Ping An Announces 2010 Interim Results
Insurance, Banking and Investment Businesses See Strong and Balanced Growth
Reports Net Profit of RMB9,866 Million; Achieves Breakthrough in SDB Investment
Hong Kong, Shanghai, August 24, 2010 - Ping An Insurance (Group) Company of China, Ltd. (hereafter "Ping An", "the Company" or "the Group", HKEX: 2318; SSE: 601318) today announced its 2010 interim results. In the first half of 2010, the Group pursued relentlessly its strategic plans to build an integrated financial services platform, with robust and healthy development of its three core businesses - insurance, banking and investment, and realized balanced and strong growth. The Group also achieved breakthrough in its strategic investment in Shenzhen Development Bank (hereafter "SDB") and pushed ahead with the merger of Ping An Bank and SDB. For the six months ended June 30, 2010, the Group reported net profit of RMB9,866 million, up 27.9% year-on-year. Earnings per share were RMB1.30 (2009 interim: RMB1.02). Net profit of non-insurance lines of businesses rose 180.1% year-on-year.
Summary of the Company's core businesses development in the first half 2010:
Continuous and rapid business growth:
- Total income grew 29.0% yoy to RMB96,980 million
- Net profit up 27.9% yoy to RMB9,866 million
- Total assets grew 10.4% from end of 2009 to RMB1,032,908 million
- Total equity up 19.8% from end of 2009 to RMB109,895 million
- Growing synergies were seen: There is growing synergy from the integrated financial services model. Cross-selling contributes 53.1% more to property and casualty insurance premiums; 111.5% more to corporate deposits (increment in daily average size) of the banking business, as 22% of new corporate deposits; 61.9% of newly-issued credit cards were form cross-selling
- First-year written premiums from individual life insurance business soared 52.1% yoy. Embedded value of first half year's new business grew 43.9%
- Ping An Property & Casualty reported 61.1% yoy growth in premium incomes, with its market share improved by 1.5 percentage points to 14.4% compared with end of 2009
- Quality of property and casualty insurance business further improved, with combined ratio decreased by 4.7 percentage points yoy to 96.5%. Net profit of property and casualty insurance business reached RMB1,088 million
Banking business achieves breakthrough
- Steady progress in strategic investment in SDB was made. As at June 30, 2010, Ping An holds 29.99% shares in SDB, which has been contributing profit to the Group
- Ping An Bank achieved superb organic growth:
- realized net profit of RMB900 million in the first half of 2010, an increase of 56.0% yoy
- non-performing loan ratio was controlled at 0.45%
- capital adequacy ratio reached 11.8%, maintained at an industry leading level
Investment business sees steady development
- Ping An Securities reported a growth of 125.6% in net profit
- Investment banking arm continued to maintain its leading position in the SMEs and the GEM underwriting market, sponsoring 22 IPOs and 6 refinancing projects as a lead underwriter. We ranked top in the league table by number of deals and volume of underwriting fees received
- Transformation of trust business progressed smoothly. Scale of high margin products for individuals increased steadily
Three core businesses maintain robust and healthy growth; achieves breakthrough in SDB investment
Mr. Ma Ming zhe, Ping An's Chairman and Chief Executive Officer, said: "In the first half of 2010, the world's financial markets were preoccupied with fears on Europe's sovereign debt crisis and concerns of a setback in the global economic recovery. In contrast, China's economy continued its robust and steady growth. However, challenges remained. Faced with such a complex situation, Ping An kept focus on its stated strategic direction and operational targets for the year, continuing to drive towards achieving the goal of building an integrated financial services model. Our core businesses, insurance, banking and investment, all recorded healthy and strong growth. Concurrently, we made a major breakthrough in our strategic investment in SDB."
