OREANDA-NEWS. March 24, 2014. Ping An Insurance (Group) Company of China, Ltd. (hereafter “Ping An” or the “Group”, HKEx: 2318; SSE: 601318) announced its 2013 annual results.

2013, Ping An achieved significant growth on the whole, with its traditional financial businesses maintaining a leading position in the market. It actively laid a strong foundation for its non-traditional businesses, built up its collective strengths and achieved sound growth momentum in its operations. Net profit rose by 34.6% year-on-year to RMB36,014 million, with RMB28,154 million in net profit attributable to shareholders of the parent company, up 40.4% year-on-year. Ping An’s embedded value grew steadily, rising 15.3% over the end of 2012.

The value of new business for life insurance increased by 14.1%, leading the market. Meanwhile, the net investment yield of its insurance funds hit a three-year high. In terms of non-traditional businesses, Ping An actively researched and developed creative strategies from the perspective of innovative and competitive internet finance, and focused on improving the business model of a variety of innovative entities, including Lufax, PAhaoche and Ping An Pay.

As at December 31, 2013, the Group’s total assets reached RMB3.36 trillion while equity attributable to shareholders of the parent company stood at RMB182,709 million, up 18.1% and 14.5%, respectively over the end of 2012. Net profit attributable to shareholders of the parent company for 2013 was RMB28,154 million, up 40.4% year-on-year. Earnings per share was RMB3.56 (2012: RMB2.53). The solvency margin ratios for the Group and its subsidiaries, Ping An Property & Casualty and Ping An Life were 174.4%, 167.1% and 171.9%, respectively.

The Board of Directors have proposed a final dividend of RMB4.5 (tax inclusive) per 10 shares. Together with an interim dividend of RMB2.0 (tax inclusive) per 10 shares, the total dividend for the year amounted to RMB6.5 (tax inclusive) for every 10 shares. 
 
Three pillars of business achieved balanced growth; integrated financial system further optimized

In 2013, the growth of China’s economy slowed while it proceeded with its structural adjustments. Against the complex and volatile economic backdrop, Ping An Life recorded stable and healthy growth. The quality of our property and casualty insurance business remained sound, and our annuity business maintained its industry lead. Ping An Bank underwent a strategic transformation and strengthened its business structure and operations, steadily growing its profit contribution to the Group. Ping An Trust’s customer base continued to grow. It continued to strengthen risk management and focused on developing high-quality business. Ping An Securities ranked fourth in terms of the number of credit bonds issuance it sponsored, while the investment management business continued to improve the asset structure of investments under its insurance funds, achieving the highest net investment yield in three years. Meanwhile, Ping An made faster progress in integrated finance with technological innovation spurring its business development. Ping An developed the strategy for internet finance and stepped up its execution.

Dr. Peter Ma, Ping An’s Chairman and CEO, said, “In 2013, the domestic and overseas economic environment were complex and ever-changing, and the competition in the internet industry intensified. Facing the numerous challenges marked by the domestic economy structural adjustment, market transformation, and revolution in traditional models brought by internet technology, Ping An further implemented the operational strategy of ‘Reasonable Growth, Structural Optimization and Planning for the Future’. We achieved significant growth in our traditional financial businesses, actively laid the foundation for non-traditional businesses, built up our collective strengths and achieved sound growth momentum in our operations. In 2013, the Group successfully issued RMB26 billion of Convertible Bonds, which further entrenched our capital base and strengthened our solvency position.”

Life insurance business: Solid growth in business scale and agency force with sustainable improvement in NBEV margin

In 2013, with value growth as the core focus and led by the two key strategies of “Reaching New Heights” and “Dual Development”, Ping An Life recorded written premiums of RMB210,125 million. Of this, the individual life insurance business recorded written premiums of RMB197,010 million, up 11.9% year-on-year. According to the 2013 PRC life insurance industry data published by the CIRC, of the total premium income generated by all life insurance companies, Ping An Life captured a market share of 13.6%, up 0.7 percentage points compared with 2012, placing second in the market.

As at December 31, 2013, Ping An Life had approximately 57,846,000 individual customers and 998,000 corporate clients. For the individual life insurance customers, the 13-month persistency ratio reached 91.7%.The number of individual life insurance sales agents reached nearly 557,000, up 8.6% over the start of 2013. The value of new business rose 14.1% year-on-year, with the ongoing optimization of the business structure. The margin of embedded value for new business was 30.8%, up 2.9 percentage points compared with that of 2012.

In addition, 2013 also witnessed the continuous and rapid development of Ping An Annuity with received accumulated annuity payments reaching RMB18,599 million. As at December 31, 2013, entrusted assets reached RMB72,290 million, while assets under investment management reached RMB80,486 million. These three key indicators firmly cemented Ping An Annuity’s leading position amongst domestic professional annuity companies. In 2013, Ping An Health maintained the rapid growth of its insurance business, with premium income up 46.4% year-on-year. It also honed its competitive edge with product innovation under the “Vitality” program, leaping to first place in the high-end medical insurance market.

