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Ping An Reports Net Profit of RMB13.959 Billion in the First Half of 2012 Solid Growth of 9.4% amid Adverse Environment

(Hong Kong, Shanghai, August 23, 2012) - Ping An Insurance (Group) Company of China, Ltd. (hereafter "Ping An" or "the Group", HKEx: 2318; SSE: 601318) today announced its 2012 interim results. In the first half of 2012, Ping An managed to maintain growth above the industry average amidst a complex economic and market environment. The Group's three pillar businesses, namely insurance, banking and investment, all achieved healthy and steady growth. For the period under review, net profit attributable to shareholders of the parent company was RMB13.959 billion, up 9.4% year on year. Meanwhile, pursuant to the smooth integration of Shenzhen Development Bank Co., Ltd. (hereafter "SDB") and the original Ping An Bank, the implementation of Ping An's integrated financial strategy was intensified further.

                       

As at June 30, 2012, total assets of the Group amounted to RMB2,644.999 billion, representing an increase of 15.7% as compared with the beginning of 2012. Equity attributable to shareholders of the parent company was RMB146.762 billion, representing an increase of 12.1% as compared with the beginning of 2012. Earnings per share were RMB1.76 (2011 interim: RMB1.67). The Board of Directors proposed an interim dividend of RMB0.15 (tax inclusive) per share for the year of 2012.

 

In the first half of 2012, facing slowing growth across the insurance industry, Ping An Life proactively adjusted its business structure and maintained steady increases in its business scale and number of insurance agents. Net profit of Ping An's property & casualty business achieved solid growth of 2.0%, with the combined ratio maintained at a healthy level. The private wealth management business of Ping An Trust grew at a healthy pace, while the investment banking business of Ping An Securities continues to hold its leading position in the market. In the meantime, the core business of Ping An Bank developed steadily with its business structure continuing to improve. Substantial progress has been made in the integration of SDB and the original Ping An Bank. The deregistration of the original Ping An Bank was completed on June 12. SDB formally changed its name to "Ping An Bank Co., Ltd." on July 27. The original Ping An Bank and SDB officially became one legal entity.

 

According to Ping An, Ping An Life experienced rapid growth with an average annual growth rate of 30% for more than ten years. However, due to changes in macro-environment in recent years, there are new trends in the growth and development model of the market as a whole. Ping An has taken the initiative to adjust the structure of its life insurance business to cope with market changes and enhanced its orientation towards adding value in order to gradually build a value-added and sustainable growth platform. Ping An believes that the structural adjustment of the life insurance business will gradually show its effects in the second half of this year and will help to achieve healthy, valuable and sustainable growth momentum.

 

Summary of Ping An's consolidated results in 1H2012Prepared in accordance with IFRS

 

 

For the six months ended June 30 (RMB million)

2012

2011

 

 

 

Total income

179,003

133,810

Net profit

17,527

12,998

Net profit attributable to shareholders of the parent company

13,959

12,757

Earnings per share (RMB)

1.76

1.67

 

 

 

Net profit by business segment:

 

 

   Life insurance

7,031

6,762

   Property and casualty insurance

2,746

2,693

   Banking

6,731

2,397

   Securities

663

715

   Other businesses and elimination

356

431

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Three pillar businesses maintained steady and healthy growth; implementation of integrated financial strategy intensified

 Mr. Ma Mingzhe, Chairman and Chief Executive Officer of Ping An, said, "Despite facing a complex economic and market environment in the first half of 2012, Ping An managed its business with a steady hand and met challenges head-on as it worked towards establishing its ‘one customer, one account, multiple products, and one-stop services' integrated financial model. This ensured the healthy and sustainable growth of all business units and facilitated the seamless integration of SDB and the original Ping An Bank. At the same time, we sought to explore the innovative use of technology in the financial industry premised on the new financial customer experience of ‘expertise makes life simple', which laid a solid foundation for the further implementation of our integrated financial strategy."

 

Life insurance business: proactive adjustment in business structure; business scale and the number of insurance agents grew at a steady pace

 

In the first half of 2012, with changes in the macroeconomic environment and new policies governing the bancassurance business sector, the life insurance market faced greater challenges with industry growth slowing across the board. Despite facing such a market environment, Ping An's life insurance business continued to grow its business in a steady manner, with its business scale and the number of insurance agents increasing at a steady pace. The more profitable individual life insurance business also maintained stable growth. Ping An's life insurance business achieved written premiums of RMB114.837 billion in the first half of 2012. Among this, written premiums from the individual life insurance business amounted to RMB102.367 billion, representing an increase of 7.9% compared with the same period of last year, allowing Ping An to maintain its leading position in the industry.