"Ping An's life insurance business boosted its efforts to expand its profitable individual life insurance business over the period. First-year written premiums from individual life business soared, increasing 52.1% compared with the corresponding period in 2009. Leveraging specialized sales channels, Ping An Property & Casualty achieved 61.1% significant growth in premium income in the first half of 2010 and its market share increased by 1.5 percentage points compared with the end of 2009. As the quality of our property and casualty insurance business further improved, the combined ratio decreased by 4.7 percentage points to 96.5% from the corresponding period of last year. In addition, three major performance indicators of our annuity business - annuity payments received, assets entrusted and assets under investment management - all maintained leading position in the industry."
"As for banking business, the Group made steady progress in its strategic investment in SDB. As at June 30, 2010, we hold 29.99% shares in the company. As an associate company of Ping An since May, SDB has already started to contribute profit to Ping An. At the same time, Ping An Bank also achieved good performance and superb organic growth, realizing a net profit of RMB900 million in the first half of 2010, an increase of 56.0% year-on-year. As our business expanded rapidly, our non-performing loan ratio was comfortably controlled at an industry leading level of 0.45% and capital adequacy ratio at 11.8%. Our retail deposits and credit card businesses are growing rapidly, with cross-selling driving a significant part of the strong growth."
"As for investment business, investment banking business of Ping An Securities continued to hold its leading position in the market. The transformation of our trust business progressed smoothly. Ping An Securities reported a growth of 125.6% in net profit. Our investment banking arm continued to maintain its leading position in the SMEs and the GEM underwriting market, sponsoring 22 IPOs and 6 refinancing projects as a lead underwriter. We ranked top in the league table by number of deals and volume of underwriting fees received. Ping An Trust strived to build an asset management platform serving high worth individuals. Driven by the product innovation and the expanded direct sales channels, the scale of high margin products increased steadily."
"In the first half of the year, we got lots of support and understanding from the relevant regulatory bodies and community at large on our strategic investment in Shenzhen Development Bank. After the share-swap transaction with NEWBRIDGE and subscription of new shares of Shenzhen Development Bank, we are now the largest shareholder of Shenzhen Development Bank. We fully understand that the completion of previous investment transactions just signifies a start. The key to value creation and synergy lies in how to get the best part of the two banks and fully leverage on our integrated financial strategy. We will comply with laws and regulations and achieve a balance of interests. In future, we will pursue on the restructuring and integration of Shenzhen Development Bank and Ping An Bank. We aim at a "win-win" situation for different parties."
Summary of Ping An's consolidated results (Prepared in accordance with IFRS)
For the six months ended June 30 (RMB million) 2010 2009
Total income 96,980 75,171
Net profit 9,866 7,712
Earnings per share (RMB) 1.30 1.02
Net profit by business segment:
Life insurance 6,551 6,942
Property and casualty insurance 1,088 (25)
Banking 1,104 577
Securities 828 367
Other businesses 295 (149)
First year written premiums of individual life business soared 52.1% year on year
For the six months ended June 30, 2010, the Group's life insurance business accounted for approximately 15.8% of the total written premiums received by all life insurance companies in China. The number is calculated in accordance with the PRC insurance industry data published by the CIRC. In terms of written premiums, Ping An Life is the second largest life insurance company in China.
During the first half of 2010, by executing strategies of "Reaching New Heights" and "Two-Tier Market Development", Ping An Life continued to optimize its operating platform and achieved healthy and sustainable development. Written premiums for individual life business increased by 35.9% to RMB73,358 million in the six months ended June 30, 2010 from RMB53,990 million in the same period 2009. There was a 52.1% increase in first-year written premiums to RMB25,943 million in the six months ended June 30, 2010 from RMB17,055 million in the same period last year. In addition, renewal written premiums for individual life business increased by 28.4% to RMB47,415 million in the six months ended June 30, 2010 from RMB36,935 million in the same period 2009.
