Announces Annual Results for 2005

Hong Kong, March 30, 2006 -- Ping An Insurance (Group) Company of China, Ltd. (“Ping An” or the “Group”, HKEx: 2318) announced its annual results for 2005 today. During the year Ping An continued to deliver excellent results in its core businesses, growing faster than the industry average. Sufficient capital and steady profit growth have positioned Ping An strongly for accelerated development.

The Group reported substantial growth in 2005. Net profit was RMB4,265 million, an increase of 35.6%. Total assets and total equity increased 20.9% and 17.1% to RMB319,706 million and RMB33,522 million respectively. Basic earnings per share were RMB0.68. Ping An’s Board of Directors has proposed a special interim dividend payment(1) of RMB0.20 per share for the year 2006.

Ping An’s total revenue in 2005 was RMB64,590 million. Gross written premiums, policy fees and premium deposits were RMB70,767 million and total investment income was RMB9,655 million, an increase of 9.1% and 49.8% respectively over 2004. The Group’s embedded value was RMB48,363 million, an increase of 29.8%.

Growth in net profit was due to improved performance in the Group’s core life insurance and property and casualty insurance businesses. The improvements were a result of a better product mix in both businesses, cost control and improved total investment returns.  Life insurance accounted for 83.3% of net profit, while property and casualty insurance accounted for 9.9%.

In his review of the financial results for the year, Ping An Chairman and CEO Ma Mingzhe said: “We are extremely pleased with our performance in 2005.  The opening of the insurance sector to foreign players this year created an intensely competitive environment. Even so, the Group was able to sustain its growth momentum.”

Mr. Ma added: “We were able to meet the competition and deliver good results. For the last three years, we have actively prepared ourselves for market liberalization through proactive reforms. Today, our financial services platform is much broader, with effective cross selling a wide range of products.  Our business mix, productivity and key performance indicators continued to improve. ”

Life Insurance: Continued Improvement in Quality and Productivity

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

In 2005, Ping An’s life insurance business achieved net profit of RMB3,551 million, an increase of 31.3% over 2004. Total gross written premiums, policy fees and premium deposits were RMB58,691 million. This represents a 16.1% share of the national life insurance market. 

Gross written premiums, policy fees and premium deposits for individual life business were RMB46,169 million, an increase of 15.0% over 2004.  This increase was primarily due to a 29.1% increase in first year premiums, policy fees and premium deposits to RMB11,572 million. Moreover, most of new sales were generated from regular premium insurance products. These products are expected to generate a stable revenue stream and provide a basis for sustainable long-term profit growth. The value of one year’s new business for the year was RMB4,539 million, an increase of 16.0% from the previous year.

In group life insurance business, the Group focused on short-term accident and health insurance products and promoted its pension products to corporate customers.

During this period, relative to 2004,

·        Gross written premiums, policy fees and premium deposits for the bancassurance business decreased 11.7% to RMB5,224 million from RMB5,917 million as a result of management’s strategy of de-emphasizing lower margin products.

·        On the other hand, gross written premiums, policy fees and premium deposits for the group insurance business decreased 15.6% to RMB7,298 million from RMB8,648 million. As a result of continued improvement in product mix, gross written premiums and policy fees for short-term accident and health insurance business increased 37.2% to RMB1,990 million from RMB1,450 million.

·        Total investment income increased 48.6% to RMB8,536 million from RMB5,746 million. Total investment yield increased to 4.3% from 3.7%.

·        Claims and policyholders’ benefits increased 29.3% to RMB15,559 million from RMB12,032 million. This was due to an increase in payments for maturities and survival benefits, and surrenders of insurance policies.

·        Commission expenses, paid primarily to sales agents, increased 12.9% to RMB5,168 million from RMB4,577 million due to an increase in first year premiums, policy fees and premium deposits from individual life products. Commission expenses as a percentage of gross written premiums, policy fees and premium deposits increased to 8.8% from 8.4%. 

·        General, administrative and other expenses increased 16.1% to RMB4,278 million from RMB3,685 million.  General, administrative and other expenses as a percentage of gross written premiums, policy fees and premium deposits increased to 7.3% from 6.7%, due to an increase in sales of first year premiums, policy fees and premium deposits.