 

As at June 30, 2012, Ping An Life had approximately 51.89 million individual customers and 831 thousand corporate clients. It managed to maintain excellent 13-month and 25-month persistency ratios of 93.7% and 91.6%, respectively, for individual life insurance policies. In the meantime, the size of the agency was expanded yet further, and at a time when the number of life insurance agents in the industry as a whole declined, the number of individual life insurance sales agents of Ping An continued to increase, up 1.4% as compared to the end of 2011 to reach nearly 494 thousand. Of the total premium income generated by all life insurance companies in the PRC, Ping An's life insurance business captured a market share of 13.8%, as calculated in accordance with the PRC insurance industry data published by the CIRC. In terms of premium income, Ping An Life is the second largest life insurance company in China.

 

In the first half of 2012, Ping An's annuity business also achieved healthy and rapid growth, with three major performance indicators - annuity payments received, assets entrusted, and assets under investment management - all maintaining leading positions in China's annuity industry. In the first half of 2012, cumulative annuity payments received amounted to RMB17.033 billion,as at June 30, 2012, assets entrusted amounted to RMB50.794 billion, and assets under investment management amounted to RMB61.649 billion. Ping An Health kept its focus on offering mid- and high-end medical insurance and medical services. In the first half of 2012, Ping An Health made rapid progress in its business development. Written premiums increased by 77.5% as compared to the same period of last year. Ping An Health launched the "Hiking the World-Vitality" health promotion program, the first-of-its-kind in the industry, which will give Ping An Health a unique competitive edge in the industry.

 

The following table highlights key financial and operating data in Ping An's life insurance business:

 

For the six months ended June 30 (RMB million)

2012

2011

 

 

 

Written premiums

114,837

112,630

        Individual life

102,367

94,860

        Bancassurance

7,598

13,459

        Group insurance

4,872

4,311

 

 

 

Premium income

78,898

75,158

        Individual life

67,535

61,554

        Bancassurance

7,566

10,362

        Group insurance

3,797

3,242

 

Property and casualty insurance business: net profit achieved solid growth of 2.0% while combined ratio remained at a healthy level

 

In the first half of 2012, leveraging its increasingly professional operation and advanced service standards, Ping An Property & Casualty achieved stable business growth and recorded premium income of RMB48.75 billion, representing an increase of 19.7% as compared with the same period in 2011. During the period, Ping An Property & Casualty was dedicated to enhancing its overall service standards and optimizing internal control system, laying a strong foundation for specialized operations and sustainable business growth in the future.

 

As at June 30, 2012, Ping An Property & Casualty had a paid-up capital of RMB17 billion, maintaining a status of abundant capital and solvency. The quality of its business also remained sound with a combined ratio that stood at 93.1%. In the first half of 2012, Ping An Property & Casualty accounted for approximately 17.4% of the total premium income received by property and casualty insurance companies in China, as calculated in accordance with the PRC insurance industry data published by the CIRC. Ping An Property & Casualty is the second largest property and casualty insurance company in China in terms of premium income.

 

The following table highlights key financial and operating data in Ping An's property and casualty insurance business:

 

For the six months ended June 30 (RMB million)

2012

2011

 

 

 

Premium income

48,914

40,922

        Automobile insurance

36,660

30,792

        Non-automobile insurance

10,993

8,979

        Accident and health insurance

1,261

1,151

 

 

 

 

June 30, 2012

December 31, 2011

Ping An Property & Casualty's market share by premium income

17.4%

17.4%

 

Banking business: core businesses exhibited healthy growth and constant improvement in business structure

 

In the first half of 2012, the integration of SDB and the original Ping An Bank reached a critical stage and achieved significant progress. On April 24, 2012, CBRC approved SDB's absorption merger with the original Ping An Bank. The deregistration of the original Ping An Bank was completed on June 12, 2012. On July 27, 2012, SDB formally changed its name to "Ping An Bank Co., Ltd.". SDB and the original Ping An Bank thus officially became one legal entity.

 

In the first half of 2012, the Company made steady progress towards implementing the banking business development strategy and the integration of the two banks. As a result, there was stable growth momentum across the business and improved performance. In the first half of 2012, Ping An's banking business achieved profit of RMB6,731 million and contributed RMB3,467 million to the Group, with profit contribution increasing by 6 percentage points to 24%.Total assets of the bank amounted to approximately RMB1.5 trillion, demonstrating the expanding scale of the bank's business and its greater overall strength. During the transition period, the banking business exhibited healthy growth and constant improvement in its business structure. Total deposits amounted to RMB949,578 million, an increase of 11.6% as compared with the end of 2011, of which retail deposits amounted to RMB176,611 million, up 16.0% as compared with the end of 2011. Total loans amounted to RMB682,906 million, up 10% as compared with the end of 2011. The trade finance business maintained rapid growth, while trade finance facilities balance amounted to RMB277.5 billion, representing an increase of 18.9% as compared with the end of 2011.