While actively expanding the team of individual life insurance sales agents, Ping An Life further upgraded the professionalism and productivity of the team through continuous refinement of training programs. As a result, the first-year written premiums per agent per month saw a significant increase from the same period last year. Agent productivity was improved, as seen by an increase in first-year written premiums from RMB6,261 per agent per month to RMB10,311 per agent per month. Ping An is also committed to improving its customer service. As at the end of June 2010, Ping An Life had approximately 43.04 million individual customers and 611,000 corporate customers. The 13-month and 25-month persistency ratios for its individual life insurance customers were maintained at a satisfactory level of above 90.0% and 85.0% respectively.
The following table highlights key financial and operating data in Ping An's life insurance business:
Life insurance business
For the six months ended June 30 (RMB million) 2010 2009
Written premiums 93,125 73,921
Individual life 73,358 53,990
Bancassurance 16,269 16,299
Group insurance 3,498 3,632
June 30, 2010 December 31, 2009
Market share 15.8% 16.5%
Property and casualty insurance business made significant progress in improving both scale and quality. Premium incomes grew 60.9% yoy while combined ratio dropped to 96.5%
During the first half of 2010, the Chinese economy kept moving towards a promising direction and the sales of motor vehicles climbed. The environment for the development of business within the industry has become more regular. Ping An Property & Casualty seized the opportunity, setting a goal to establish itself as the industry-role model and promoted the building of distribution channels, thereby achieving a steady climb in its market share. For the first six months ended June 30, 2010, property and casualty insurance business recorded a premium income of RMB30,191 million, representing an increase of 60.9% compared to the same period of 2009. In particular, automobile insurance was the fasting growing product, with premium incomes increased by 71.8% year-on-year. The Group achieved breakthrough in building new distribution channels. 13.6% of property and casualty insurance premiums came from cross-selling.
Ping An Property & Casualty accounted for approximately 14.4% of the total premium income received by property and casualty insurance companies in China, an increase of 1.5 percentage points compared with the end of 2009. Ping An Property & Casualty is the second largest property and casualty insurance company in China in terms of premium income.
In the first half of 2010, Ping An's property and casualty insurance business remained relatively profitable through the continuous enhancement of its risk management and cost control capabilities. As a result, combined ratio improved to 96.5% while expense ratio and loss ratio improved by 2.3 percentage points and 2.4 percentage points respectively compared to the same period 2009.
The following table highlights key financial and operating data in Ping An's property and casualty insurance business.
Property and casualty insurance business
For the six months ended June 30 (RMB million) 2010 2009
Premium income 30,191 18,764
Automobile insurance 22,990 13,378
Non-automobile insurance 6,169 4,418
Accident and health insurance 1,032 968
June 30, 2010 December 31, 2009
Ping An Property & Casualty's market share by premium income 14.4% 12.9%
Banking business saw robust growth in scale; cross-selling continues to pay off; asset quality continues to top the industry
Ping An Bank's business grew robustly during the first half of the year and reported net profit of RMB900 million, up 56.0% year-on-year. Deposit balance was up to RMB167,839 million, increasing by 12.6% compared with the end of 2009. The Guangzhou and Hangzhou branches led the local markets in terms of deposit growth rate. Business structure continued to be optimized with the percentage of consumer deposit and SME loan going up steadily.
Asset quality continues to top the industry. Although the business expanded rapidly, capital adequacy ratio (CAR) was 11.8% and non-performing loan (NPL) ratio was 0.45%, both of which led the industry. Ping An Bank performed well in controlling NPL ratio, maintaining CAR and preventing fraud, and has laid a solid foundation for sound long-term development.
Cross-selling begins to show effect and its channels and products continue to develop with increasing number of innovations. The Group has enhanced the management by each specialized industry as well as batch marketing with regard to corporate business and actively promoted cooperation with channels. 22.0% of the new corporate deposits were from cross-selling. Retail business line has launched Unsecured Personal Loan (Xin Yi Dai), Cun Dai Tong and other innovative products and has increased percentage of new consumer deposits from the life insurance cross-selling channel. The newly-issued credit cards totalled 1.097 million, 61.9% of which were from cross-selling. The number of accumulated issued credited cards approached 5 million. In June 2010, Ping An Bank officially opened Huizhou branch, the 9th branch of the bank in China.
