(Bloomberg) --

Ping An Insurance (Group) Co., China’s largest insurer by market value, reported results for last year that missed analyst estimates, although profit jumped 39% as a stock-market rally and tax relief helped fuel earnings growth.

  • Net income for the 12-month period ended Dec. 31 climbed to 149.4 billion yuan ($21.3 billion), from 107.4 billion yuan a year earlier, the company said in an exchange filing after market close on Thursday. That trails the 157.3 billion yuan average estimate of 21 analysts surveyed by Bloomberg.

Key Insights

  • Stripping out short-term investment volatility and one-off items, the result shows growth momentum at Ping An lost some steam. Operating profit, which Ping An says better reflects its performance, climbed 18.1%, compared to 19% in the previous year
  • Growth in the value of new business, a gauge of the profitability of new life policies sold, slowed to 5% from 7.3% in 2018. That’s going to put more pressure on management, with analysts from Daiwa Capital Markets Hong Kong Ltd. to CCB International Holdings Ltd. forecasting a further slowdown in the key indicator this year as the coronavirus hurts sales of higher-value products
  • Ping An has plowed billions into tech investments and its senior management has argued for a higher stock valuation, despite some skepticism. Operating profit from Ping An’s fintech and health-tech businesses, which sell products from facial recognition to blockchain solutions, slumped 40% to 4.7 billion yuan from 7.7 billion yuan in 2018
  • Daiwa’s Leon Qi last week downgraded Ping An to underperform from hold, saying the insurer sometimes prioritizes cross-selling its fintech products “in order to achieve operating and financial targets for its fintech” units, at the expense of life insurance. He expects a poor first quarter with the value of new business falling by double digits versus the first three months of 2019 as online sales of low-margin policies struggle to offset the epidemic’s impact on protection products sold via agents on the ground
  • Third-party agencies are expecting significant declines in insurance sales for February. Business quickly dried up in late January when Wuhan, the epicenter of the outbreak, was put on lockdown, Shanghai-based Minder Insurance Brokers said
  • Investment income more than tripled to 101.7 billion yuan, as a 22% gain in the Shanghai Composite Index in 2019 bolstered returns from its stock holdings

Market Reaction

  • Ping An rose 0.6% Thursday to HK$91.60 in Hong Kong ahead of the results. That trims this year’s decline to 0.5%

Get More

  • China Insurers’ Investments Hit as Virus Outbreak Fells Yields
  • China Life Prelim FY Net 57B-59.3B Yuan; Est. 59.5B Yuan (1)

To contact Bloomberg News staff for this story: Zhang Dingmin in Beijing at dzhang14@bloomberg.net

To contact the editor responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net

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