While food delivery firm Meituan-Dianping shocked investors with the biggest corporate loss in Hong Kong history (see page 9), Ping An Insurance has been making headlines for better reasons.
Thanks to rapid growth in its life and health insurance business, the Shenzhen-based insurer posted a better-than-expected 21% increase in net profits last year to Rmb107.4 billion ($16 billion).
In further good news for its shareholders last week, Ping An said it will be spending Rmb10 billion on buying back its Shanghai-listed shares over the next 12 months.
Ping An says the buyback will only stop if its shares rise above Rmb101.24 in price. Its A-shares have been trading at around Rmb75 this week and its Hong Kong-listed shares at HK$85 ($10.9, or Rmb73)
Ping An went public in Hong Kong in 2004 and became a member of the benchmark Hang Seng Index four years later. But this is the first time that the insurer’s net profit has surged past the Rmb100 billion threshold. Thus the comparisons being drawn with Meituan, which reported a Rmb115 billion loss in the same week.
The moral drawn by investors: the pastures aren’t always greener in China’s new economy sector.
“Ping An is making more than Rmb100 billion in profit. And the company is not selling some yet-to-be-achieved concepts such as the monetisation of Big Data, but boring, traditional insurance policies,” an op-ed in the Oriental Daily suggested.
In fairness, Ping An has been busy over the last few years trying to convince the investment community that it has expanded from its more traditional roots into new areas. It has positioned itself as a savvy fintech play too, for instance (see WiC379), and it has flaunted plans to spin-off a number of its tech and healthcare units.
Five of the biggest ones, it reminded analysts yet again last week, are worth at least $70 billion combined (Ping An’s market value stands at about $205 billion).
Some of these fast-growing subsidiaries have already achieved unicorn status, including Good Doctor, an AI-driven healthcare platform which went public in Hong Kong last year.
However, similar to the disappointing post-IPO performance of other tech unicorns such as Meituan and Xiaomi, Good Doctor was trading 20% below its offering price as of this week.
Ping An’s investors will hope that its new economy counters will fetch higher valuations on the recently announced tech bourse in Shanghai, which is likely to commence trading this year. Ping An’s Lufax (short for Lujiazui International Financial Asset Exchange), one of the country’s largest wealth management platforms, is already in prime position to be one of the debutants on the new exchange.
Besides Lufax’s potential IPO in Shanghai, Ping An has latched onto another hot investment theme: the Greater Bay Area (GBA) concept.
In an interview with Hong Kong’s Singtao Daily this week, Ping An president Ren Huichuan said the company is ready to play a pivotal role in the planning and development of the GBA. The financial conglomerate’s cashflow is likely to top Rmb500 billion in the near future, Ren said, and a tenth of this could go into investing in infrastructure, local government bonds as well as equity investment in leading firms in the GBA.
If Ping An is to become what it terms a “financial corridor” for the GBA, a good starting point would be helping to resolve the administrative rigmarole facing drivers on the new Hong Kong-Zhuhai-Macau Bridge.
Currently drivers of vehicles that cross the bridge have to buy different insurance policies from each of the three jurisdictions. Creating a single policy that covers the trio would make life considerably simpler for all concerned.
In fact Ping An says that it already has the technology in place to support cross-border insurance. Now all that is needed is regulatory approvals, it reported last week.
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