Ping An Insurance: Focus On Peers' Premium Income Growth And Brand Strength

seekingalpha01-28

The latest December 2023 premium income numbers for Ping An Insurance were inferior to that of its key peers.But Ping An Insurance is the top Mainland Chinese insurance company on Brand Finance's ...

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(OTCPK:PNGAY) [2318:HK] is still rated as a Hold. In my November 11, 2023 initiation article, I drew attention to Ping An Insurance's risk factors for the near term and the company's growth potential in the long run. In this latest write-up, I come to the conclusion that a Hold rating for Ping An Insurance is still justified based on a peer comparison. Ping An Insurance's recent monthly premium income growth was weaker than two of its key Chinese insurance peers, but PNGAY has the strongest brand among insurance companies in China. Investors should take note of the fact that they can deal in Ping An Insurance's shares on the Hong Kong market and the Over-The-Counter Market. The average daily trading value for the company's OTC shares in the past 10 trading days was $7 million (source: S&P Capital IQ). Readers can also choose to trade in Ping An Insurance's relatively more liquid Hong Kong-listed shares (10-day mean daily trading value of $200 million) utilizing US stock brokers such as Interactive Brokers. Ping An Insurance's Latest Monthly Premium Income Metrics Were Disappointing Ping An Insurance discloses the year-to-date premium income figures for its key businesses on a monthly basis. In the middle of January 2024, PNGAY issued an announcement revealing its full-year FY 2023 premium income numbers for its Life Insurance and Property & Casualty Insurance business units. Based on a comparison of this recent January 15, 2024 release with the company's mid-December 2023 disclosure highlighting its 11M2023 metrics, it is possible to derive Ping An Insurance's premium income for December 2023. Based on my calculations, Ping An Insurance's premium income for the Property & Casualty Insurance and Life Insurance business divisions were RMB28,514 million and RMB32,591 million, respectively in the final month of the previous year. The growth in premium income for Ping An Insurance and Life Insurance and Property & Casualty Insurance businesses for the most recent month was a disappointment. In December 2023, PNGAY's Property & Casualty Insurance business achieved a modest +1% YoY increase in premium income. In contrast, the Property & Casualty Insurance division of its peer China Pacific Insurance (Group) Co., Ltd.'s (OTCPK:CHPXF) [2601:HK] delivered a much better +8% YoY premium income expansion for December 2023. On the other hand, Ping An Insurance's Life Insurance unit suffered from a -2% YoY decline in premium income for December last year. China Pacific Insurance's Life Insurance business registered an impressive +17% YoY growth in its premium income. Another one of PNGAY's peers, China Life Insurance Company Limited (OTCPK:CILJF) [2628:HK], saw its December 2023 Life Insurance premium income jump by +13% YoY. The latest monthly premium income numbers released by Ping An Insurance have negative read-throughs for the company's Q4 2023 and full-year FY 2023 results announcement in mid-March (estimated timing sourced from S&P Capital IQ) this year. The market currently expects PNGAY's net earned premiums growth to accelerate from +0.3% for FY 2022 to +10.7% in FY 2023 as per S&P Capital IQ's consensus data. Ping An Insurance's disappointing premium income growth on both an absolute and a relative basis imply that there are downside risks associated with the company's actual 2023 financial performance disclosure in March 2024. But PNGAY Is The Leading Chinese Insurance Company In Terms Of Brand Strength PNGAY published a media release on January 18, 2024 noting that the company has been \"named China's Most Valuable Insurance Brand\" by \"brand valuation consultancy Brand Finance.\" In Brand Finance's 2024 ranking of worldwide brands, Ping An Insurance was ranked first among insurance brands in China and eight among all Chinese brands. It is also relevant to highlight that PNGAY was ranked way above its competitors and peers in the Mainland Chinese insurance market. Specifically, Ping An Insurance was ranked 31st in Brand Finance's 2024 brand listing, while China Life Insurance secured the 109th ranking on the same list. China Pacific Insurance was ranked even lower with Brand Finance awarding a 126th placing on the global brand ranking to the company. Ping An Insurance's brand strength didn't translate into robust premium income growth for December 2023 as indicated in the preceding section. But the company does believe that its \"strong brand\" can eventually translate into higher \"customer numbers\" as highlighted in the chart below taken from its 2023 Investor Day presentation. The company also emphasized in its 2023 interim report that it has built a brand known for its \"heartwarming financial services\" by offering \"'worry-free, time-saving, and money-saving' one-stop integrated finance solutions.\" Ping An Insurance's Business Expansion And Value Creation Framework PNGAY's 2023 Investor Day Presentation In its Q3 2023 earnings release, Ping An Insurance shared that its core life insurance business has been \"refining the tiered management of high-productivity agents\" and making a shift towards \"toward more balanced professional sales channels\" in 9M 2023. The company's restructuring moves seemed to have affected its short-term business performance. As detailed in the previous section, PNGAY's December 2023 premium income metrics weren't as good as what one would have hoped for. Notably, Ping An Insurance's number of life insurance agents decreased by -4% QoQ in Q3 2023 as compared to a marginal -0.2% contraction in life insurance agents for China Life Insurance. This meaningful decline in the number of life insurance agents for Ping An Insurance in Q3 2023 is most likely linked to the actions that the company has taken to optimize its agent productivity and sales channels. Even though such restructuring initiatives might have a negative impact on PNGAY's performance for the short term, these moves could help to strengthen Ping An Insurance's brand for the long haul as evidenced by its Brand Finance ranking. Closing Thoughts PNGAY's December 2023 premium income numbers weren't as good as that of its peers, China Pacific Insurance Group and China Life Insurance Company. On the other hand, Ping An Insurance is ranked higher than its peers in Brand Finance's 2024 ranking of global brands, but this is already reflected in its valuations. The market values Ping An Insurance at 0.65 times (source: S&P Capital IQ) trailing P/B now. As a comparison, China Pacific Insurance and China Life Insurance are currently trading at relatively lower P/B ratios of 0.57 times and 0.56 times, respectively. Taking into account both the recent premium income figures and the latest brand ranking for Ping An Insurance, a Hold rating for the stock is warranted.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. 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