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Ping An notes COVID-19-induced challenges as profit falls by 43% in Q1

23rd April 2020 - Author: Luke Gallin

Ping An Insurance (Group) Company of China, Ltd. has reported that its net profit declined by almost 43% year-on-year in Q1 2020, while operating profit jumped by over 5% as the company adopted numerous measures to mitigate the impacts of the COVID-19 outbreak.

Ping An insurance logoNet profit attributable to shareholders of the parent company reached RMB26,063 million (approx. USD 3.68bn) in Q1 as operating profit climbed year-on-year to RMB35,914 million (approx. USD 5.1bn).

At the same time, the insurer says that investment income “fell sharply due to the greater volatility of fair value gains and losses driven by nosediving capital markets both at home and abroad”, as well as the implementation of new accounting standards.

In its Q1 2020 results announcement, Ping An highlights challenges regarding offline operations, rising credit risk, volatile equity markets and fading interest rates, all of which are unfavourable conditions being driven by the coronavirus crisis.

As of the end of March, 2020, Ping An’s investment portfolio of insurance funds grew by more than 5% from the start of the year, achieving an annualised investment yield of 3.6% and an annualised total investment yield of 3.4%.

“Faced with these unexpected and sudden challenges from COVID-19, Ping An capitalized on its leading technologies to rapidly deploy various online initiatives, including remote office, to mitigate the impacts and maintain operations in an orderly manner. The initiatives enabled the Group to offer services without compromising anti-epidemic efforts.

“In addition, the Group closely tracked the development and trend of the epidemic, and fulfilled its mission as an insurer by supporting epidemic prevention and control with insurance services, cutting-edge technologies, and health expertise,” explains the firm.

By segment, and the company’s property and casualty (P&C) unit’s premium income grew by just 5% in Q1 2020 when compared with the same period last year, to RMB72,589 million. The P&C division combined ratio deteriorated slightly in the period to 96.5%, which Ping An says remains above the industry’s.

Within P&C, Ping An integrated online services and launched “One-click Claims Services” in light of COVID-19, enabling claim settlement absent the need for physical contact. Furthermore, as at the end of March, registered users of the firm’s “Ping An Auto Owner” app exceeded 100 million users, which is growth of nearly 12% from the end of 2019.

The after-tax operating profit of Ping An’s life and health insurance segment increased 23% year-on-year to reach RMB24,556 million in Q1 2020. The insurer notes that its traditional offline operations were hit by the ongoing coronavirus pandemic, as was the firm’s high-value protection business.

In addition, the company sought to promote the sales of simple, marketable online solutions with lower NBV margins in the quarter in light of the virus outbreak, which led to the NBV of the life and health segment falling by 24% year-on-year.

“In response to changes in the market, industry and technology, the Company turned challenges into opportunities by leveraging technologies to enable online operations and agile responses while maintaining operational stability,” says Ping An.

Ultimately, the insurer warns that in the short-term, the current crisis will negatively impact the offline development of its insurance business, dent investment income substantially while at the same time drive heightened credit risks and decreased demand for finance.

“However, in the medium and long term, business opportunities and challenges will coexist. The demand for insurance and financial services will rebound. Moreover, epidemic prevention and containment highlights the significance of technological empowerment, spurring technological application and spawning development opportunities for health services,” says Ping An.

Throughout the current outbreak, Ping An has leveraged its reach and technologies to mitigate the financial impacts to its own balance sheet, but also to assist with the global response effort.

As an example, Ping An Good Doctor cooperated with more than 50 provincial and municipal governments to offer local residents real-time online consultation services during the outbreak. While Ping An HealthKonnect worked alongside Ping An Healthcare Diagnostics Centre to fight the virus by pooling resources from a range of parties, says the insurer.

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