Ping An Insurance Announces 2006 Annual Results

Accelerating growth in core insurance businesses

Net profit reached a new high in Group’s corporate history

Hong Kong, April 12, 2007 -- Ping An Insurance (Group) Company of China, Ltd. (“Ping An” or the “Group”, HKEx: 2318; SSE: 601318) announced its annual results for 2006 today. During the year Ping An continued to deliver excellent results, achieved historical breakthroughs and made new progress in various segments of its businesses. The Group’s core businesses accomplished rapid growth at rates faster than the industry’s average. Net profit for the year reached a new high in the Group’s corporate history. Sufficient capital and steady profit growth have created a strong foothold for Ping An to continue its sustainable development.

The Group reported substantial growth in 2006. Under International Financial Reporting Standards (IFRS), the Group’s net profit was RMB 8,000 million, an increase of 87.6% over 2005. Total assets and total equity increased by 54.6% and 42.4% to RMB 494,309 million and RMB 47,750 million respectively. Basic earnings per share were RMB 1.27.

Under PRC Accounting Standards, the Group’s net profit was RMB 5,986 million, an increase of 79.3% over 2005. Total assets reached RMB 441,791 million and total shareholders’ equity grew to RMB 36,668 million. Underwriting income was RMB 81,713 million, an increase of 21.3% over 2005. Earnings per share based on latest share capital were RMB 0.81.

Ping An’s Board of Directors has proposed a final dividend payment of RMB 0.22 per share for the year 2006, or a total of RMB 1,616 million, based on the total of 7,345,053,334 shares in issue (including additional shares issued under the initial public offering of A shares).

Enhanced Structure of Integrated Financial Business

Reviewing the financial results for the year, Ping An Chairman and CEO Ma Mingzhe said: “In 2006, the PRC economy maintained stable and rapid growth while investment, export and consumers’ spending increased steadily. As the reform in the financial sector progressed successfully and the financial regulatory system further improved, a healthy market environment is set for reform and development of the financial and insurance industries. During the period under review, we achieved historical breakthroughs as well as made new progress in various segments of our businesses.”

“Of which our core businesses saw net profit reaching a record level and had been growing rapidly at rates higher than the industry’s average. We continued to develop our other insurance businesses. Our annuity business received an approval from the China Insurance Regulatory Commission (CIRC) to build a nationwide distribution and service network in 127 cities across 35 provinces. We shall gradually expand our annuity business across the country.”

“Our banking business also made a breakthrough as Ping An successfully acquired Shenzhen Commercial Bank and formed a professional management team with rich international experience. We will complete the integration of Ping An Bank and Shenzhen Commercial Bank in 2007 and gradually develop a nationwide platform. Our banking business will become one of our core profit sources.”

“In the area of investments and asset management, Ping An of China Asset Management (Hong Kong) Company Limited was successfully established. It is in the process of putting together a team with international experience and a world-class investment management platform. With more liberal investment policies, our professional investment team delivered record-high investment returns. Our securities brokerage and trust businesses also benefited from their pro-active reform efforts. Ping An Securities achieved a record high net profit.”

“Early this year Ping An successfully completed the issuance of A shares which was heavily subscribed. As a domestic financial enterprise, the Group will benefit from this A shares listing in terms of its brand recognition and transparency in the PRC market, thus laying a solid foundation for our long-term development,” Mr Ma added.

Operating Highlights

Financial and Operating Data under IFRS:

Financial and Operating Data under PRC Accounting Standards:

Under IFRS, Ping An’s total revenue in 2006 was RMB 87,943 million. Ping An’s gross written premiums and policy fees was RMB 69,696 million and total investment income was RMB 21,871 million, representing increases of 18.1% and 126.5% respectively over 2005. Total and net investment yields increased from 4.3% and 4.2% respectively in 2005 to 8.3% and 4.6% in 2006. Thanks to good results from all businesses and good total investment return, the Group’s consolidated net profit increased 87.6% to RMB 8,000 million in 2006 from RMB 4,265 million in 2005.

Under PRC Accounting Standards , Ping An’s underwriting income was RMB 81,713 million in 2006, an increase of 21.3% over 2005. The Group’s consolidated net profit increased 79.3% to RMB 5,986 million in 2006 from RMB3,338 million in 2005.