Property and casualty insurance business: Premium income exceeded RMB100 billion, maintaining sound profitability

In 2013, as the overall macro economy remained stable, the accelerated growth in automobile sales drove the steady increase in premiums of the automobile insurance industry. Ping An Property & Casualty continued to implement its operational strategy of “Professional Operations and Leading Services”, which led to a 16.8% year-on-year increase in premium income to RMB115,365 million. Ping An Property & Casualty accounted for approximately 17.8% of total premium income received by property and casualty insurance companies in China, according to the 2013 PRC insurance industry data published by the CIRC. Ping An Property & Casualty is the second largest property and casualty insurance company in China by premium income.  As at December 31, 2013, Ping An Property & Casualty had registered capital of RMB17 billion, with its capital and solvency margin ratios well above regulatory requirements. In the face of the increasing competition which hurt the profitability of China’s property and casualty insurance market, Ping An Property & Casualty continued to make headway with innovative developments and continued raising its professional standards, maintaining sound profitability with a combined ratio of 97.3%.

The following table highlights key financial and operating data in Ping An’s property and casualty insurance business:

Banking business: key performance indicators continued to be favorable with ongoing improvement in business structure

In 2013, faced with a complex and volatile external environment, Ping An Bank set out the guiding principle of “Reform, Innovation and Development” and made steady progress in its strategic transformation, achieving healthy growth in its various businesses. The banking business recorded a net profit of RMB14,904 million, up 12.6% year-on-year. Its profit contribution to the Group reached RMB7,807 million. Non-interest net income maintained stable growth by reaching RMB11,500 million, up 68.8% year-on-year. It accounted for 21.9% of operating income, up 4.9 percentage points year-on-year, which further improved the income structure. In 2013, the Group successfully completed a capital injection of RMB14,782 million to Ping An Bank. The latter’s capital adequacy position was significantly improved, with capital adequacy ratio and core tier 1 capital adequacy ratio being 9.90% and 8.56%, respectively.

As at December 31, 2013, Ping An Bank had total assets of RMB1.89 trillion, up 17.8% over the start of the year. Total deposits stood at RMB1,217,002 million, up 19.2% over the start of the year. Total loans reached RMB847,289 million, up 17.6% over the end of 2012. In addition, Ping An Bank continued to tighten risk control, improve its risk management system, and maintained stable asset quality. As at end 2013, the non-performing loans ratio was 0.89%, 0.06 percentage points lower over the start of the year. The provision coverage ratio was 201.06% while the loan loss provision ratio was 1.79%, up 18.74 percentage points and 0.05 percentage points respectively over the start of the year.

With the steady growth of its business, Ping An Bank invested continuous efforts in developing the areas of investment banking business, retail, microfinance, credit card, automobile finance and trade finance. It achieved major breakthroughs in innovating its business model, products and services. As at December 31, 2013, the Bank’s trade finance facilities balance reached RMB370,556 million, up 29.0% over the end of 2012; its micro-loans balance reached RMB87,128 million, up 56.0%; automobile consumption loan balance reached RMB48,747 million, up 130.8% and with a leading market share; while credit cards in force (CIF) reached 13.81 million, up 25.6% over the start of the year. In addition, Ping An Bank ramped up its network expansion, with the number of business outlets growing rapidly. As at the end of 2013, Ping An Bank had 528 outlets, a number that was up 78 over the end of 2012.

Investment business: Achieved highest net investment yield in three years; trust business recorded stable growth

As at December 31, 2013, Ping An Asset Management had assets under management of RMB1,275,288 million, up 29.8% over end 2012. This was mainly due to the increases in investable assets and investment income arising from the steady growth of the insurance business. In 2013, leveraging its expertise in investment assessment and effective risk management, Ping An Asset Management responded promptly to the changes in the bond and equity markets, optimized its asset allocation, steadily increased its investments in fixed income assets with high interest rates, maintained the flexibility of its equity asset allocation and achieved stable investment returns. As at December 31, 2013, the value of our insurance funds reached RMB1,230,367 million. Net investment yield was 5.1%, up 0.4 percentage points over that of 2012 and reaching a three-year high. Total investment yield was 5.1%, up 2.2 percentage points over that of 2012. Ping An Asset Management (Hong Kong) operates the Group’s overseas investment management business, and has established a professional team with ample experience in global investment. As at December 31, 2013, assets denominated in foreign currency under the management of Ping An Asset Management (Hong Kong) stood at HKD29,476 million.

In 2013, Ping An Trust continuously strived to innovate and achieve breakthroughs. Driven by its three main engines of product, channel and operating service, the number of its active and high net worth customers exceeded 21,000, up 14.5% over the start of the year. Assets held in trust were up 36.9% over the start of the year and reached RMB290.320 billion, of which paid-in capital of collective trust products mostly held by individual customers reached RMB175.8 billion, up 47% year-on-year, placing Ping An Trust at the forefront of the industry. The Company actively managed assets held in trust with strict risk control measures, and saw the successful redemption of products reaching maturity.

