Cash Dividend Growth of 28% and Adoption of Its First Share Repurchase Plan
(Hong Kong, Shanghai, 12 March 2019) Ping An Insurance (Group) Company of China, Ltd. (hereafter Ping An or the Group or the Company, HKEX: 2318; SSE: 601318) announced today its 2018 annual results for the year ended December 31, 2018.
Ping An achieved steady growth overall for 2018, operating profit and NBV growth exceed market expectations and operating profit attributable to shareholders of the parent company rose 18.9% year on year to RMB112,573 million. Net profit grew 20.5% year on year to RMB120,452 million, and net profit attributable to shareholders of the parent company rose 20.6% year on year to RMB107, 404 million. Under the old accounting standards for financial instruments, the Company's net profit attributable to shareholders of the parent company would have risen 39.5% year on year to RMB124, 245 million. Under the circumstances of industrial restructuring, NBV of the life and health insurance business grew by 7.3% year on year after growing 16.9% year on year in the second half of 2018.
Ping An increased its cash dividend for the 10th consecutive year in light of robust operating profit growth and strong solvency position. The Group proposed a final cash dividend of RMB 1.10 per share to shareholders which brings total ordinary dividend per share to RMB 1.72 per share, up 14.7% year on year. In addition to the 30th Anniversary Special Dividend of RMB0.20 in cash per share declared in the first quarter in 2018, total dividend for the year amounted to RMB1.92 per share, up 28.0% year on year.
In order to proactively respond to policy guidance from the central government and regulatory bodies, the Company will adopt its first share repurchase plan so as to provide stability to the capital market while maximizing the shareholders’ interests. The total capital required for the repurchase plan will not be less than RMB5 billion and not exceed RMB10 billion. The repurchase plan will be financed from the Company's internal resources.
In 2018, adhering to its two-pronged finance + technology and finance + ecosystem strategies, Ping An continued to pursue the initiative of empower finance with technology, empower ecosystem with technology, and empower finance with ecosystem. During the year, the Group's core finance business remained strong and stable, while profit contribution from technology business increased significantly. The fintech and healthtech business recorded RMB 6,770 million in operating profit attributable to shareholders of the parent company, accounting for 6.0% of the Group's operating profit attributable to shareholders of the parent company.
Business highlights in 2018:
- Operating profit attributable to shareholders of the parent company grew 18.9% year on year to RMB112,573 million, recording an operating return on equity (Operating ROE) of 21.9%. Group Embedded Value hit RMB1, 000 billion for the first time, being RMB1, 002.456 billion n (=RMB54.84 per share), up 21. % year on year.
- Retail operating profits rose 31.1% year on year. The retail business accounted for 86.8% of the Group's operating profit attributable to shareholders of the parent company. Retail profit growth was driven by an 11.0% rise in retail customers which stands at 184 million coupled with an 18.1% rise in operating profit per customer. Group acquired 40.78 million new retail financial customers last year of which 14.50 million were sourced from our five internet ecosystems which have 538 million unique internet users. Group has significant scope to further penetrate its internet user base as 381million use our internet services but are not yet our financial customers.
- Cross sell penetration accelerated. Our 184 million retail financial customers have 2.53 contracts per customer and 34.6% of them are holding products from multiple business units which are up materially from 19.0% in FY15 despite rapid growth in number of new customers. Ping An's technology patent applications increased to 12,051, up by 9,021 from the beginning of 2018, covering artificial intelligence (AI), blockchain and cloud computing.
- Life and Health NBEV rose 7.3% year on year after growing 16.9% in the second half of 2018. Ping An Life recorded a 30.8% Operating ROEV.
- Fintech and healthtech business's operating profit attributable to shareholders of the parent company rose 24.9% year on year, accounting for 6.0% of the Group's operating profit attributable to shareholders of the parent company. Lufax Holding completed C-round financing, implying a post-money valuation of USD39, 400 million.
