(Bloomberg) -- Ping An Insurance (Group) Co. expects profitability to recover after a 23% drop in full-year net income led its shares to post the biggest fall since November 2022.

While 2023 was “very challenging” due to macroeconomic and market conditions, “we believe we’ll see continued improvement from this year onward,” Co-Chief Executive Officer Michael Guo said in an interview with Bloomberg. He said risks including exposure to the property sector are “controllable” and the company has set aside sufficient reserves, while the backbone life business saw continued growth in the first quarter.

Investors sold off the shares after the results showed operating profit slid 20% and its asset management business swung to a loss. A stock-market rout and falling bond yields weighed on Chinese insurers’ investment returns last year, just as changes in the nation’s accounting policies amplified the impact of market volatility on profits. 

Still, Ping An’s life insurance business largely recovered as a three-year overhaul lifted agents’ productivity and the low-yield environment boosted sales of higher-margin savings products. 

Last year’s drop in operating profit “may not repeat this year, as we believe it proactively lifted provisions and revalued investments amid rising credit risks,” Bloomberg Intelligence analyst Steven Lam wrote in a note. 

Net income slid to 85.7 billion yuan ($11.9 billion), missing the 101.7 billion yuan average estimate of analysts surveyed by Bloomberg. The asset management business recorded a 20.7 billion yuan loss. The benchmark CSI 300 Index slumped 11% last year as the nation’s recovery from the pandemic cooled. 

‘Huge Impact’

The macroeconomic environment brought a “huge impact” on businesses from financial to technology, but “looking forward, we believe the profitability of all our business lines will be able to keep improving,” Guo said. 

Ping An fell as much as 7.5% in Hong Kong trading on Friday, the biggest intraday decline since Nov. 28, 2022. The shares have lost more than 6% this year after a 32% decrease in 2023. 

New business value, which gauges the profitability of new life policies sold, rose 36%, versus a 24% decline in the previous year. That was mainly driven by a 90% jump in average NBV per agent, which offset a drop in the number of agents as the company revamped the sales force. 

The momentum in the recovery can be sustained as the company is also making progress in other channels of life sales, Guo said. NBV growth continued in the first quarter despite difficulties due to regulatory changes, and the pace was “relatively satisfactory,” he said, without providing details. 

While management remains “prudent” with full-year results given challenges such as falling bond yields, the company can keep its investment risks “within a controllable range,” Guo said, citing the firm’s 11 trillion yuan of assets. 

Ping An is confident in the future of China Vanke Co., “an excellent enterprise,” he said, while declining to disclose the insurer’s exposure to the giant developer now facing repayment risks. 

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