·        The 13-month and 25-month policy persistency ratios maintained at a healthy level of above 85% and 80%, respectively, as a result of improvements in customer service.

Property and Casualty Insurance: Strong Revenue Growth and Enhanced Profitability

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

In 2005, Ping An’s property and casualty insurance business realized net profit of RMB422 million, an increase of 94.5% over 2004. Gross written premiums increased to RMB12,076 million, an increase of 19.0% over 2004. The Group’s national market share of gross written premiums moved up to 9.9%.

During this period, compared to 2004,

·        Gross written premiums increased 19.0% to RMB12,076 million from RMB10,150 million.  The increase was due to significant growth in all three principal business lines.

·        Total investment income increased 65.8% to RMB398 million from RMB240 million. Total investment yield increased to 4.3% from 3.6%.

·        Total claims increased 18.4% to RMB5,259 million from RMB4,440 million. The increase was due to an increase in premium growth, as well as increase in claim reserves to provide for compulsory third party motor insurance coverage.

·        Commission expenses increased 20.9 % to RMB820 million from RMB678 million.  As a percentage of gross written premiums, commission expenses increased to 6.8% from 6.7% due to higher market commission rates resulting from an increase in market participants and intense competition in the property and casualty insurance industry.

·        General, administrative and other expenses increased 26.3% to RMB2,294 million from RMB1,816 million in 2004. This increase was primarily due to the increase in provisions for doubtful debts from some of the longer outstanding reinsurance recoverables.

·        The combined ratio improved to 95.3% from 97.2% due to the conscious effort to improve the quality of underwriting.

Better Investment Income as Asset Allocation Improved

In 2005, Ping An achieved the following results from investments relative to 2004,

·        Net investment income increased 29.4% to RMB9,338 million from RMB7,219 million primarily due to an increase in investment assets to RMB246,748 million from RMB201,125 million in 2004.  Net investment yield was at 4.2%.

·        Total investment income increased 49.8% to RMB9,655 million from RMB6,446 million in 2004.  Total investment yield increased to 4.3 % from 3.6 %.  In addition, the Group made an investment gain in 2005 as compared to the investment loss suffered in 2004 from the investments in the PRC equity markets. As a result, the net realized and unrealized gains in 2005 were RMB317 million compared to net realized and unrealized losses of RMB773 million in 2004.

The Group continued to improve portfolio asset allocation, in response to changes in the capital markets.  Bonds increased to 64.8% of total investment assets in 2005, from 56.1% in 2004, while equity investments increased to 6.2% compared to 2.9% in 2004.

Back-Office Centralization

Construction of a national back-office support centre in Zhangjiang, Shanghai proceeded smoothly.  The Integrated Operating Centre saw the completion of a significant part of its premises during the year.

·            Nearly 70% of underwriting and document processing for individual life insurance and bancassurance were centralized;

·            70% of claims processing for life insurance and 20% of claims processing for property and casualty insurance were centralized;

·            50% of accounting for operating expenses was centralized;

·            A national call centre was completed, serving all life insurance customers and 40% of property and casualty customers.

A Comprehensive Platform for Financial Services

In order to meet consumer demand for diversified financial services, the Group has been working to improve product development, allocate resources more effectively to serve both individual and corporate customers, and introduce organizational changes to enhance the Group’s ability to cross-sell financial products and services.

In 2005, following the establishment of Ping An Annuity Insurance Company of China, Ltd. in 2004, the Group started Ping An Health Insurance Company of China, Ltd. and Ping An Asset Management Co., Ltd. and moved the headquarters of Ping An Bank to Shanghai. Today, the Group has a total of eight major subsidiaries providing a wide range of financial services and products to its customers.

Looking Ahead

Chairman Ma Mingzhe said: “In 2006, the PRC economy is expected to grow at a fast and healthy pace. As the living standards and purchasing power improve, customers will demand better financial products and services for wealth management. We intend to leverage on our strong financial base and reputation for quality service to take advantage of this enormous opportunity.”

“We will also look for new investment opportunities, such as infrastructure, in order to diversify and mitigate investment risk, enhance investment returns.”