If taking out insurance and claiming on it required no written forms, would more people sign up? Some companies think so. Ping An was early to the game and has already started seeing some returns from investing in technology. Earnings for last year beat market expectations. This may just be the beginning for China’s largest insurance company.
Just 8 per cent of Chinese people have life insurance. In a country with a population of 1.4bn, these are exciting times. For Ping An, which earns more than half of its profits from this business, last year was good. Net profit was up 21 per cent at Rmb107bn ($16bn).
Ping An aims to use technology, including apps and blockchain, to make insurance accessible to the masses. Its acquisition of Lufax, a peer-to-peer lending platform, and its launch of Zhong An, China’s first digital insurer, with Tencent and Alibaba six years ago have been paying off. Its Hong Kong-listed unit Ping An Healthcare & Technology, offering free virtual doctor visits and hospital appointment-booking services, has started shrinking its losses.
This may be why Ping An likes to think of itself as a tech company. It even suggests its valuation should be elevated accordingly. But that is getting ahead of itself. Revenues from the fintech businesses are 6 per cent of the total. Fast growing, but there are many more years to go.
Investors should not be disappointed. Ping An is positioned well. Even with the shares up 30 per cent this year, it trades at 13 times forward earnings. That is the lowest among its peer group including China Life Insurance Company and AXA. Yet measures of profitability, including its 18.9 per cent return on equity, stand at more than double the same peers.
The Chinese insurance market has been growing at an annual average of 18 per cent for the past 10 years, making it the world’s second biggest. Improving dividend yields together with future market potential make Ping An a name worth watching.
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