Analysis of Ping An 2020 Q3 Financial Statements: Several Indicators need to be Improved

As we all know, Ping An has a tough year in 2020, not only the insurance business was severely affected by the Covid-19 epidemic, but also the poor investment performance from invested in the HSBC and Chinese real estate. The stock price of Ping An has fallen down by 6% this year so far, by contrast, the peer China Life Insurance Company stock price has risen by 34% and HS300 has risen by 14%. 

However, in my opinion, Ping An management team knows the situation clearly, and promte lots of reform to cope with these challenges. 

The business performance is OK, the operating profit rose by 4.5% in this tough year, and has several highlights, such as customers numbmers are increased, technolgy patents still increased a lot.

In the insurance business, compared with net profit, the operating profiting reflects the real operating performance, and operating ROE is up to 20.9%, so we can see that the fundamental of Ping An is still competitive. 

As I have introduced before, Ping An has many businesses, such as life and health insurance, property and casualty insurance, banking, trust, securities, asset management, technology etc. From the below graph, we can see life and health insurance, property and casualty insurance, and banking is taking the large proportion of Ping An whole business. In the growth drivers, the life and health, property and casualty impacted the operating profit most. 

So, we need to dive into the two businesses one by one. 

First, in the financial performance of life and health insurance, NBV dropped a lot by 27.1%. As we know, the NBV is comprised of two factors: New insurance premium and NBV margin. The new insurance premium is affected by Covid-19, and NBV margin dropped sharply. 

NBV margin is the indicator that the new insurance premium value. If the NBV margin is too low, that means the insurance price is low and hard to profit in the future. In the past, the NBV margin of Ping An is good, which shows Ping An insurance business competitive. 

Second, in property and casualty insurance, there is combined ratio is also important as NBV margin. 

The reason why the property and casualty insurance business has a poor business this year, that’s because the combined ration is rise up quickly. The ration is up to 99%, means it’s not make profit if not considering investment. This is another key indicator that measure the competitiveness of property and casualty insurance business. 

Third, as I have mentioned before, Ping An provides an integrated financial business model of “one customer, multiple products, and one-stop services. From technology + ecosystem platform, Ping An has transform users to customers. 

Through the huge investment in technology and ecosystem platform, Ping An is easy to get large base of users, and cultivate customers. In Q3 2020, Ping An has around 579 Million users and 214 Million customers, and the numbers is still growing. In the future, users and customers numbers are another indicators that measure the wideness of moat of Ping An.

 

Relative Posts:

1. Business Analysis of Ping An 2019 Annual Report

2. Ping An, a World-Leading Technology-Powered Retail Financial Services Group

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