Ping An Profit Beats Estimates in Recovery From Pandemic

(Bloomberg) -- Ping An Insurance (Group) Co. reported profit that beat analyst estimates as China’s largest insurer by market value recovers from the effects of the pandemic and stock market rallies boost investment returns.

Net income for 2020 fell 4% to 143 billion yuan ($22 billion), the company said in a statement Wednesday. That beat the 132 billion yuan average estimate of 23 analysts surveyed by Bloomberg.

Operating earnings, which Ping An says better reflect performance by stripping out short-term investment volatility and one-time items, rose 4.9% to 139.5 billion yuan.

“Overall the results are in line, but life business was weaker than thought,” said Steven Lam, Hong Kong-based analyst with Bloomberg Intelligence. “But new business value should pick up from this year and the worst is probably behind.”

Ping An’s recovery from a coronavirus-induced downturn early last year has been slowed by a major revamp of its core life-insurance unit aimed at removing less-competitive agents and low-margin products to bolster profitability. The Shenzhen-based company’s life premiums fell 2%, shrinking its market share faster than other big rivals as the sector expanded 7%.

Individual life first-year premiums slumped more than 50% in December, prompting Morgan Stanley analyst Jenny Jiang to cut estimates last month for new business value, which gauges the future profitability of new life policies.

The measure dropped 35% for the full year, widening from a 24% slump in the first half, according to the filing. That compares to a 5% increase in the previous year.

New business value may reverse declines to expand 21% this year as the life unit overhaul starts to bolster productivity through digitalization, Kaiyuan Securities Co. analysts wrote in a Jan. 22 report.

Investment income rose by 4%, compared with a 28% decline in the first-half. Realized gains jumped more than eightfold to 47 billion yuan, although the company also booked 4.8 billion yuan in paper losses, reversing unrealized gains from a year earlier. The Shanghai Stock Exchange Composite Index rallied 14% last year after recouping from a slump in the first-quarter.

Operating profit from its tech businesses, which offer services including facial recognition and blockchain solutions, jumped 91%, reversing a slump in 2019 when costs rose.

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