By following the pace of reform and strengthening its competitive edge, Ping An Securities actively developed and undertook innovations in its new business in 2013. Its fixed income business completed 27 credit bond issuance projects as the lead underwriter, ranking fourth in the industry. Its reform in the securities brokerage business achieved remarkable results, with the margin trading and securities lending business reaching RMB3.25 billion, up 241.1% over the start of the year, further strengthening the business structure. For its innovative business, Ping An Securities was granted a license to conduct OTC equity swaps and OTC option transactions, as well as trade securities pledged by stock held under repurchase agreements at Shanghai Stock Exchange and Shenzhen Stock Exchange. It was among the first batch of securities companies to obtain the license to provide remote pledged securities brokerage services.

Integrated finance progress gained traction; efforts in Customer Migration pay off

In 2013, the Company made greater headway in integrated finance, demonstrating the soundness of its “Financial Supermarket and Customer Migration” strategy. For personal integrated finance, Ping An has designed a customer value segmentation and management system and established a big data analysis platform, to facilitate the migration of customers and optimize cross-selling. A total of 5.1 million customers have been migrated across business lines, accounting for 27% of new customers of all subsidiaries combined. Ping An Life achieved written premium of RMB6,610 million from telemarketing sales, up 72.5% year-on-year, maintaining its market lead. 54.6% of the auto insurance premium of Ping An Property & Casualty was generated through cross-selling and telesales. 39.8%% of new credit card issuance were generated through cross-selling and telesales, while 17.0% of new retail deposits were generated through cross-selling. In terms of corporate integrated finance, the cooperation among the Group’s subsidiaries was reinforced. Through delivering one-stop integrated financial services solution to corporate clients, our brand image as an integrated financial services provider has been enhanced in the market.

In 2013, the Company stepped up the centralization of its back-office for integrated financial services, which greatly increased synergies and raised service levels. As many as 11 million customers have been offered financial services covering insurance and security since the Mobile Integrated Terminal (MIT) was launched in 2011, with over RMB88 billion in contributed premiums. During the year, Ping An Life focused on upgrading its service by committing to “Settlement Within 48 Hours for Standard Cases with Full Documentation” and achieving a 97.0% fulfilment rate. Ping An Property & Casualty committed to “Settlement within 72 Hours from Reporting to Receiving Payouts for Claims below RMB10,000” for its automobile insurance and achieved a 95.2% fulfilment rate.

Ping An set strategy for internet finance, and stepped up execution

For Ping An, 2013 was the first year in which it clearly established and actively promoted the upgrade and innovation of its strategic framework, achieving success in the initial phase of strategic deployment and for part of its businesses. Facing the swift development of mobile internet and its rapid integration with traditional finance, Ping An finalized and rolled out its strategy of “Technology-Driven Finance”. While maintaining the rapid growth of its mature traditional businesses in insurance, banking and investment, Ping An worked to have its non-traditional business develop on a strong footing in relation to the competitive internet finance market. It is leveraging mobile internet as the cornerstone of a social finance services platform covering wealth management, health management and life management.

The Group has developed new businesses such as Lufax, the Wanlitong Loyalty Points Program, the auto market, e-Payment and a mobile social finance portal. Lufax has made great strides in executing its strategy and strengthening its organizational structure with a significant increase in transaction scale. The number of Wanlitong Loyalty Points Program business partners surged from 5,000at the end of 2012 to 200,000 at end 2013. PAhaoche completed the set-up of its website and online trading platform as a preliminary measure, while opening 11 brick-and-mortar stores. “Yiwallet”, the mobile social payment application launched by Ping An Pay, is in the process of internal testing. Ping An Technology launched the mobile social finance portal “Tianxiatong”, which will greatly boost the development of traditional financial services. While it achieved significant growth in its non-traditional businesses, Ping An believes that there are further development opportunities for its traditional financial businesses.

Outlook
Dr. Peter MA said, “The year 2014 will see both greater opportunities and challenges. With the deepening of reforms, urbanization, economic restructuring, and upgrading of industrial structure continuing to stimulate the internal vitality of China’s economy, the country’s economic growth is expected to maintain a healthy and steady pace, with continuously rising national income and a corresponding greater demand for personal financial services. As a result, there will be immense opportunities for personal integrated financial services which will have a more extensive platform for growth. In the meantime, new technology with mobile internet at its core is advancing rapidly, sending shock waves to all traditional industries including the finance sector. This is a challenge, but also presents more of an opportunity.

“Ping An is now ready to face the tremendous challenges arising from the evolution of modern technology and the innovation of the traditional business model. We will chart an innovative course forward based on the theme of ‘Driven by Technology, Finance Can Serve Life Better’, achieving synergies between our traditional and non-traditional business lines. Our traditional businesses will proactively implement the twin agendas of ‘Financial Supermarket and Customer Migration’, while our non-traditional financial businesses will promote innovation by embedding financial services into the very fabric and needs of our customers daily lives, which revolve around ‘Health, Food, Housing, Transportation and Entertainment’. Ping An will promote the symbiotic growth of its traditional and non-traditional businesses to achieve its vision of ‘One Customer, One Account, Multiple Products and One-Stop Services’. We will strive to drive our business success to new heights in the new era.”