On May 7, 2010, the Group completed the non-public directed issuance of H shares and NEWBRIDGE transferred all its shares of SDB to Ping An; on June 29, SDB successfully completed its non-public directed issuance with Ping An Life. After the completion of these two transactions, the Group and Ping An Life hold a total of 1,045 million SDB shares, representing 29.99% of its total equity. In the first half of 2010, the Group recognized its share of profits from SDB, an associate company, of RMB204 million based on the equity method.
The following table highlights key financial and operating data in Ping An Bank's business:
Ping An Bank's business
For the six months ended June 30 (RMB million) 2010 2009
Net interest income 2,457 1,508
Net fees and commission income 320 186
Net profit 900 577
Net fees and commission income to total income ratio 11.0% 9.1%
June 30, 2010 December 31, 2009
Non-performance loan ratio 0.45% 0.46%
CAR 11.8% 13.0%
Core CAR 9.9% 10.9%
Investment business: Investment banking business of Ping An Securities continued to hold its leading position in the market. Transformation of trust business progressed smoothly
During the first half of 2010, Ping An Securities demonstrated rapid growth in its business, achieving high rankings in many fields of the industry. Moving into 2010, Ping An Securities's investment banking business continued to benefit from its leading position in the SMEs and GEM underwriting markets, sponsoring 22 IPOs and 6 refinancing projects as the lead underwriter, ranking the first in terms of the number of deals. Underwriting commission income increased sharply to RMB1,226 million in the six months ended June 30, 2010 from RMB137 million in the same period 2009. For the brokerage business, the Group expanded its distribution channels and operation outlets, winning approval for the opening of five more branch offices. With regard to the fixed income business, Ping An Securities led and underwrote 5 corporate debt issues, and made progresses in product innovation. Furthermore, Ping An Securities is currently in the process of applying for licenses to offer margin trading and securities lending services, which is expected to be a new profit driver for the Group.
Leveraging the advantage of the Group's integrated financial services platform, Ping An Trust strived to build an asset management platform serving high worth individuals. Driven by the product innovation and the expanded direct sales channels, the scale of high margin products increased steadily. As at June 30, 2010, Ping An Trust's entrusted assets amounted to RMB125,396 million. Productivity of individual direct sales channel was further advanced. Net profit increased by 69.8% to RMB326 million in the six months ended June 30, 2010 from RMB192 million in the same period 2009.
As at June 30, 2010, assets under investment management by Ping An Asset Management increased from end of 2009 to RMB619,862 million. Net investment yield of the insurance funds investment portfolio increased to 4.1% in the six months ended June 30, 2010 from 3.7% in the same period 2009, mainly because of the increase in dividend income from equity investments. As a result of the depressed and volatile domestic stock market, total investment income declined by 25.6% to RMB10,365 million in the six months ended June 30, 2010 from RMB13,924 million in the same period 2009. Total investment yield fell to 3.7% from 4.8%.
The following table highlights the investment income of insurance funds:
Investment business
For the six months ended June 30 (RMB million) 2010 2009
Net investment income 12,618 8,746
Net realized and unrealized gains (2,156) 5,562
Impairment losses (89) (270)
Others (8) (114)
Total investment income 10,365 13,924
Net investment yield 4.1% 3.7%
Total investment yield 3.7% 4.8%
Outlook
Mr. Ma Mingzhe said: "Looking into the second half of the year, China's economy is expected to continue its robust growth. But uncertainties such as the international market, the structural readjustment of the domestic economy and inflation are likely to create complications and pressures for Ping An. While continuously focusing on the healthy growth of our insurance business, we will accelerate the pace of development of our banking and investment businesses and continue to make progress on the strategic cooperation with Shenzhen Development Bank. We will also seek to unleash further synergy from our integrated financial services model and move steadily forward towards our goal of developing Ping An into a leading international integrated financial services provider."