 

The following table highlights key financial and operating data in Ping An's banking business:

 

For the six months ended June 30 (RMB million)

2012

2011

 

 

 

Net interest income

16,286

3,308

Net fees and commission income

2,780

794

Net profit

6,731

2,397

 

 

 

 

June 30, 2012

December 31, 2011

Non-performing loan ratio

0.73%

0.53%

CAR

11.40%

11.51%

Core CAR

8.44%

8.46%

 

Investment business: Ping An Trust achieved steady growth in private wealth management business; Ping An Securities' investment banking business maintained leading position

 

In the first half of 2012, the private wealth management business of Ping An Trust grew at a steady pace, with the number of high net worth customers exceeding 15,000, representing an increase of 21.3% compared with the end of 2011. Assets held in trust amounted to RMB236.242 billion, representing an increase of 20.4% compared with the end of 2011. Ping An Trust's investments in non-capital markets progressed as planned, with all investment projects pushing ahead smoothly. Along with the expansion of its investment team and the improvement of its investment capability, Ping An Trust is expected to contribute strongly to the Company's overall profit growth in the future.

 

As at June 30, 2012, Ping An Asset Management's assets under management amounted to RMB905.442 billion, representing an increase of 11.8% compared to the end of 2011. This was mainly attributed to an increase in investable assets generated from the steady growth in the Group's insurance business. Net investment income of insurance funds reached RMB20.944 billion in the period under review, representing an increase of 29.1% compared to the same period of 2011; net investment yield increased to 4.5% for the first half of 2012 from 4.3% in the same period of last year. Facing the volatile domestic stock market, Ping An Asset Management utilized its expertise in investment assessment and effective risk management to ensure a timely response to the changes in the market and optimized its asset allocation to enhance its investment returns. Ping An Asset Management (Hong Kong), which operates the overseas investment management business of the Group, successfully launched three HKEx-listed ETF funds for overseas investors in Hong Kong in February 2012, strengthening the influence of Ping An's investment brand in the overseas market.

 

In the first half of 2012, the investment banking business of Ping An Securities maintained its advantageous position in the SMEs and GEM markets. It successfully sponsored 11 IPOs and two refinancing projects as lead underwriter, ranked third and fourth by the number of deals and underwriting fees for IPO transactions, respectively. It also completed issuance of 22 corporate bonds as lead underwriter. The total number of deals increased by 14 compared with the same period of last year. At the same time, it proactively pursued innovation and issued four private placement bonds for SMEs. The closing balance of margin trading and securities lending at the end of the period was up 50% as compared to the end of 2011.

 

The following table highlights the investment income of the Group's insurance funds:

 

For the six months ended June 30 (RMB million)

2012

2011

 

 

 

Net investment income

20,944

16,225

Net realized and unrealized gains

(3,212)

551

Impairment losses

(3,912)

(942)

Others

82

2

Total investment income

13,902

15,836

 

 

 

Net investment yield

4.5%

4.3%

Total investment yield

3.7%

4.2%

 

Cross-selling channels further strengthened with innovative use of technology; new sales channels enhanced customer service experience

 

In recent years, working towards its integrated financial model of "one customer, one account, multiple products, and one-stop services" premised on the new financial customer experience of "expertise makes life simple", Ping An has actively sought to explore the innovative use of technology in the financial industry. Ping An Life was committed to establishing its e-sales platform and improving its customer service standards and differentiated competitiveness through the innovation of e-sales methods. After successfully launching the Mobile Integrated Terminal (MIT), in the first half of 2012, Ping An Life expanded its e-operation platform for mobile devices such as tablets and smart phones, realizing support across various mobile devices. As at the end of June 2012, the utilization rate of its MIT platform exceeded 95%, and the total number of customers insured through MIT exceeded 5 million. In terms of its customer service channels, Ping An Life made continuous improvements and innovations during the period under review. In addition to traditional over-the-counter services, Ping An Life successively launched new channels such as internet, telephone and mobile phone channels to provide efficient, convenient and comprehensive services to its customers.

 

In addition, premium income of Ping An Property & Casualty generated from cross-selling and telemarketing increased by 31.7% and accounted for a higher proportion of sales through channels at 41.9% in the first half of 2012. Leveraging the Group's integrated financial platform, cross-selling in the credit card business achieved remarkable results. As at June 30, 2012, the loan balance of credit cards amounted to RMB30.629 billion, credit cards in circulation reached 9.89 million and newly issued cards in the first half of the year reached 1.85 million.

 

Outlook

Looking forward, Mr. Ma Mingzhe said, "National macro-economic policy adjustments, a lackluster external investment environment and rising labor costs will pose bigger challenges to the Company's performance in the second half of the year. Therefore, in the second half of 2012, Ping An will continue to adhere to its established strategies and overall planning, actively respond to the changing market environment, and promote the healthy and balanced growth of its three key pillars of business. We will further strengthen the management of each business unit to achieve value-added, sustainable and above-market growth, and further enhance our core competitiveness. Meanwhile, we will proceed with our banking integration to consolidate our strengths, push forward the implementation of the best banking strategy and continue to enhance our cross-selling management platform so as to expedite our back-office consolidation and strengthen the Group's synergies. Furthermore, we will closely monitor and actively study the latest advances in financial technology, explore innovative growth models of technology coupled with traditional businesses and improve service quality to deliver the best customer experience."

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