In 2020, almost every businesses from each industry were severely impacted by the COVID-19 epidemic. The main business of Ping An is life insurance, which rely on the insurance agent keep close contact with customers, so the life insurance of Ping An has a difficult year.
If we look back the overall operation figures since IPO, we will find out the it’s the second time that the net profit and ROE of Ping An was dropped.
As we all know, Ping An aim to become a world-leading technology-powered retail financial services group. Next, I will roll out analysis from technology application, life and health insurance, management from 2020 annual report, because I think these three parts are the key for the long term growth even as Ping An has amounts of business segments.
First, technology application. As we know, Ping An has devoted lots of resources into technology. And I have see the fruits has bee created from three points:
1. Acquiring new users and customers: Ping An adheres to the philosophy of “one customer, multiple products, and one-stop services.Leveraging its ecosystems, Ping An empowers financial services with technologies, empowers ecosystems with technologies, and empowers financial services with ecosystems. Ping An provides customers with diverse products and excellent services through innovative scenario-based blockbuster product packages and marketing solutions. As of December 31, 2020, Ping An had over 598 million internet users, up 16.0% from the beginning of 2020. App users increased to over 545 million, up 16.0% from the beginning of 2020. On average, each internet user used 2.11 online service features from Ping An, and yearly active users reached nearly 321 million. Based on the large number of Internet users, Ping An continues to convert internet users into retail customers. As of December 31, 2020, retail customers who were also internet users increased by 11.5% from the beginning of 2020 to 194 million. Of the Group’s over 598 million internet users, 404 million had not yet become its retail customers, indicating large potential for user conversion. Moreover, Ping An will strengthen cross-selling penetration to increase contracts per customer and steadily boost the value of retail customers.
So Ping An is capable to continuously expand the retail customer base, steadily increase contracts per customer, and maintain stable product profitability have become the internal drivers of Ping An’s strong retail business growth.
2. Reduce service cost. From the perspective of transforming and upgrading Ping An’s main businesses, technology benefits are reflected in higher business efficiency, stronger risk management, and higher sales.
For example, in 2020, AI-driven product sales reached RMB410.5 billion, up 100% year on year. In indirect selling, product sales driven by AI via services grew 114% year on year to RMB274.1 billion, representing 61% of the total sales generated in service processes. In direct selling, product sales directly driven by AI amounted to RMB136.4 billion, up 76% year on year. And this reflected in the income statement is that the commission fee is dropped around 10% as the written premiums stays the same with last year.
3. Revenue and profit contribution. Ping An conducts its technology business via subsidiaries, associates and jointly controlled entities including Lufax Holding, OneConnect, Ping An Good Doctor, Autohome, and Ping An HealthKonnect. Ping An continues to explore innovative fintech and digital healthcare business models to strengthen its main financial businesses, facilitate industry upgrades, and serve the real economy. The total revenue of the technology business for 2020 increased by 10.1% year on year to RMB90,375 million. As of December 31, 2020, four technology companies had gone public, with a total market cap of USD68.4 billion.
In 2020, the net profit from technology business is RMB 9,503 million, and increased more than 100% comparing with 2019.
Second, Life and health insurance. As Ping An has different business services, such as life and health insurance, property and casualty insurance, banking, security and trust, and technology businesses. However, life insurance takes more than 66% of the total profit.
With the further development of insurance in China, the life insurance of Ping An has full potential to grow in future. So it’s important to keep close insight into the life insurance of Ping An.
In 2020,In 2020, Ping An’s life and health insurance business delivered a 35.0% operating ROE with operating profit after tax rising 5.3% year on year to RMB93,666 million.
As we can see, the NBV, ROE and Net profit in 2020 are all dropped compared with 2019. In 2020 annual report, it explains why: the COVID-19 epidemic hindered Ping An’s traditional offline operations. In addition, uncertainties over macroeconomic growth and personal incomes temporarily tempered consumer spending on long-term protection products. Furthermore, large-scale offline events were still restricted, and offline face-to-face meetings have not resumed to pre-epidemic levels, affecting Ping An’s high-value long-term protection business.
However, this explanation is not persuasive, since Ping An Life witnessed a decline in the overall policy persistency ratio in 2020.
The cause maybe from the fierce competition in insurance market and the insurance product is lagging behind people’s real needs.
The good thing is that Ping An is full aware of these causes, and make preparation based on Ping An ecosystem synergy advantage. In 2020, Ping An Life continued deepening transformation under the “product +” strategy. Ping An Life built a service ecosystem of “life insurance services +” products, namely “life insurance + health, medical, chronic disease, critical illness, and old-age care services.” Leveraging insurance products, Ping An Life provides customers with comprehensive services covering the entire life cycle, exploring new growth drivers by creating synergies with the main insurance business. In the coming years, Ping An Life will focus on customer demands and take advantage of the healthcare ecosystem to build a health management service portfolio meeting customer demands as well as a customer centric insurance product portfolio.
Third, Management Team. Although there are several senior management members have left in last two years, the high level management team is relatively stable.
In 2020, these management members continue to increase the shares number through key employee share purchase plan. The Key Employee Share Purchase Plan of the Company has been officially implemented since 2015. For the Key Employee Share Purchase Plan of the Company, the participants are key employees of the Company and its subsidiaries including the directors, employee representative supervisors, and senior management. The sources of funding are legitimate incomes and performance bonuses of the employees.
Regarding the Key Employee Share Purchase Plan for 2020, there were 1,522 participants. A total of 7,955,730 A shares of the Company were purchased for a total amount of RMB638,032,305.75 (expenses inclusive), accounting for approximately 0.044% of the total share capital of the Company at that time.
The management team has increase their share numbers through their legitimate income and bonuses shows they have deep confidence in Ping An long term development.
- Business Analysis of Ping An 2019 Annual Report
- Ping An, a World-Leading Technology-Powered Retail Financial Services Group
- Analysis of Ping An 2020 Q3 Financial Statements: Several Indicators need to be Improved