The Group’s embedded value was RMB 65,573 million as at December 31, 2006, an increase of 35.6% over 2005.

The net profit from the Group’s core insurance business reached a record level in Group’s corporate history in 2006.

Life Insurance: Continued Improvement in Quality and Productivity

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

In 2006, Ping An’s life insurance business achieved net profit of RMB 5,704 million, an increase of 60.9% over 2005. Total gross written premiums, policy fees and premium deposits were RMB 68,780 million. This represents a 17.0% share in the national life insurance market. 

Gross written premiums, policy fees and premium deposits for the Group’s individual life business increased 19.5% to RMB 55,166 million in 2006. This increase was primarily due to the 21.7% increase in renewal premiums, policy fees and premium deposits to RMB 42,089 million in 2006 from RMB 34,597 million in 2005. In addition, first year premiums, policy fees and premium deposits for the individual life business increased 13.0% to RMB 13,077 million in 2006. These increases were primarily due to the continued improvement in the quality and productivity of the Group’s agency force.

During this period, compared to 2005,

Gross written premiums, policy fees and premium deposits for our bancassurance business increased 18.9% to RMB 6,212 million in 2006 from RMB 5,224 million in 2005. This increase was primarily due to the growth in sales of the Group’s universal life products through the Group’s bancassurance channel.

Gross written premiums, policy fees and premium deposits for the Group’s group insurance business increased 1.4% to RMB 7,402 million in 2006 from RMB 7,298 million in 2005. This increase was primarily due to the Group’s continued efforts to manage the growth of this business line to improve profit margin. The Group continued to focus on selling employee welfare benefit plans. As a result, gross written premiums and policy fees for the Group’s short-term accident and health insurance business increased 6.6% to RMB 2,122 million in 2006 from RMB 1,990 million in 2005.

Claims and policyholders’ benefits increased 30.5% to RMB 58,890 million from RMB 45,116 million in 2005. This increase was primarily due to the higher claims expense incurred for the Group’s short term accident and health products, the increase of payments for surrenders of the Group’s participating products, the increase in sales of participating life products and the higher dividend distribution as a result of better performance in investments for the Group’s participating products.

Due to the increase in first year premiums, policy fees and premium deposits from individual life products, commission expenses of insurance operations, which the Group paid primarily to its sales agents, increased 26.9% to RMB 6,559 million in 2006 from RMB 5,168 million in 2005. Commission expenses as a percentage of gross written premiums, policy fees, and premium deposits increased to 9.5% in 2006 from 8.8% in 2005.

General, administrative and other expenses increased 40.6% to RMB 6,039 million from RMB 4,294 million. General, administrative and other expenses as a percentage of gross written premiums, policy fees and premium deposits increased to 8.8% from 7.3% in 2005 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 89.0% and 80.3%, 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, prepared in accordance with IFRS:

In 2006, Ping An’s property and casualty insurance business realized net profit of RMB 1,048 million, an increase of 148.3% over 2005. Gross written premiums increased to RMB 16,074 million, an increase of 33.1% over 2005. Ping An’s national market share of gross written premiums increased to 10.7%.

During this period, compared to 2005,

Gross written premiums increased 33.1% to RMB 16,074 million from RMB 12,076 million. The increase was due to significant growth in all three principal business lines.

Total claims increased 36.5% to RMB 7,178 million from RMB 5,259 million. The increase was due to an increase in premium growth of automobile insurance business and accident and health insurance business.

Commission expenses increased 91.7% to RMB 1,572 million from RMB 820 million.  As a percentage of gross written premiums, commission expenses increased to 9.8% from 6.8%. These increases were primarily due to the increase in gross written premiums and the higher market commission rates resulting from increased competition in the property and casualty insurance industry.

General, administrative and other expenses increased 32.0% to RMB 3,029 million in 2006 from RMB 2,294 million in 2005. This increase was primarily due to the increase in gross written premiums.

Combined ratio was 95.4% in 2006 compared with 95.3% in 2005; while loss ratio improved to 69.6% in 2006 from 72.0% in 2005 due to continuous focus on disciplined underwriting and service enhanced.

Investment Returns Reached Record High Levels

With more liberal investment policies, the Group’s professional investment team with international experience delivered record high investment returns. Ping An’s asset management business saw steady growth in assets and experienced a good start in the development of third-party asset management business, where the total assets held in trust exceeded RMB16 billion.