- Ping An has world-leading face recognition (accuracy rate of 99.8%), voiceprint recognition (accuracy rate of 99.7%), and medical image recognition technologies. Ping An Brain smart engine received the Wu Wenjun AI Science & Technology Award. Ping An's medical imaging technology won the champion in a number of international contests such as lung nodule detection, gastric cancer screening and diabetic retinopathy detection. Ping An's smart imaging products have empowered 21 provinces and 62 cities, and have been deployed at about 110 hospitals. The AI-based consultation system has covered over 700 diseases and deployed at about 100 medical institutions.
- Ping An has built the world's largest commercial blockchain platform, with over 44,000 blockchain nodes worldwide spread in more than 200 banks, 200,000 enterprises and 500 governmental and other business organizations in China and overseas.
Expanding customer scale and profitability, with operating profit of retail business significantly growing 31.1% year-on-year
As at 31 December 2018, the number of Ping An's retail customers reached 184 million, up 11.0% on the year. The number of new customers amounted to 40.78 million, of which, 35.6% were sourced from internet users who joined us from one of the Group's five ecosystems, namely, financial services, health care, auto services, real estate services, and smart city services. The operating profit per customer grew 18.1% year on year to RMB531, while each customer held approximately 2.53 contracts on average, up 9.1% from the beginning of the year.
In 2018, the Group posted a 31.1% increase year on year in its retail business's operating profit to RMB97,729 million, representing 86.8% of the Group's operating profit attributable to shareholders of the parent company, driven by increasing cross-selling and customer value enhancement. For the year, about 63.64 million retail customers of the Group held contracts with multiple subsidiaries, up 34.7% from the beginning of the year, which accounted for 34.6% of total customers, up 6.1 pps from the beginning of the year.
Peter Ma, Chairman and CEO of Ping An, said, Focusing on retail customers, Ping An is committed to becoming a world-leading technology-powered retail financial services group. We continue to improve service efficiency and the quality of our products and channels, to enhance customer experience, and boost both retail customer value and corporate value.
Empower financial services with technologies: Return on Embedded Value (ROEV) of the life and health insurance business reached 30.8%, the combined ratio of the property and casualty insurance business was 96.0%, and the net profit contribution of the retail banking business increased to 69.0 %
By leveraging its world-leading technologies in AI, blockchain, and cloud computing, Ping An's financial offerings gained competitiveness, and core financial businesses grew steadily through reduced costs, boosted efficiency, enhanced risk management, and improved customer experience.
The life and health insurance business posted steady growth, thanks to AI-enhancing competitiveness. In 2018, against a backdrop of industry transformation, the Group carried out the strategies of product+ and technology+. In 2018, NBV of the life and health insurance business grew by 7.3% year on year to RMB72, 294 million. NBV grew by 16.9% year on year in the second half of 2018. Operating ROEV reached 30.8%, operating profit after tax rose 35.1 % year on year to RMB 71,345 million and the residual margin stood at RMB786, 633 million, up 27.6 % from the beginning of 2018.
AI is widely used within our life and health insurance business. Since AI-based screening and interview functionalities went live, they have been applied to screening of over 11 million potential agents. Via back testing on historical data, AI-based screening model achieved an accuracy rate of 95.4% in identifying agents who would remain with us for 13 months.
The property and casualty insurance business continued to see faster-than-industry premium growth while combined ratio further improved, as a result of improving services innovation. In 2018, Ping An Property & Casualty’s premium income grew by 14.6% year on year, 3.0 pps faster than the market average. The combined ratio was 96.0%, improved by 0.2 pps year on year; the ROE was 16.7%, indicating the high quality of business.
Ping An Property & Casualty enhanced claims services to build differentiated advantages. Through upgraded 510 City Superfast Onsite Investigation services, 96.4% of the urban onsite auto claim investigations were processed within 5-10 minutes in daytime in 2018.
In 2018, Ping An continued to improve asset allocation. The net investment yield of the investment portfolio of insurance funds was 5.2%, and the total investment yield was 3.7%. On the basis of the insurance subsidiaries’ statutory financial statements prepared under the old accounting standards for financial instruments, the portfolio’s total investment yield was 5.2%.
