Lufax and Good Doctor

PUBLISHED : Monday, 19 March, 2018, 7:31am
UPDATED : Monday, 19 March, 2018, 7:31am

China’s top two insurance companies are expected to report significantly higher profit when they announce full-year results this week.

Ping An Insurance (Group), the country’s second largest insurer in terms of premium, is expected to report a 22 per cent profit increase for 2017 on Tuesday, even as it pushes ahead with fintech and spin-off plans of its Ping An Healthcare and Technology or Good Doctor, and online wealth management platform Lufax, according to brokers.

China Life Insurance, the nation’s largest insurer, is expected to post a 68 per cent jump in profit for 2017, according to analysts’ estimates.

China’s plan to combine its banking and insurance regulators – China Banking Regulatory Commission and China Insurance Regulatory Commission – will strengthen regulatory oversight and benefit Ping An and China Life, according to a Credit Suisse report.

Ping An Insurance is expected to report a net profit of 76.25 billion yuan (US$12 billion) for 2017, from 62.4 billion yuan a year earlier, according to a consensus of analysts’ estimates polled by Bloomberg.

“Ping An’s result is expected to be good due to the sales of more policies and its fintech developments,” said Louis Tse Ming-kwong, managing director of VC Wealth Management.

“What the market wants to know on Tuesday is not about its results, which is expected to be solid. The focus will be on the announcement on its spin-off plans,” Tse said.

Ping An’s ‘Good Doctor’ wins Hong Kong IPO approval despite losses

On January 31, Ping An had filed to the stock exchange of Hong Kong its plans to list health care unit Good Doctor. And on January 12, the company said it planned to list Lufax, also in Hong Kong.

Ping An’s investment in online platforms for loans, wealth management, insurance, cars, real estate and health care, has turned it into an online financial powerhouse from a traditional insurer.

“The multiyear investment in tech has created significant synergies with Ping An’s core businesses [such as life, property and casualty and banking], resulting in higher return and high growth prospects for these businesses, and hence should be rewarded with higher valuation multiples. In many cases, this is already visible,” a Goldman Sachs report said.

Ping An shares closed on Friday at HK$89.65, double from a year earlier.

Meanwhile, rival China Life is expected to post a net profit of 32.09 billion yuan, up from 19.13 billion yuan a year earlier, according to analysts’ estimates polled by Bloomberg.

Profit fell 44.9 per cent year on year in 2016 because of the A-share market downturn.

China Life and six other big mainland insurers have seen their market share fall to 60 per cent from 80 per cent from 2014 to 2016, amid aggressive competition from smaller firms.

China’s Lufax plans Hong Kong IPO in April at US$60 billion valuation: sources

However, as the CIRC began a crack down in early 2017 on aggressive products from the smaller players, firms such as China Life, which sell more long-term protective policies, have benefited.

“Ongoing financial deleveraging should prevent irrational competition and force product mix upgrade,” according to a Citi research.

“We reiterate our view that China has reached a take-off point for life insurance, as half of the national life market has surpassed US$10,000 per-capita GDP. Developed market experiences suggest once penetration takes off, the secular trend would last for 10 plus years and there is usually also a product mix shift to health insurance,” the report added.

China Life closed at HK$23.05 on Friday, down 8.5 per cent from a year earlier.