In 2006, Ping An achieved the following results from investments relative to 2005, prepared in accordance with IFRS:

Net investment income increased 30.6% to RMB 12,198 million in 2006 from RMB 9,338 million in 2005. This increase was primarily due to the increase in the Group’s investment assets to RMB 313,907 million as at December 31, 2006 from RMB 246,142 million as at December 31, 2005. Net investment yield increased to 4.6% in 2006.

Total investment income increased significantly to RMB 21,871 million in 2006 from RMB 9,655 million in 2005. Total investment yield increased to 8.3% in 2006 from 4.3% in 2005. These increases were primarily due to the strong performance in the PRC equity markets. As a result, the net realized and unrealized gains increased significantly to RMB 9,673 million in 2006 from RMB 317 million in 2005.

Ping An continued to improve the asset allocation of the Group’s portfolio in response to changes in the capital markets. As a result, its term deposits as a percentage of its total investment assets decreased to 18.8% as at December 31, 2006 from 28.0% as at December 31, 2005, and the Group’s equity investments increased to 14.3% as at the end of 2006 from 6.2% in 2005.

In 2006 the Group achieved smooth progress in establishing its investment platform. Ping An of China Asset Management (Hong Kong) Company Limited was successfully established. It is in the process of putting together a team with international investing experience and a world-class investment management platform. The Group’s securities brokerage and trust businesses also benefited from their pro-active reform efforts and achieved substantial growths. In 2006, Ping An’s trust business achieved breakthroughs in both its business scale and product forms, while Ping An Securities realized a net profit of RMB 609 million in accordance with IFRS, a record high since incorporation.

Breakthroughs in Banking Business

In 2006, Ping An achieved breakthroughs in its banking business. Ping An Bank was authorized by the China Banking Regulatory Commission to offer Renminbi services to corporate customers in June 2006. By the end of the year, Ping An secured its control of a 89.36% stake in Shenzhen Commercial Bank (SZCB) through equity transfers and capital injection. Subsequently, SZCB will ascribe the equity interests of Ping An Bank respectively held by HSBC and Ping An Trust, making Ping An Bank its 100% owned subsidiary.

Due to the consolidation of SZCB from the date of acquisition and increase of interest income from Ping An Bank as it began to provide Renminbi services to corporate customers in 2006, under IFRS, net interest income from banking business increased significantly to RMB 112 million in 2006 from RMB 18 million in 2005. Net handling fees and commission income increased to RMB 7 million in 2006. Net profit from banking business increased significantly to RMB 71 million in 2006 from RMB 7 million in 2005.

At present, Ping An is in the process of restructuring businesses of Shenzhen Commercial Bank and Ping An Bank under a single brand name. Banking business will become one of the core profit sources for the Group. Contributions from the distribution channels managed by banking business will become increasingly important.

Continual improvement in basic operating platform

The Group’s national back-office centre in Zhangjiang, Shanghai is the largest of its kind in Asia. This centre plays an instrumental role in improving the Group’s service standards, operating efficiency and risk management capacity. Ping An believes that this centre will help enhance the Group’s overall sales capability, improve and integrate management of underwriting and claims operations of its life and property and casualty insurance businesses. It will also help strengthen the Group’s internal control and risk management and enhance the overall efficiency through appropriately delegating powers and responsibilities to different executives on different management levels. The centre targets to keep the Group’s cost under tighter control and upgrade the Group’s overall profitability.

Prospects

Chairman Ma Mingzhe said: “Looking ahead in 2007, the PRC economy will continue to grow steadily, personal wealth will continue to increase, and the opening up of the financial sector to foreign companies will be accelerated. The Group is expected to benefit from all these developments. Ping An will focus on its strategic missions and visions, maintain its leading position in the domestic market, create synergy across our portfolio of businesses, execute the ‘One Customer, Multiple Products’ strategy, and constantly enhance our competitive advantages.”

Ping An’s 2006 annual results will be released at the Group’s website www.pingan.com.cn, and in designated newspapers, on April 12. The webcast of the Group’s 2006 Results Announcement Press Conference will be available at www.pingan.com.cn on April 13.

- End -