(Bloomberg) -- Ping An Insurance (Group) Co. said profit rose nearly 7% in the first half, after a stock-market recovery helped bolster investment returns at China’s second-largest insurer by market value. The shares jumped.
Net income climbed to 74.6 billion yuan ($10.5 billion) in the six months ended June 30, from 69.8 billion yuan a year earlier, the Shenzhen-based company said in a filing to the Hong Kong stock exchange Thursday. That reversed a 4.3% profit decline in the first quarter.
Operating profit, which the insurer says better reflects performance by stripping out short-term investment volatility and one-time items, dropped 0.6%, narrowing from a 20% slump last year.
China’s CSI 300 Index eked out a 0.9% gain in the first half after recovering from a meltdown early in the year, underpinning the performance of insurers’ equity holdings. That helped return Ping An’s asset management operations to a profit in the first half, boosting Co-Chief Executive Officer Michael Guo’s confidence for profitability as the Chinese economy and the property market stabilize.
“We’re fairly confident in operating profit maintaining stable and healthy momentum in the second half,” he said in an interview, declining to provide specifics.
Ping An rose 3.6% to close at HK$35.55 in Hong Kong. That reversed this year’s decline to a 0.6% gain.
Investment income jumped 65% to 65.8 billion yuan, according to the filing. Net impairment losses on financial assets dropped 26% to 26.5 billion yuan.
New business value, which gauges the profitability of new life policies sold, grew 11% in the first half, slowing from a 21% gain in the first quarter. A three-year reform at the main life unit lifted agent productivity.
Regulators’ recent move to lower assumed interest rates used in pricing life policies will have a “positive” impact on the business as it will reduce liability costs, Guo told a briefing in Hong Kong. While that brings uncertainty to Ping An’s new business value growth as the company adjusts its product mix, the company expects the gauge’s pace to be “relatively healthy” for the whole year, he said in the interview.
All listed Chinese insurers likely saw earnings improve in the first half compared with the first quarter, Morgan Stanley analysts wrote in a July 25 report. They expect life insurers to report “sound” new business value growth helped by higher margin and agent productivity.
Guo reiterated Ping An’s stake in HSBC Holdings Plc is a “financial investment,” declining to say if the insurer will further cut its holdings after disclosing a reduction in May. Any decision to buy or sell in the future will be “based on considerations of a financial investment” like any other stock.
(Updates with Co-CEO interview comments from fourth paragraph)
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