Ping An Insurance (Group) Co., China’s second-largest insurer by market value, posted a 31.5% drop in third-quarter profit as a stock-market slump hurt investment returns and an economic slowdown hampered sales.
Net income fell to 16.2 billion yuan ($2.3 billion) in the three months ended Sept. 30, the Shenzhen-based company said in a filing to the Shanghai Stock Exchange Wednesday. That compares with a 3.9% gain in the first half, and a 22% decline projected by China International Capital Corp. analysts led by Mao Qingqing.
Operating profit, which the company says better reflects performance by stripping out short-term volatility, rose 3.8% in the first nine months of the year, slowing from a 4.3% increase in the first half. The results were “affected by the short-term impact of domestic sporadic Covid-19 outbreaks and the volatility of capital markets,” the company said.
China’s falling stock market is adding to the challenges at Ping An, which is going through a painful reform at its core insurance arm. It’s also grappling with weakening demand amid the pandemic and a slowing economy, although analysts pointed to signs that the worst may be over.
Ping An shares rose 3.7% to HK$34.75 as of 10:43 a.m. in Hong Kong trading on Thursday, in line with a broader market rally, trimming this year’s loss to 38%.
The shares are “cheaply valued,” Jefferies analysts led by Sam Wong wrote in a note, saying the results were “largely” in line with expectations. “The stock presents interesting risk reward and could re-rate quickly from current levels should market sentiment improve,” they wrote.
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“Operating profit after tax might continue to expand steadily after a 2.8% increase in 3Q, thanks to robust bank earnings and a low year-earlier base in 4Q,” Bloomberg Intelligence analyst Steven Lam wrote in a report.
The banking unit said earlier that profit jumped 26% to 14.6 billion yuan for the quarter after it boosted non-interest income, even as interest margins shrank.
New business value, which gauges the profitability of new life policies sold, dropped 27% in the nine months, narrowing from a 29% decline in the first half. The weakening economy is hurting consumer sentiment, eroding demand for long-term policies that generate better business value.
Investment income fell 82% in the nine months, while net impairment losses on financial assets dropped 8%, according to the statement.
The benchmark Shanghai Composite Index slumped 11% in the three months ended Sept. 30., accelerating from a 7% loss in the first half, as Covid restrictions and a deepening property crisis weighed on the economy and markets.
Credit Suisse Group AG analysts earlier this month cut Ping An’s full-year profit forecast by 4% to “reflect a soft A-share market” in the second half and lowered the target price of its Hong Kong-traded shares to HK$60 from HK$67.
Photograph: The Ping An International Financial Center in Beijing, China, on Saturday, Aug. 20, 2022. Photo credit: Bloomberg
Topics Profit Loss
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