In the investing world of financial stocks, insurance companies rarely set the pulse racing.
However, in China, insurance is both a big and growing business.
That’s mainly down to two key reasons – its massive population (China has nearly 1.4 billion people) and also the fact that many individuals don’t have a sufficient level of protection when it comes to all types of insurance, from auto and housing to health and life.
Therefore, it makes sense that insurance firms in China have a huge growth opportunity in front of them. That’s certainly been the case for Hong Kong-listed insurance giant Ping An Insurance Group Co of China (HKEX: 2318).
As China’s largest listed insurer – by market capitalisation – the company has been a leading player in the development of the insurance industry in China and has become an integrated financial services giant.
Ping An Part Of China’s Noughties Listing Wave In Hong Kong
Ping An Insurance was founded in Shenzhen 35 years ago (in 1988) by Peter Ma Mingzhe, who also headed the company as CEO up until 2020 when he stepped down and took up a position as Chairman.
Ping An carved out a name for itself as a technology-forward insurance company, that was privately-run, which was in stark contrast to the stodgy and state-run insurance companies that typically dominate.
As a fast up-and-comer in the insurance scene, the company listed on the Hong Kong Stock Exchange amid the flurry of China listings that happened in the 2000s (aka “the Noughties”). Indeed, when Ping An Insurance was listed in June 2004, it was the largest IPO in Hong Kong’s history at that point – raising HK$14.3 billion (US$2.46 billion) at a share price of HK$10.33 apiece.
Its H-share listing in Hong Kong was followed up with an A-share listing on the Shanghai Stock Exchange in 2007, making it a dual-listed company.
The company has always been one that looks to set new standards that are in line with international business norms. For example, Ping An Insurance was the first insurer in China that hired an international accounting firm as an external auditor.
Growing Into An Integrated Financial Services Player
While its core offering was always insurance, ever since listing Ping An has strived to become a wholly-integrated financial services provider.
How has it done that? Well, it was able to use its core business, as being one of the largest life, health and property insurers in China, to launch offerings in other verticals to its 230 million retail customers that have multiple contracts with the company.
Source: Ping An Insurance 9M 2023 earnings presentation
Many of these offerings have included leveraging its technological edge, such as its Good Doctor brand – a digital-medicine service that looks to cross-sell online healthcare to corporate customers via Ping An Insurance’s massive user base.
Indeed, the allure of cross-selling services is what’s driven Ping An Insurance to launch a variety of subsidiaries, many of whom have also been listed.
Besides Ping An Good Doctor (listed in Hong Kong), there’s also Lufax Holdings – listed in Hong Kong and serving the loans market for SMBs – and One Connect Financial Technology, which is a New York-listed technology-as-a-service platform for financial institutions.
Underpinning all this is a reliance on technology to power its solutions, from utilising reams of data and AI to increase its agents’ productivity scores to the many consumer-facing applications built by its army of software engineers.
How Has Ping An Insurance’s Business Performed?
While the business has seen a meteoric rise over the past three decades, more recently Ping An’s business has been negatively impacted by the slowdown in China’s economy. In the first nine months of 2023, Ping An Insurance reported a 9.8% year-on-year decline in operating profits to RMB 112.5 billion (US$15.6 billion).
Its three core businesses – Life & Health, Property & Casualty, and Banking – contributed over 100% of its operating profit during the period.
So, while the company has a lot of potential in its various technological offerings, all of its operating profits are still coming from its core businesses.
Focused On Efficiency
For shareholders, Ping An Insurance is an exciting growth story given the demand for comprehensive insurance that still exists within China.
However, because of the uncertainties related to the property sector in China – and how much of it is tied to the economy – the share prices of both insurers and banks have suffered. Ping An Insurance hasn’t been able to escape that trend, with its Hong Kong-listed shares down over 25% so far in 2023 – underperforming the Hang Seng Index’s 12% decline over the same period.
But with a highly profitable core business and strong capital buffers, Ping An Insurance should be able to weather any near-term uncertainty.
For any investors looking at the Chinese insurance industry, and its continued growth, then Ping An Insurance is certainly one company worth monitoring.
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