Ping An Bank made significant progress and remarkable results in strategic transformation towards retail banking. In 2018, retail banking accounted for 53.0% and 69.0% of the Bank’s revenue and net profit, up 8.9 pps and 1.4 pps year on year. Ping An Bank continued to de-risk itself. The deviation of non-performing loans was 97%, down 46 pps from the beginning of 2018. Both the balance and percentage of loans more than 90 days overdue declined from the beginning of 2018.
Empower ecosystems with technologies: proactively creating value, with tech-powered business posting an operating profit attributable to shareholders of the parent company of RMB6, 770 million
In 2018, the Company persisted in strengthening its leading technology know-how and exported innovative products and services with a focus on five ecosystems, namely financial services, health care, auto services, real estate services, and smart city services.
- Ping An empowered China’s smart city initiative by building 1+N platforms in over 100 Chinese cities, including Beijing, Shanghai and Shenzhen, as well as countries and regions involved in the Belt and Road Initiative. The platforms cover a variety of sectors, including fiscal management, government, transportation, life, health care, customs control, education, agriculture, judicial activities, environmental protection, and community governance, with hundreds of millions of people benefitting from our smart city services.
- In terms of smart government services, to help provincial and municipal governments to address pain points and difficulties in city governance, Ping An has built several benchmark platforms with government departments in Shenzhen. These platforms enable Shenzhen government to oversee 3.1 million business entities.
The Group has incubated a number of technology companies from scratch in recent years, two of which have listed and three received external financing, with a total valuation of approximately USD70 billion
- Lufax Holding is a world-leading online wealth management and retail lending technology platform. In 2018, Lufax Holding maintained steady profit growth. It completes C-round financing from world-renowned institutional investors at a post-money valuation of USD39, 400 million.
- Ping An Good Doctor is the largest online health care platform in China. As of December 31, 2018, Ping An Good Doctor had provided services to over 265 million users, with over 1,000 in-house medical staff members and over 5,000 contracted external doctors. Its one-hour drug delivery network covered 86 cities nationwide. In 2018, Ping An Good Doctor’s revenue was RMB3, 338 million, up 78.7 % year on year.
- OneConnect is committed to building a world-leading fintech service cloud platform. As of December 31, 2018, OneConnect had provided services for 3,289 financial institutions, including 590 banks, 72 insurers and 2,627 non-bank financial institutions in China. The Internet Finance Alliance of Small and Medium-sized Banks in China, with OneConnect as an initiator, covers 260 small and medium-sized Chinese banks whose assets totaled more than RMB47 trillion.
- Ping An HealthKonnect is committed to becoming China's leading tech-powered managed care service platform. As of the end of December 2018, Ping An HealthKonnect had provided social health insurance (SHI) and private insurance management services in over 200 cities across China. Over 5,000 hospitals were connected with its service platform. City OneConnect app, targeting individual users, covered 69 cities.
In 2018, turning 30 years old, Ping An gratefully promoted Ping An Rural Communities Support. This three-pronged project comprises the Village Officer Program, Village Doctor Program and Village Teacher Program for smart poverty alleviation through the promotion of industry development, health care and education support in rural areas. As at the end of 2018, the Company had implemented Ping An Rural Communities Support in nine provinces or autonomous regions across China. The Company contributed RMB 5,394 million for poverty alleviation, built or upgraded over 400 rural clinics, trained 5,702 village doctors, built or upgraded 391 rural schools, and trained 4,819 village teachers.
Looking forward, Mr. Ma said:The year 2019 marks the 70th anniversary of the founding of the People's Republic of China and is the beginning of Ping An's fourth decade, a crucial period for our strategic transformation. In 2019, we will maintain stable, healthy growth of core businesses, optimize the business mix, strictly manage risks, and build the foundation of our future. We will continue to pursue finance + ecosystem, and enhance our data-driven smart operations to create value for customers, shareholders and society. Ping An will bravely navigate through the uncharted deep waters ahead toward a brighter future.